UPS quantified the financial benefits of its transformation initiatives based on the company’s outlook for revenue quality improvement and operating cost reductions between 2018 and 2022.
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The company expects these actions to result in an incremental increase to adjusted earnings per share in the range of $1.00 to $1.20 by 2022.
The company is focused on four strategic imperatives where it is well-positioned for profitable growth:
- Continued expansion of high-growth international markets where the company efficiently connects domestic and export customers to its global network;
- Profitable expansion from both B2B and B2C e-commerce, as U.S. industry package revenue is expected to grow by 40% from 2017 to 2022, and cross-border e-commerce volume is expected to grow by 28% over the next three years;
- Further penetration of the Healthcare and Life Sciences logistics market, given the increasing shift toward home healthcare, where UPS’s trusted residential delivery network will provide new value for healthcare companies and consumers;
- Enhancing services and value for Small- and Medium-sized Businesses, as the company repositions its commercial and service strategies to help this growing economic segment reduce logistics complexity and costs, and take advantage of UPS-offered technology platforms for growth.
UPS’s business strategy includes continued capital investment in its vast global network at previously announced levels. New and renovated facilities, aircraft and fleet assets are coming online at record levels during the next four years. In 2018, 2019 and 2020, UPS will add 350,000-400,000 pieces per hour of sortation capacity in the U.S. each year, which is about seven times the additional sortation capacity added in 2017, alone.
Seven new ‘super hub’ automated sortation facilities will be opened during the period, with 30-35% higher efficiency than comparable less-automated facilities. More than 70 expansion projects will be implemented during the period. UPS will have completed 17 projects in 2018, in time for the peak holiday shipping season.
The U.S. domestic segment will receive approximately two-thirds of the benefits of the transformation program. Initiatives throughout the unit’s operations will enhance revenue quality and reduce operating costs to increase operating leverage. ■