UPS and FedEx are shrinking as packages evaporate due to economic forces and headcount is declining in key areas. This disruption is forcing the giants to lighten their asset-intensive networks and rethink their operations for a future of more efficiency. To do this, the logistics firms are transitioning to automation, hoping to increase the speed of package sorting, reduce their physical footprint and achieve cost savings.
Carol Tomé, CEO of UPS, previously served on the company’s board for seventeen years and is confident in her abilities to prevent further losses. Her team are continuing to invest in certain sectors but also making cost cuts in certain areas, while also looking to leverage technology. Meanwhile, FedEx is taking a longer approach to cost-cutting with massive layoffs and laying up planes, as well as undergoing a business restructuring.
Trimming down air shipments to favour slower and thriftier services is also a strategy employed by both giants. Glenn Gooding, former UPS employee, believes in normal business cycles this sort of workforce reduction is common and will be replaced when daily volume output increases.
Data and technology is driving changes for the better at these companies, with UPS looking to integrate automation into larger facilities and FedEx using its proprietary data program, Dataworks, to more effectively optimize. The goal is for these firms to emerge from the downturn with smaller, more proficient networks of operations.
UPS was founded in 1907, and is a global leader in supply chain and logistics, providing sophisticated transportation and logistics solutions with many customers globally. The company has an expansive physical network built from their worldwide offices and sortation hubs, with a focus on improving operations through digital innovation.
Brian Newman is UPS’s CFO, who reports that the company will be reducing their overhead costs as well as selling off some facilities in the second quarter of this year. This move towards consolidation and automation is at the behest of Carol Tomé, who believes that by gathering more volumes into highly automated and efficient buildings, UPS can reduce their overall footprint without negatively impacting customer service and without developing unnecessary additional facilities.
John Smith, the new executive in charge of combining FedEx Ground and Express, said that the two companies have no need to pass each other on the street and the solution to optimizing this would involve data and technology. FedEx CEO Raj Subramaniam stated that Dataworks has unlocked dozens of opportunities to integrate the company’s networks, with the aim of making them more flexible, efficient and intelligent.
Through automation, cost-cutting and data-driven technology, UPS and FedEx are looking to shrink strategically and eventually save money. The coming months will show whether these steps will bring them back from the brink even more agile than before.
