Tomé reveals secrets on UPS growth & cost cuts! 😱

UPS CEO Tomé on Growth Opportunities, Cost-Cutting, Bridge Collapse

UPS CEO Carol Tomé discusses the company’s growth opportunities and cost-cutting plans. Speaking with Alix Steel and … “I got to ask. The stock is down almost 8%. Investors not liking it. Why? Well, Alex, if I could answer that question, I’d probably have a different job. I was really proud of our team today and the outline that we provided to grow our company, our revenues, and our margin. And invest in the future. So I’d love to talk about our plans and how we’re going to create value over the long term. So first of all, that was a great answer. Second of all, I think to the point, what some analysts were pointing out was. A couple of fold. One is that you’re going to have to maybe raise prices in order to meet some of these estimates in a tough growth environment. So I wanted to get your thoughts on that. Yeah. So give us your thoughts on that first. Happy to.

Division of Growth

Divided into three segments: U.S., International, and supply chain solutions
Focus on growth in health care and health care logistics
Addressable market for health care logistics is $152 billion

Targeting the complex side worth $82 billion
Plan to double health care logistics revenue from $10 billion to $20 billion over three years

Growth in the United States

Target growth in revenue by $10 billion
Includes volume growth and higher revenue per piece
Leaning into sectors that value end-to-end network
Focus on small and medium-sized businesses and B2B space
General rate increase for 2024 is 5.9%
Plan to retain around 50% of the increase

Customer Acquisition

Opportunity to gain customers from competitors and new customers
Focus on fragmented health care logistics market
Global expansion targets $50 billion addressable market
Utilize end-to-end solutions and orchestration to differentiate

Cost-Cutting and Automation

Last year saw a shrink in the small package market
Implemented cost-cutting under the operating model “fit to serve”
Plan to drive out costs through automation, with a focus on consolidating and automating buildings
Announced “network of the future” with 400 fully automated buildings by the end of the initial phase
Expected to save $3 billion in costs by 2028, with half realized by 2026

Inorganic Growth Strategy

$6 billion in inorganic growth targets
Focus on expanding health care logistics portfolio through acquisitions
Prioritize acquisitions that enhance capabilities and support growth
Strategy based on a pipeline of opportunities for enabling acquisitions

Impact of Bridge Collapse

Express sympathy for those affected by the tragic bridge collapse in Baltimore
No direct impact on UPS operations due to global supply chain capabilities
Ability to reroute products to different ports and transport modes as needed
Assurance of continued service and support for existing customers

Outlook on the U.S. Economy

Perceive the U.S. economy as resilient with decreasing inflation rates
Lower inflation rates positively impact consumer spending on goods
Observing promising signs of recovery in international trade, particularly in China and Asia

Hot Take

Discussing the growth opportunities, cost-cutting measures, and response to the bridge collapse, UPS CEO Tomé provides insights into the company’s strategic direction and future prospects. With a focus on expanding health care logistics, driving automation, and navigating global supply chain disruptions, UPS aims to position itself for sustained growth and success in a changing market landscape.