UPS limits some large retailers to pace itself as pandemic shopping surge tests capacity

United Parcel Service (UPS) is limiting shipping capacity for some large retailers as online shopping balloons in tandem with the coronavirus pandemic.

The shipping giant informed its drivers on Cyber Monday to stop picking up from six large retailers – Nike, Gap, L.L. Bean, Hot Topic, Newegg and Macy’s – as the volume of orders threatened to exceed capacity, The Wall Street Journal reported, citing an internal email sent to drivers across the U.S.



a truck parked on the side of a road: A UPS driver prepares to deliver packages.


© Patrick Semansky
A UPS driver prepares to deliver packages.

A UPS driver prepares to deliver packages. (Patrick Semansky /)

The caps will run throughout the holiday season, reported CNN.

It comes amid a 44% jump in online shopping in just one five-day span including Black Friday and Cyber Monday, The Wall Street Journal reported, citing the National Retail Federation.

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Both those big shopping days saw record online spending, while customers for the most part eschewed brick-and-mortar outlets. And consumers are also stocking up with regular household goods as they prepare to hunker down for a pandemic winter without going out to the store, the Journal said.

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“UPS continues to work closely with our largest customers to steer volume to capacity and ensure the UPS network is reliable for all customers,” UPS said in a statement cited by MassLive. “This collaboration includes specific capacity allocations last weekend and throughout the holiday season. We’ve worked with our large retail customers to ensure they are aware of how much capacity is available to them.”

“Knowing the unique constraints the industry is facing this peak season, we worked with our carriers early on to collectively build a strategic plan of execution,” Gap told CNN. “We have been very satisfied with the level of partnership and commitment we have received from our carrier base, and especially that of UPS, and expect that to continue through the holiday season.”

UPS and FedEx were already scrambling to obtain enough vans for deliveries, Bloomberg reported Monday. While it wasn’t hampering delivery times, it was driving up costs, Bloomberg said.

UPS has grown its number of facilities by 20, and obtained 14 additional aircraft during this peak season, CNN said, plus expanded weekend operations and ground delivery speed.

The restrictions are temporary and designed so that UPS can pace itself without having merchandise get backed up and clog the system, CNBC reported.

“We’ve worked with our large retail customers to ensure they are aware of how much capacity is available to them,” UPS spokesman Glenn Zaccara told CNBC on Wednesday, adding that if demand surpasses the allocations, the company will “work with our larger customers to ensure the volume gets picked up and delivered as more capacity becomes available in our network.”

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Holiday online shopping surge tests UPS network

In a year when consumers have turned to online shopping more than ever, holiday purchases for delivery are already starting to test the shipping capacity at UPS.

Drivers for UPS — the world’s largest package-delivery company, based in the Atlanta metro — wrote in online forums this week that they were instructed not to pick up packages at some major retailers as e-commerce orders hit an all-time high Monday.

The shipping restrictions affected retailers including Macy’s, Gap, Nike, New Egg, L.L. Bean and Hot Topic, the Wall Street Journal reported Wednesday.

Instead of visiting stores during the coronavirus pandemic, a growing number of customers are ordering goods online from stores, which then ship the goods to customers’ homes.

Consumers spent $34.4 billion from Thanksgiving through Black Friday and Cyber Monday this year, according to an analysis by software firm Adobe. Monday was the largest online shopping day in U.S. history, according to Adobe.

UPS is trying to spread out shipments over peak and nonpeak times through a longer holiday shopping period to avoid big spikes in volume. It said it set “specific capacity allocations” last weekend and through the holiday season, and worked to ensure large retail customers “are aware of how much capacity is available to them.”

The shipping giant also said it wants to maintain reliability for other customers including small- and medium-size businesses, “which have been hit hardest during the pandemic and are also seeing an increase in holiday volume.”

An overloaded shipping network could mean delays for online shoppers waiting for their items to arrive. Industry observers have warned that this year more than ever, consumers should order items early to ensure they are delivered in time for the holidays, or arrange to order online and pick up items at stores.

UPS spends much of the year preparing for the peak holiday season, including settings plans with some of the nation’s largest retailers on how much they will ship and when.

UPS also imposed higher holiday shipping surcharges on some of the biggest retailers this year to cope with rising costs and deter retailers from putting in a surge of orders at one time.

The shipper said it has added 20 facilities and 14 planes for the peak holiday season, and is hiring more than 100,000 temporary workers.

E-commerce behemoth Amazon also has been hiring more workers and is encouraging customers to consider consolidating their deliveries or having items delivered to Amazon Hub pickup locations.

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UPS tells drivers not to pick up packages from six retailers during online shopping surge: Report

United Parcel Service reportedly instructed drivers not to pick up packages from six major retailers amid a surge in online holiday shopping fueled by the coronavirus pandemic.





© Provided by Washington Examiner


The delivery service placed temporary shipping restrictions on Cyber Monday on L.L. Bean, Gap, Hot Topic, Newegg, Macy’s, and Nike, according to a message to drivers obtained by the Wall Street Journal. Drivers in several regions confirmed that they had received the same message.

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“No exceptions,” the message read.

Drivers said that they hadn’t seen restrictions like this one during past holiday seasons, suggesting that the unprecedented increase in online shopping has forced UPS to meter “the flow of packages into its network to preserve its performance during one of the busiest shipping weeks of the year,” according to the outlet.

Both UPS and FedEx also added “peak” delivery surcharges far earlier than usual, beginning in May rather than the typical holiday season. UPS said that companies such as Amazon and Target “have been inundating its delivery network with many more packages and oversize items during the coronavirus pandemic.”

Those brick-and-mortar companies are more reliant than ever on shipping services to deliver products to customers. With the coronavirus pandemic keeping people from visiting crowded stores, online shopping surged more than 20% on Black Friday — and more than 44% over a five-day period that included Black Friday and Cyber Monday.

