UPS: 5M packages per day are projected to be in peak demand, exceeding capacity
- Package delivery demand during the 2021 peak season is projected to exceed capacity by about 5 million pieces per day, UPS CEO Carol Tome said during the company’s Q2 earnings call, as UPS and its competitors ramp up for another holiday shipping surge.
- UPS will increase its capacity in peak season. This includes 2 million square feet more sorting space, and more cargo planes, Brian Newman, UPS’ Chief Financial Officer, stated.
- Tome stated, “Our peak planning has been well underway.” We are looking for the right aircraft to manage the volume. We’re also looking at rental equipment to support the volume.
After the COVID-19 pandemic, parcel carriers UPS and FedEx anticipate another busy peak season. The high demand and limited capacity created a difficult peak environment for shippers last year. ShipMatrix President Satish Jindel projected daily delivery capacity would be short 7.2 million parcels ahead of the 2020 peak season.
There will be more time in 2021 to prepare for holiday demand. Tome stated that UPS will meet with 300 customers who make UPS’ peak volume surge to discuss their holiday demand projections. The company has also announced surcharge increases ahead of peak, which are targeted toward high-volume shippers and those experiencing demand spikes.
Shippers are increasing their peak-season shipping times to meet the demand surge. Some shippers, such as Stitch Fix, are diversifying their parcel carriers to avoid volume caps.
Tome has emphasized that UPS will adopt a “better than bigger” approach to shipments, with a focus on smaller businesses and higher margins, rather than attempting to take in as many volume as possible. Tome stated that 27% of UPS’s Q2 revenue came from the U.S., up from 20% last year.
UPS’s average daily volume of domestic packages in the United States fell by 3% over the past year. Newman explained that SurePost volume fell by approximately 1.3 million packages each day. SurePost, the UPS service that delivers shipments to the U.S. Postal Service for last-mile delivery.
Tome said that it is difficult to compare volume to the previous year due to the rapid growth of e-commerce in the initial stages of the pandemic. She stated that SurePost volumes were expected to drop as UPS customers reopened brick-and-mortar locations.
However, UPS’ other business segments saw volume growth. The company’s Saturday Ground delivery volume increased 13% year-over-year as it expanded its weekend coverage. Tome stated that this is an example of “better, not bigger” as they are expanding their service with very low capital expenditure. The company is still on pace to cover about 90% of the U.S. population on Saturday by October.
Tome stated that “these improvements benefit all of our customers large and small by enabling faster transit times and expanding capacity.”