UPS has been criticized by Wall Street analysts for the company’s transition from earlier corporate performance that included a broad range of shippers and shipping charges, to a recent reliance on shipping large numbers of small packages for big shippers such as Amazon.
The complaint is that carrying millions of relatively low-cost packages has squeezed profit margins. In response to the criticism, UPS has completed a planing strategy that it believes will rectify any shortcomings of recent years. There are plans for the company to re-engage small businesses and the health sector in shipping with UPS, saying, “We’re going to participate in richer pools.” Small and midsize businesses tend not to have the bargaining power in rates that large shippers get, while health products often have time-sensitive commitments for which shipping costs more. The company is also planning on expanding internationally while at the same time continuing to participate in the growth of the U.S. e-commerce market. As a way of improving revenue per piece that it receives, UPS will plan on cost-cutting measures as well as completing the $20 billion capital spending plan that is set to automate every shipping facility in the U.S. Along with the automation, there have been network upgrades that allow handling 400,000 more pieces per hour – seven times the capacity added last year. As well, 40 new aircraft will boost air carrier capacity by one-third. CEO Jim Barber has said that UPS will focus on reliability during the upcoming peak season, and that, in past years, the company primarily focused on forecasting volume but this year the focus with the new systems will be on where the package is originating and where it is going – a much more “robust plan for this year,” according to Barber.