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UPS Inc. and FedEx Corp. are offering a new type of pricing for deliveries within a 50-mile radius, according to a person familiar with the companies’ strategy, in a move designed to divert local “last mile” business-to-consumer traffic normally moving with the U.S. Postal Service (USPS).
Short-haul shipments delivered by the two giants would fall under a new “zone 1” rating, according to the person. UPS and FedEx would price those deliveries cheaply, largely because they wouldn’t involve the use of over-the-road, line-haul services that add to the carriers’ costs. The pricing has been made available to a select group of large customers that have requested it, according to the person.
After years of struggling to predict shipping demand for the December peak season, UPS is giving retailers a stronger incentive to provide accurate forecasts.
Consumers love being able to order gifts from online retailers like Amazon.com a few days before Christmas and have the parcels show up on their doorsteps in time for the holiday. After all, anything beats braving the crowds at malls in late December!
However, for package-delivery giants United Parcel Service (NYSE:UPS) and FedEx (NYSE:FDX), this trend has led to one nightmare after another. Some years they have been overwhelmed by demand, leading to missed deliveries. Other years, they have had too much capacity relative to the amount of last-minute shipping demand, driving up costs.
UPS is trying a new tactic to avoid these problems in the future. It will reserve the right to charge retailers if they reserve shipping capacity and then fail to meet their e-commerce targets. This will give retailers an incentive to meet (but not exceed) their forecasts.
Shareowners of UPS (NYSE: UPS) today elected a Board of Directors for a one-year term and ratified the appointment of Deloitte & Touche LLP as the company’s independent registered public accountants.
Twelve directors stood for election to the Board and all were re-elected by substantial margins. The twelve include: Chairman and Chief Executive Officer David Abney, Rodney Adkins, Michael Burns, Bill Johnson, Candace Kendle, Ann Livermore, Rudy Markham, Franck Moison, Sandy Randt, John Stankey, Carol Tomé and Kevin Warsh.
UPS stock’s movement is unpredictable even if its business model isn’t
For a company with such a plain business model United Parcel Service, Inc. (NYSE:UPS) stock is very choppy. It rallied as much as 40% from the January 2016 low to the December high. It has since given back more than 10% but still is within that much of its all-time high.
Even though UPS trades in a choppy manner, it does it within predictable ranges and this makes trading its stock using options relatively easy. There I can sell risk against proven support levels and let time do the rest.