Can UPS get retailers to share in delivery costs?
United Parcel Service (UPS) wants retailers to get their shipping acts together and to pay more when they don’t, according to a Wall Street Journal report.
The delivery company allocates human resources and space, particularly during the Christmas selling season, based on shipping forecasts provided by its retailer customers. When these companies fall short of the projected volume, it costs UPS money.
Dave Abney, CEO of UPS, told the Journal that the idea of retailers paying for unused resources is not intended to be punitive but a part of negotiations it has with its customers.
The company has faced criticism from analysts for not raising prices to compensate for lost profits due to more e-commerce deliveries. Mr. Abney has resisted calls to raise the company’s fees.
“I’m convinced we have the right balance,” he told the Journal in an interview for a separate article. “We’re going to focus on growing the business and increasing the yield.”
While UPS has benefited from increased shipments due to e-commerce activity, the company has also been challenged by the higher costs of making smaller deliveries to private homes compared to multiple-package drops at business accounts. UPS has turned to route-optimization software and is working with its retail customers to keep a lid on costs that eat into its top and bottom lines.
As a Journal article points out, UPS began placing additional charges for shipments on retailers who exceeded their shipping forecasts. The latest proposal is intended to protect the delivery company when the opposite situation occurs.
Earlier this month, UPS announced the addition of package delivery and pickup on Saturdays. Last month, the carrier expanded a three city pilot to 15 major metropolitan areas around the country. It plans to have Saturday service available across the country by the end of next year. UPS expects to create more than 6,000 new jobs by adding Saturday deliveries, without the need to invest in additional trucks or buildings to make the service work.
- UPS Tries a New Twist on Surge Pricing – The Wall Street Journal
- UPS Pressured as Rising Costs Outpace Gains – The Wall Street Journal
- Is UPS’s Saturday announcement a sign of deliveries to come? – RetailWire
DISCUSSION QUESTIONS: What is the state of sales and shipping forecast tech in the retail industry today? How would you rate retailers’ track record when it comes to forecasting sales and e-commerce delivery demands? Will retailers be willing to pay added fees when they fall short of delivery forecasts?