How Big Is Purchased Transportation Cost For UPS?


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How Big Is Purchased Transportation Cost For UPS? - Forbes

Around 20% of United Parcel Service’s total expenditures goes toward purchased transportation, which includes the costs of transportation services including truck and air freight, purchased from third party contractors. This figure has been going up for the company over the last few years, as it partnered with third party vendors to meet the volume growth. However, it is lower than that for its peer FedEx. While purchased transportation costs between 2016 and 2018 have increased $4 billion (nearly 44%), we believe that UPS’s attempts to reduce these costs would have had a sizable negative impact on revenues due to lower delivery volumes. Over the recent years, UPS has seen steady revenue and expenses growth. However, its total expenses as a percentage of revenue has largely remained in the range of 92% to 94%. In this note we discuss the key drivers of UPS’ total expenses.