UPS Announces Record Profits and Higher 2022 Shipping Rates

October 29, 2021


Q3 Earnings Results

UPS continues to benefit from its ‘better not bigger’ strategy as the company announced consolidated revenue rose 9.2% to $23.2 billion and consolidated operating profit grew 23.4% to $3 billion year-over-year for the third quarter. The gains were attributed to revenue quality growth and strong expense control.

As a result, for the first nine months of 2021, UPS generated more operating profit than any full year in our history according to UPS CEO, Carol Tomé.

Improving profits and technology investments are allowing UPS to focus on productivity improvements to help speed up deliveries and reduce costs. Combined, improvements contributed to a decrease in direct labor hours per day of 5.1%.

Even most of the weekend expansion was made possible without deploying additional capital according to Tomé. The expansion, which is planned to be completed by the end of this week, will cover 90% of the US population on Saturday for both residential and commercial pickups and deliveries. It also is expected to provide more capacity for Sunday SurePost deliveries, which the USPS performs last-mile deliveries on behalf of UPS.

More good news for UPS as total volumes began to balance out during the quarter with 42% B2B and 58% B2C. Traditionally, B2B volumes are usually more profitable versus B2C.

Also, SMB average daily volume, including platforms, was up 10.9% year over year. Strong growth in this group has been noted for the past six quarters. In the third quarter, SMBs made up 27.4% of UPS’ total US volumes.

Indeed, UPS will continue to be selective in terms of volumes. As Tomé noted, “With an increasing penetration in SMB customers, that means the enterprise customers declined a bit, as we expected, for a couple of reasons. One, we were up against tough year-over-year comparisons. Secondly, we're controlling the volume that comes into our network because we're laser-focused on revenue quality. We used to think that every package was the same. We don't think that anymore. So, for some shippers, we're no longer delivering their packages, and that's OK with us.”

2022 Shipping Rates

Productivity gains, volumes that are favorably balancing back to an equal proportion, and selective volumes are being aided by higher shipping rates and surcharges. UPS plans to continue this practice into 2022 as it introduced its average 5.9% rate increase effective Dec 26 along with an increase in fuel surcharges effective Nov 15.

While the average increase is 5.9%, some shipping rates and surcharges will be higher for shippers.

For example:

- Large Package surcharge will increase from $105 per package to $145 per package (+38.1%)
- Additional Handling will increase from $16 per package to $18 per package (+12.5%)
- Residential Delivery (Ground) will increase from $4.45 per package to $4.85 per package (+9.0%)

How Will These Rates Impact Shippers?

The Transportation Insight team is currently analyzing how the UPS and FedEx 2022 GRIs will impact customers. Later in November, the group will be hosting a webinar to discuss the increases and the parcel market outlook. Click here to register now for insights into what 2022 will bring for small parcel shippers.

 


ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts has united with Transportation Insight to become North America’s #1 provider of small parcel management and optimization services.  Our team of best-in-class analysts employs cost modeling techniques to help clients optimize their supply chain spend, reducing costs by 20% or more.  Our approach is non-invasive to daily supply chain operations as we employ unparalleled market intelligence and proprietary cost modeling technology, targeting hidden costs and identifying savings opportunities. After establishing the success criteria, SME leverages proven project plans, data warehousing, and milestone documents to ensure an optimized and implementable solution. We build strong business cases based on your data to negotiate better terms, pricing, and service for our clients. We deliver your competitive edge.

Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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UPS Announces Record Profits and Higher 2022 Shipping Rates

October 29, 2021


Q3 Earnings Results

UPS continues to benefit from its ‘better not bigger’ strategy as the company announced consolidated revenue rose 9.2% to $23.2 billion and consolidated operating profit grew 23.4% to $3 billion year-over-year for the third quarter. The gains were attributed to revenue quality growth and strong expense control. As a result, for the first nine months of 2021, UPS generated more operating profit than any full year in our history according to UPS CEO, Carol Tomé. Improving profits and technology investments are allowing UPS to focus on productivity improvements to help speed up deliveries and reduce costs. Combined, improvements contributed to a decrease in direct labor hours per day of 5.1%. Even most of the weekend expansion was made possible without deploying additional capital according to Tomé. The expansion, which is planned to be completed by the end of this week, will cover 90% of the US population on Saturday for both residential and commercial pickups and deliveries. It also is expected to provide more capacity for Sunday SurePost deliveries, which the USPS performs last-mile deliveries on behalf of UPS. More good news for UPS as total volumes began to balance out during the quarter with 42% B2B and 58% B2C. Traditionally, B2B volumes are usually more profitable versus B2C. Also, SMB average daily volume, including platforms, was up 10.9% year over year. Strong growth in this group has been noted for the past six quarters. In the third quarter, SMBs made up 27.4% of UPS’ total US volumes. Indeed, UPS will continue to be selective in terms of volumes. As Tomé noted, “With an increasing penetration in SMB customers, that means the enterprise customers declined a bit, as we expected, for a couple of reasons. One, we were up against tough year-over-year comparisons. Secondly, we're controlling the volume that comes into our network because we're laser-focused on revenue quality. We used to think that every package was the same. We don't think that anymore. So, for some shippers, we're no longer delivering their packages, and that's OK with us.”

2022 Shipping Rates

Productivity gains, volumes that are favorably balancing back to an equal proportion, and selective volumes are being aided by higher shipping rates and surcharges. UPS plans to continue this practice into 2022 as it introduced its average 5.9% rate increase effective Dec 26 along with an increase in fuel surcharges effective Nov 15. While the average increase is 5.9%, some shipping rates and surcharges will be higher for shippers.

For example:

- Large Package surcharge will increase from $105 per package to $145 per package (+38.1%) - Additional Handling will increase from $16 per package to $18 per package (+12.5%) - Residential Delivery (Ground) will increase from $4.45 per package to $4.85 per package (+9.0%)

How Will These Rates Impact Shippers?

The Transportation Insight team is currently analyzing how the UPS and FedEx 2022 GRIs will impact customers. Later in November, the group will be hosting a webinar to discuss the increases and the parcel market outlook. Click here to register now for insights into what 2022 will bring for small parcel shippers.  

ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts has united with Transportation Insight to become North America’s #1 provider of small parcel management and optimization services.  Our team of best-in-class analysts employs cost modeling techniques to help clients optimize their supply chain spend, reducing costs by 20% or more.  Our approach is non-invasive to daily supply chain operations as we employ unparalleled market intelligence and proprietary cost modeling technology, targeting hidden costs and identifying savings opportunities. After establishing the success criteria, SME leverages proven project plans, data warehousing, and milestone documents to ensure an optimized and implementable solution. We build strong business cases based on your data to negotiate better terms, pricing, and service for our clients. We deliver your competitive edge. Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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