Online shopping to drive record holiday shipments for UPS

Sandy Springs-based shipping giant UPS said it is adding technology, increasing shipping rates and working closely with big customers to prepare for a 10 percent increase in holiday deliveries this year.

“The growth of online shopping and returns continues to redefine the holiday peak season at UPS,” said chief commercial officer Alan Gershenhorn during an investor conference call on quarterly financial results. For the period from Thanksgiving through December, UPS expects to handle more than 630 million packages.

The busiest holiday shipping day will be Dec. 22, when UPS expects to deliver about 36 million packages — double its average day’s deliveries. UPS is hiring about 95,000 temporary workers this holiday season.

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The company plans to again use a “control tower” setup to coordinate holiday shipping demand during the peak season, and also expects its acquisition this year of Coyote Logistics to help expand capacity.

UPS this year also began charging more for some shipments by pricing based on “dimensional weight.” It is also increasing surcharges for large packages that require special handling, Gershenhorn said.

And this holiday season, many people may be getting their UPS shipments of holiday gifts in different ways beyond just finding a package on their doorstep.

UPS said it is expanding its use of “Access Point” pickup locations at UPS Stores and other neighborhood businesses to more than 100 U.S. cities. And it expects 20 million customers to be registered for UPS My Choice, which offers fee-based services that allow customers to change delivery times or addresses.

The company is also in the midst of lengthy labor contract negotiations with pilots, who recently voted to authorize a strike if they clear a number of hurdles, including getting released from federally-mediated talks and gaining National Mediation Board permission to strike,

“We’re confident the negotiations will be completed with our pilots without any disruption to our customers,” said UPS president of UPS operations Myron Gray, adding that negotiations already scheduled for November and December.

UPS gave the update on the peak holiday shipping season as it reported more than $1.2 billion in profit for the third quarter, up 3.5 percent. Its revenue, however, was down due to lower fuel surcharges and currency exchange rates.

Fuel prices are down, but UPS is using more gallons of fuel, said CFO Richard Peretz. That’s because with the rise of e-commerce, the company is making more deliveries directly to consumers, meaning more stops to individual houses that are farther apart than stores in a shopping center. As a result, the company is increasing its fuel surcharges to cover costs, he said.

UPS said it had an increase in shipments in the third quarter compared with a year ago, handling 1.1 billion packages, up 1.9 percent. It also increased base rates, though the company said that was offset by changes in the mix of customers and products in its domestic business.

Overall, third quarter revenue fell 0.4 percent to $14.2 billion, led by a decline in international package revenue.

Looking at economic conditions, Peretz said results are mixed. E-commerce is growing faster than physical retail. Unemployment figures point toward a solid climate, but “at the same time job creation hasn’t been there.”

“We have seen some softness in the U.S. economy,” while also seeing growth in online retail, said UPS CEO David Abney. “Really we just see mixed signals.”

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