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 The No. 1 U.S. courier company is investing in new technology and
expanded capacity so that the 2014 holiday season should go
smoothly, Chief Financial Officer Kurt Kuehn said on Thursday.
"We'll be absolutely prepared to have a great peak season this
December," he said in an interview. "We will be very prepared this
coming December. I'm not worried about that."
Last month, the company known for its brown trucks was overwhelmed
by the volume of holiday packages, delaying the arrival of gifts
around the world and prompting customers to vent their frustrations
on social websites.
Kuehn said an increase in last-minute shipping by retailers was also
partly responsible for the glitches, and also made it difficult for
the company to forecast volumes.
Retailers such as Amazon.com Inc guaranteed deliveries by Christmas
Day on orders placed as late as December 22.
The unexpected rise in online shopping, combined with bad weather
and a shorter holiday shopping season than in 2012, added to the
bottlenecks. There were six fewer days between Thanksgiving and
Christmas in 2013 than in the previous year.
"In years past retailers had a Web presence but it wasn't this
critical a part of their market strategy," Kuehn said. "There was a
big focus this year, with incentives that drove increased and late
demand."
UPS warned on January 17 of fourth-quarter earnings well below
market expectations due to the surge in online shopping that caught
the company off guard and increased its costs.
It said on Thursday that it expects full-year 2014 earnings to
increase by 11 to 16 percent over last year.
UPS shares closed 0.5 percent higher at $95.78 on the New York Stock
Exchange on Thursday.
Kuehn said the rise in last-minute shipping also made it more
difficult for UPS to forecast volumes near Christmas.
UPS said global daily deliveries during the 2013 holiday period
topped expectations by surpassing 29 million packages on five days,
with peak volume exceeding 31 million on December 23.
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"We did have a good strong cyber week," he said, referring to the
week after the U.S. Thanksgiving holiday. "Typically the week after
that tapers off but this year (2013) the numbers just kept going up
till a point where we saw eight days during December U.S. delivery
volume exceeded our previous company high which was set in 2012."
Cyber Monday, or the Monday after Thanksgiving, is traditionally the
busiest day for online shopping as workers go back to offices but
continue their holiday shopping on personal computers and other
devices.
Once it became evident that demand was not going to slow down after
Cyber Monday, UPS had to hire 30,000 more seasonal workers than
expected, but package volumes had already built up by then, Kuehn
said.
UPS has increased investments in capacity expansion by $500 million,
a large part of which is a direct reaction to the recent holiday
season's glitches, Kuehn said. Total capital expenditures in 2014
are expected to reach $2.5 billion.
The company is also going to focus on improving communications with
key customers as part of the new strategy, while adding technology
that makes it easier to estimate volumes.
Kuehn said UPS will implement systems that can track packages on the
way from retailers — whereas at present it sometimes has no status
updates on packages until they arrive at the UPS sorting lot.
"In some cases the customers hadn't given us details of how many
packages were in certain loads. That was a frustration," he said.
(Reporting by Nivedita Bhattacharjee in
Chicago; editing by Matthew Lewis)
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