UPS to invest $2bn in international infrastructure by 2019

UPS to invest $2bn in international infrastructure by 2019

UPS said yesterday it plans to invest $2bn over the next five years in its international infrastructure in Europe, Asia and the Americas. The world’s largest package delivery firm held an investors’ conference to discuss its long-term growth plans at which it revealed plans to invest 4.5% to 5% of annual revenue from 2015 to 2019.

UPS said going forward it would focus on international growth markets and work to improve the profitability of its e-commerce deliveries.

The UPS strategy from 2015 includes targets to grow total revenue by 5-7% per year, and operating profit by 8-11% per year.

UPS wants to grow its US domestic revenue by 5-6% each year up to 2019, and operating profit by 8-10% a year. The company also aims to grow international revenue by 6-9% per year and international operating profit by 9-12% per year.

“UPS is a strong company that has proven its ability to adapt,” said UPS chief executive David Abney. “The needs of our customers continue to change, and we’re changing with them by offering new and innovative solutions.”

“UPS provides superior customer benefit by connecting a broad portfolio of solutions to the UPS global network. When coupled with efficient investment in technology, UPS generates substantial value for customers and shareowners,” Abney said.

Improving profitability

UPS said it expected online shopping to account for 51% of its US domestic volume by 2019, up from 46% this year.

The company said it aimed to make lightweight e-commerce packages more profitable by increasing delivery density through technology improvements like the new ORION route software, and by pricing items by dimension as well as weight. More value added solutions like delivery management service UPS My Choice should also help with profitability, the firm said.

Technology optimising routes and boosting planning would mean lowering the cost per package of delivery, UPS said.

ORION is already in use by 22,000 UPS drivers with full deployment expected to be completed by 2016.

“The company is adapting well to the rapidly changing market conditions,” said chief financial officer Kurt Kuehn. “We are developing the right solutions today, to ensure customers choose UPS for their supply chain needs tomorrow.”

“Our innovation, history of service excellence and financial discipline has positioned the company at the forefront of global economic expansion,” added Kuehn. “Our business model and global network are unique, highly efficient, difficult to copy and, above all, extremely profitable.”

UPS delivers about 4.3bn packages a year across the world, making a $46.5bn turnover in the process through its global network of more than 96,000 vehicles.

The company’s domestic package division represents 61% of turnover, but its international division, generating 23% of revenue this year so far, has been growing more quickly with rising Internet penetration and the growth of the middle class in regions like Asia.

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