After a holiday delivery season that fell “far short” of expectations, UPS executives said failures that kept many people from getting Christmas gifts by Dec. 25 would not happen again.
“We’ve been through over 100 successful peak (seasons), and this was an outlier,” UPS Chairman and CEO Scott Davis said in a conference call Thursday. “You’ll not see another one of these hopefully in the next 100 years at UPS.”
The Sandy Springs logistics company is working “around the clock” to ensure the problems of 2013 are not repeated, chief operating officer David Abney said, despite a 2014 holiday season that is nearly as short as last year’s.
Abney said UPS plans to expand some facilities, and will expedite building upgrades and technology that will increase its package capacity. As more people shift to online shopping, UPS has had to rapidly adjust to delivering an increasing number of packages to homes, instead of businesses, in a short holiday season.
Among other moves, UPS will improve its communication with shippers, Abney said.
Despite $50 million in service refunds for deliveries that were promised, but not made on time, the company will not change its guarantees, chief financial officer Kurt Kuehn said. Kuehn said the company will consider changing its pricing model, but its focus is on increased capacity and better forecasts and communication.
Late deliveries came because online sales far exceeded the company’s expectations — UPS planned for an 8 percent increase in average daily shipments during the holiday season, Kuehn said, but the increase was 14 percent.
Because retailers offered last-minute online deals — more than 70 businesses guaranteed next-day delivery for orders made by 11 p.m. Dec. 23, Abney said — the busiest day was later than expected. Bad weather also played a role.
“We hate not to live up to expectations,” Kuehn said.
The delivery challenges, and the cost of hiring additional temporary workers to deal with them, hit UPS’ bottom line, as they announced earlier this month. The company made $1.17 billion in the fourth quarter, 8.5 percent less than it brought in last year, when a charge related to pensions is excluded. Its annual profit of $4.34 billion is 1.2 percent lower than its 2012 totals, minus the pension charge.
UPS said it expects profits to increase between 11 and 16 percent this year.
About the Author
