UPS is the world’s largest package deliverer, and it is on the brink of entering into home delivery of large, heavy packages.
In a significant strategic shift, talks are in the works with potential delivery partner Werner Enterprises to help UPS compete in this area, possibly by year end.
Delivery of these purchases is now one of the fastest growing segments of online retail, and UPS wants a piece of the action. Younger consumers in particular want to buy their furniture online. UPS currently has a maximum weight of 150 pounds for home delivery, but partnering with Werner would enable UPS to deliver for online retailers like Amazon, Wayfair, Ikea, and Target that are trying to compete with companies like Crate and Barrel and big-box stores.
This post is based on the CNBC article, UPS weighs strategy to deliver bulky goods to boost growth, by Andrew Harrar, May 2, 2018. Image source: © McGraw-Hill Education/Andrew Resek.
1. How and why is UPS’s operation’s strategy changing?
Guidance: In the past, investing in speeding up its package-sorting operations has been a key strategy for UPS as it focuses on keeping its costs down. UPS is known for its time and motion studies for its loaders and drivers and for using sophisticated software programs to manage the routing of its trucks, all in an effort to be as efficient as possible. For years, UPS has limited the sizes of unwieldy, “non-conveyable” items which complicate the package handling process and take up large amounts of space inside vehicles.
Using Werner as a partner would help UPS branch out into this growing area of the delivery market to maintain its dominance of the industry. As more and more consumers want to buy furniture online, UPS’s retail customers like Wayfair or Amazon.com need reliable partners to deliver and possibly assemble these purchases. UPS can lend its logistical expertise, while Werner can supply the trucking networks and manpower to make the in-home deliveries happen.
2. What benefits come from partnering with a company like Werner Enterprises rather than trying to make the final-mile deliveries itself?
Guidance: UPS would gain a quick foothold in the final-mile delivery business without having to make the investment to expand its own fleet or acquire end-of-line infrastructure, like terminals. It is a less risky way for UPS to test out this delivery option, providing more flexibility in the long-run as well.