Improved management, stringent order policies and strategic investments have helped United Parcel Service, Inc. UPS deliver packages on time this Christmas.
In order to put up a better delivery performance, United Parcel preponed its order taking date by a day to Dec 21. The new policy also helped the express carrier to achieve on-time delivery rate between 97% and 98% this festive week. However, the company failed to match up to its regular delivery rate of 98% to 99% during off season when the volumes are at least 50% lower.
As per the new policy, United Parcel offered its clients two and three-day shipping options. Moreover, the company made clear that customers who would order post the deadline would miss a delivery on Dec 25. United Parcel had estimated delivering over 630 million packages – a 10% year-over-year increase – during the year-end festivities.
Furthermore, United Parcel turned down last-minute orders from retailers which may have impacted its delivery performance. Moreover, recruitment of seasonal workers during the busy season and investments of nearly $500 million to expand its supply chain networks and addition of fuel-efficient aircraft, also contributed to the impressive performance.
In the week following Black Friday, United Parcel managed to generate an on-time delivery rate of only 93%. However, the leading express carrier geared up for the festive season.
On the contrary, United Parcel’s close competitor FedEx Corporation FDX — which had estimated shipment of 317 million packages – a 12.4% year-over-year increase – during the Black Friday to Christmas Eve period — failed to improve its delivery performance.
FedEx cited harsh weather conditions and last-minute online order rush as the primary factors that delayed timely deliveries in spite of around $1.6 billion investment in fiscal 2016 on capacity and automation projects at its Ground division and the recruitment of seasonal labors.
Unlike United Parcel, FedEx lacks a firm delivery policy while taking orders from customers which usually results in package overload during Christmas Eve, thereby causing delays.
FedEx currently carries a Zacks Rank #3 (Hold) while United Parcel has a Zacks Rank #4 (Sell). Better-ranked stocks in the sector are Avianca Holdings S.A. AVH and Delta Air Lines Inc. DAL. Avianca sports a Zacks Rank #1 (Strong Buy) while Delta Airlines carries a Zacks Rank #2 (Buy).
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