© Stocksak. FILE PHOTO – UPS CEO Carol Tome introduces Donald Trump to an event at Hartsfield-Jackson Atlanta International Airport. Atlanta, Georgia, U.S.A., July 15, 2020. REUTERS/Jonathan Ernst/File Photograph
By Lisa Baertlein
LOS ANGELES (Stocksak) – United Parcel Service (NYSE:)’s new chief executive is focusing on lucrative healthcare business as well as package-tracking technology, as she adjusts the strategy of the world’s largest delivery company to navigate a global economy that is cooling.
CEO Carol Tomé took the helm in June 2020 as UPS was grappling with a surge in pandemic-fueled e-commerce deliveries that were swamping drivers and hammering profit.
(Graphic: Softening U.S. e-commerce demand https://graphics.reuters.com/UPS-RESULTS/znvnbdzajvl/chart.png)
Her original “Better not Bigger” strategy focused on using resources and workers more efficiently, eliminating unnecessary costs, and shedding low-margin businesses.
Analysts and investors believe that the plan helped UPS weather COVID-19 business disruptions, ongoing political and economic turmoil more skillfully than FedEx (NYSE:).
Now, with e-commerce demand ebbing and global economies downshifting, Tomé is revising the company mantra to “Better and Bolder.” UPS teams are actively seeking new revenue. They are focusing on profitable industries and services that can lower UPS delivery costs. This will help customers get better service.
Tomé, the first woman to lead UPS, said the 115-year-old company used to put volume ahead of value.
Now, Tomé told Stocksak, the company’s plan is to “lean in, and whatever comes our way, build enough agility into our operating plan that we can turn on a dime.”
UPS shareholder Gary Bradshaw said Tomé had a successful track record as chief financial officer at Home Depot Inc (NYSE:).
Bradshaw, a portfolio manager at Hodges Capital Management in Dallas who holds approximately 20,000 UPS shares in various accounts, said that “She delivers.” “As a shareholder you feel like you can count on her.”
HEALTHCARE TO RETAIL
UPS was at the forefront of super-cold COVID-19 vaccid delivery. This year’s acquisition of Italy’s Bomi will increase its footprint in this highly competitive segment of global healthcare logistics.
The deal, estimated at $500 million to $1 billion in value, will boost the company’s presence in Europe and Latin America. It will also accelerate growth in UPS’s healthcare business which Tomé says is on track to top $10 billion in annual revenue by 2023 and could double that over the next several years.
UPS has a cost advantage over FedEx. Analysts say that UPS has a cost advantage over FedEx because it runs a single network instead of its competitors’ dissimilar systems.
UPS is adopting new technology to grow its lead and to attract new businesses to shelter profit in a challenging operating environment.
It is adding radio frequency identification (RFID), tags used on premium healthcare shipments, to everyday packages. This will allow UPS workers to avoid scanning millions of packages per day, allowing them to focus on other tasks and reducing the number of lost and misdirected packages.
UPS has a new project that uses data to consolidate deliveries for shoppers who have multiple orders from different retailers in a matter of hours. This could cut down on the number and cost of delivery trucks that are required.
Those and other digital initiatives are expected to help UPS win roughly $2 billion in new business this year from retailers and small businesses that sell via platforms like eBay (NASDAQ:) and Shopify (NYSE:), Tomé said.