UPS Executives Look to Accelerate 'Transformation'
April 26 2018 - 11:50AM
Dow Jones News
By Paul Ziobro
United Parcel Service Inc. is ramping up a "transformation" plan
to cut costs across the organization as the delivery firm responds
to changes in how people shop and nontraditional competitors such
as Amazon.com Inc.
UPS executives on Thursday spoke often of accelerating a review
of the company's operations after it reported its latest quarterly
results. The company is now delivering a majority of packages to
consumers, rather than businesses, in the U.S., a more expensive
delivery since it means delivering fewer packages to more
stops.
"The pace of change of business is accelerating so quickly,"
Chief Executive David Abney said on the company's first-quarter
earnings call. "We feel like we had to respond with a sense of
urgency."
At the same time, UPS is facing new entrants encroaching its
delivery turf, from Amazon's expanding delivery operations to other
startups vying to deliver packages to homes.
The review is being led by Scott Price, a former Walmart Inc.
executive who joined UPS in December with a seat on the company's
top leadership committee, a rare appointment for an outsider.
The changes from his review are just starting to trickle out.
The first involves a voluntary early retirement program available
to nonunion management workers in nonoperations roles. Mr. Price is
also looking to lower procurement costs across the global
organization.
"These are really just the beginning of what is going to be a
very extensive program," Mr. Price said.
In an interview, Mr. Abney said in addition to the growth in
e-commerce, the restructuring will look at opportunities in
emerging markets and how to incorporate new technology into
operations. "We know we have to be on the front edge of technology
to make sure nobody tries to get inside our business," he said.
Other details on cost cuts were scant. UPS plans to hold a
meeting with investors in the coming months that will focus on more
potential changes.
The cost cuts are being paired with the start of a three-year
period of ramped up spending to upgrade and expand UPS's network,
including up to $7 billion in capital spending this year.
UPS's first-quarter results showed some of the obstacles.
Revenue rose 7%, to $10.2 billion, in its large U.S. domestic
package business, but segment profit fell on higher costs from
several items, including expanding Saturday delivery, network
upgrades and severe winter weather.
Overall, UPS's profit rose 15%, to $1.3 billion, from $1.2
billion last year. The company's international and freight business
offset the drop in the domestic business. Total revenue rose 10%,
to $17.1 billion.
The changes UPS is planning come as the company is engaged with
the Teamsters union over the renewal of its contract, which expires
July 31. Mr. Abney said the two sides have made progress on some of
the union's demands. "We are confident that we can reach an
agreement," Mr. Abney said.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
April 26, 2018 11:35 ET (15:35 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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