UPS Earnings Skyrocket in First Quarter

UPS has reported their first quarter 2021 earnings and they are staggering to say the least.  UPS posted revenues in the first quarter of the year at $22.91 Billion an increase of 27% over the same period last year.  While this increase should not come as a surprise to anyone based on the tremendous growth of on-line shopping since the Coronavirus Pandemic started a little over a year ago, there are elements of this revenue increase that are very revealing.

UPS’ CEO, Carol Tome has made it quite clear since taking over the helm of UPS that profit growth was going to be a major focus of the company and she has certainly led UPS in that direction.  “Our focus on Small and Midsize Businesses and Healthcare does not take away our desire to grow our large enterprise accounts, which are many large retailers,” Ms. Tome stated on a conference call this past Tuesday.

UPS reported that a large part of their revenue growth came from those small and midsize businesses.  In fact that group of shippers’ volume increased a very strong 36% outpacing UPS’ larger customers volume growth.  Again, no surprise here.  UPS you will remember made it clear to many of their larger retail customers during the 2020 Peak Shipping Season that UPS would limit the acceptance of additional packages over a certain volume threshold that was based on what these larger retailers shipped in the early part of 2020.  This decision was apparently based on concerns about lack of capacity during the Peak Shipping Season, but UPS obviously found the capacity to handle the 36% growth from the SMB community.

UPS also benefitted financially from the growth of healthcare activities largely driven by the distribution of the Covid-19 vaccinations.  UPS to date has delivered approximately 196 million vaccine doses to approximately 50 countries and territories.  This will obviously increase till at least the end of the year.

Additional UPS Financial stats:

• Average daily volume increased 14%
• Supply Chain operations generated $4.29 Billion in revenue, an increase of 34% over the prior year’s first quarter
• UPS’ profit was $4.79 Billion for the quarter compared to a meager $965 Million in the first quarter of the Covid-19 year of 2020
• Investors received a whopping $5.47 per share compared to $1.11 a share for the same period last year

So what lessons should UPS shippers, (in fact all freight shippers for that matter), learn from these revenue and profit statistics?  First, we are still in a very volatile marketplace when it comes to carrier rates and capacity issues.  The age-old system of Supply and Demand will continue to dictate the marketplace regardless of mode of transportation.  More Supply – Less Demand = Lower Rates.  Less Supply – More Demand = Much Higher Rates; it’s as simple as that!

But shippers cannot afford to become complacent and just accept the status quo of less carrying capacity and higher shipping costs.  For one thing, they will need to account to corporate management why their actual shipping costs have greatly exceeded their budgets and answer questions like, “just how long will this trend continue.”  Secondly, they cannot become complacent and just expect to deal with these issues without fully understanding what options they may actually have in the marketplace, again, regardless of the mode of transportation.  The most critical step is for every shipper to benchmark their operational needs as well as their shipping costs against the vast network of competing shippers and transportation and logistics service providers to ensure they are receiving not only “Best in Class” service, but also “Best in Class” rates for the services their companies need.

And, let’s not forget one other critical point here, and that is shippers WILL need the assistance of third party logistics and supply chain consultants in order to perform these Benchmark Evaluations.  No shipper on their own can truly ensure they have “Best in Class” service and rates without this assistance.  Ready to ensure your company receives these “Best in Class”  evaluations, we’re here to help.