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.
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