UPS Adopts New Global Logistics Model
UPS announced a new global operating model and leadership structure, concretely shifting focus from low-margin parcel delivery to high-value integrated
United Parcel Service announced a new operating model and leadership structure on Monday. The company aims to better exploit its global network to accelerate profit growth as it evolves from a traditional small package carrier into more of an integrated logistics provider.
The timing coincides with the major phase-out of low-margin Amazon business and a downsizing of its domestic parcel network, actions largely completed by the end of June. Under the new approach, UPS will standardize processes and procedures across geographies while maintaining flexibility for local markets. The goal is to give customers greater consistency, agility, and scale as the company deemphasizes its traditional status to focus more on being an integrated logistics provider.
As e-commerce growth normalized after the Covid-fueled boom and low-cost delivery competitors entered the market, UPS parcel volumes have stagnated. The company has stressed for two years its intent to deemphasize last-mile delivery of e-commerce packages and focus more on high-value, premium market segments like healthcare, industrial, and automotive logistics, as well as services for small-and-medium size businesses.
Leadership Changes
UPS appointed Nando Cesarone as executive vice president and chief global operations officer. He is responsible for the company’s global air network and airport gateways, surface transportation, building and engineering operations, Intelligent Network of the Future initiatives, automotive operations and sustainability functions. Cesarone was previously president of U.S. Operations.
Matt Guffey was named chief U.S. Domestic officer. He oversees UPS’s U.S. Businesses including small package, Roadie same-day delivery, Happy Returns, The UPS Stores and Mail Innovations, the company’s delivery partnership with the U.S. Postal Service. His previous role was chief commercial and strategy officer.
The company is also creating a new role of chief global commercial strategy officer, responsible for global strategy, marketing and communications, product management and pricing. A search is underway to fill the position.
Meanwhile, Kate Gutmann, president of international, healthcare and supply chain solutions, will retire for personal family reasons, ending a 37-year career. Over the past six years she played a key role in driving UPS’s growth into the upper echelons of healthcare logistics, which is now a nearly $12 billion business for the company, and navigating the international segment through the rise in U.S. Protectionism.
Network and Volume Changes
Over an 18-month period, UPS eliminated 50% of its Amazon volume, or about 2 million pieces per day, because they were no longer economical to handle. It also closed 150 parcel sort centers and laid off 30,000 workers as part of its domestic network downsizing.
Financial Context
UPS stock closed Monday at $104.23, essentially flat for the year. The price is down from $127 per share two years ago and $169 per share on August 31, 2023. The strategic pivot comes as the company seeks to improve its standings in the competitive logistics market and leverage its global squad of assets and personnel more effectively.
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Write to Eric Kulisch at ekulisch@freightwaves.com.
