UPS CEO: Thanks to automation, we're shipping more packages with the same number of people

Nicole Sinclair
Markets Correspondent

The upcoming holiday period is shaping up to be another record-breaking shipping season. In fact, United Parcel Service (UPS) forecasts 750 million packages will be delivered between Black Friday and New Year’s Eve, a 5% increase from last year.

Despite the expected increase in volume, UPS expects to hire the same number of temporary seasonal workers as last year (95,000).

“Last year we hired about the same number of people and we’re doing it this year with an extra 5% of packages and it is because of automation,” UPS CEO David Abney told Yahoo Finance.

UPS has focused on making temporary workers more effective and better able to handle more packages, including using technology that allows drivers to utilize cell phones as delivery devices for their routes. These initiatives have been key for the company as volume in the business-to-consumer category, which has been a less profitable business than business-to-business, rises exponentially.

The holiday period is incredibly important for UPS, where its average daily volume of packages doubles. In 2013, the company didn’t correctly predict enough of a surge in last minute packages while in 2014 it spent too much money on seasonal workers that weren’t utilized.

Abney reinforced that the company is well-prepared for this season.

The company is also rolling out a peak surcharge during Cyber Week and the week prior to Christmas to encourage customers to adjust volume to the middle weeks

“The price hike or the peak surcharge was to make sure that we’re compensated for the additional cost of peak,” Abney explained.

Meanwhile, Abney said he is open to different consumer initiatives from customers, including Walmart’s (WMT) proposed delivery into consumers’ homes, but doesn’t see much evidence of demand yet.

“What is yet to be proven is what kind of market there will be for that,” Abney said. “It’s something we would analyze but it’s not something we see big demand for at this time. But the market changes and we’ll be watching closely.”

Currently, UPS offers a service called MyChoice that allows consumers to give UPS their gate code in a gated community so drivers can easily enter.

“It’s very important for us to use technology to increase automation to have things in effect like UPS MyChoice that gives our consumers more control of the delivery,” he said.

 

UPS CEO David Abney discusses the company’s upcoming high-volume holiday season

Abney added that UPS has strong barriers to entry and remains committed to advancing its business, something that’s come under scrutiny after reports that Amazon (AMZN) is developing its own delivery service.

“We’re not standing still,” Abney said. “If anyone is going to significantly change or disrupt our business, we want it to be us.”

The company reported an earnings beat for its third quarter on Thursday.

Nicole Sinclair is markets correspondent at Yahoo Finance

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