Cyber Monday was the biggest online shopping day in U.S. history, according to the Hill, with upward of $11.4 billion in sales.

A UPS spokesman said that the shipping company “will work with our larger customers to ensure the volume gets picked up and delivered as more capacity becomes available in our network.”

“We are pleased with the way the UPS network is performing as we exit the Thanksgiving holiday and move into the month of December, delivering record volume,” the spokesman told the Hill. “UPS continues to work closely with our largest customers to steer volume to capacity and ensure the UPS network is reliable for all customers.”

Shipping analysts anticipate that the 2020 holiday season will bring a daily surplus of 7 million packages between Thanksgiving and Christmas.

The Washington Examiner reached out to UPS for further comment.

Tags: News, UPS, Shipping, Commerce, Holidays

Original Author: Tyler Van Dyke

Original Location: UPS tells drivers not to pick up packages from six retailers during online shopping surge: Report

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UPS places shipping cap on some of its largest retailers as holiday shopping booms

UPS is placing shipping limits on some of its largest retailers as online shopping picks up steam during the holidays.



a person standing on a sidewalk: A United Parcel Service Inc. (UPS) driver carries packages in the Lincoln Park neighborhood of Chicago, Illinois, U.S., on Monday, Nov. 30, 2020. Online shoppers in the U.S. are expected to drop a record-busting $12.7 billion on Cyber Monday -- the busiest e-commerce day of the year -- presenting a valuable opportunity for retailers whose websites, customer service departments and delivery operations can withstand the period of crushing traffic. Photographer: Christopher Dilts/Bloomberg via Getty Images


© Christopher Dilts/Bloomberg/Getty Images
A United Parcel Service Inc. (UPS) driver carries packages in the Lincoln Park neighborhood of Chicago, Illinois, U.S., on Monday, Nov. 30, 2020. Online shoppers in the U.S. are expected to drop a record-busting $12.7 billion on Cyber Monday — the busiest e-commerce day of the year — presenting a valuable opportunity for retailers whose websites, customer service departments and delivery operations can withstand the period of crushing traffic. Photographer: Christopher Dilts/Bloomberg via Getty Images

The restrictions will take effect this week and run throughout the holiday season, the company said. Retailers were notified of their shipping capacity in tandem with the newly enforced limits.

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“UPS continues to work closely with our largest customers to steer volume to capacity and ensure the UPS network is reliable for all customers,” the company said in a statement.

UPS didn’t provide names of the retailers that would be affected by the new limits.

The new limits were first reported by the The Wall Street Journal, which said the retailers included brands such as Nike and Gap.

“Knowing the unique constraints the industry is facing this peak season, we worked with our carriers early on to collectively build a strategic plan of execution,” Gap said in a statement. “We have been very satisfied with the level of partnership and commitment we have received from our carrier base, and especially that of UPS, and expect that to continue through the holiday season.”

Nike didn’t immediately respond to requests for comment.

The shipping company is imposing the restrictions to ensure it can meet customers’ needs, including small and medium-sized businesses that have been hit hard by the pandemic. The shipping limits come as the pandemic has pushed more shoppers to buy online, especially for the holidays.

Holiday sales so far this year have broken records. Thanksgiving day sales jumped to $5.1 billion, up 22% compared with last year, while Black Friday sales totaled $9 billion, also a 22% increase, according to Adobe Analytics.

Cyber Monday sales also saw an upswing, bringing in $10.8 billion in sales, a 15% bump from the previous year. That made Cyber Monday the largest online shopping day in history, per Adobe Analytics.

UPS says it has agreed on strategies with some if its retail customers which include “shifting package volume away from the heaviest demand shipping days, fully utilizing weekend capacity, and aligning promotional strategies with capacity.”

Many parcel delivery services have struggled with the surge in demand for shipments and have began imposing measures to deal with the influx. Other shipping services such as FedEx and USPS have increased their pricing premiums for the holidays and hired thousands of temporary workers to handle shipments.

UPS says it added 20 new facilities and 14 additional aircraft for the peak season. It also expanded its weekend operations and the speed of its ground delivery.

Meanwhile, Amazon,

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From Shopping to Vaccines, UPS is Set to Deliver

Since adding UPS (UPS) to our model Income Portfolio two years ago, it has returned 65%, most of that in the form of capital appreciation, notes Jim Pearce, growth and income expert and editor of Investing Daily’s Personal Finance.

As a result of its rapidly escalating share price, the company’s most recent dividend declaration of $1.01 works out to a forward annual dividend yield of 2.4% at a $170 share price.

Should new investors jump on the bandwagon now at a relatively low yield expecting a steady diet of dividend hikes in the immediate future, or eschew UPS in favor of other companies with higher yields?

Certainly, UPS is generating enough cash flow to continue raising its dividend at an aggressive rate. Through the first nine months of this year, its cumulative cash flow from operations of $9.3 billion is roughly 60% ahead of last year’s pace.

That’s a lot of money that can be used in many ways. In April, the company suspended its share repurchase program to conserve cash. Although UPS has not formally stated that it will reinstate the plan, that announcement is likely in early 2021 if this quarter is as strong as the last one.

Regardless, the company intends to spend $2.2 billion on capital expenditures during Q4 and it could pay down some of the $25 billion in total debt that it carries at a weighted average coupon rate of 2.7%.

If all goes according to plan, those efforts should result in another dividend hike in 2021. Over the past seven years, UPS has increased its annual cash dividend payment by an average of 7.2%.

In hindsight, the timing of the firm’s partnership with Amazon (AMZN) could not have been better — as homebound shoppers are getting packages delivered in record numbers.

UPS has also stated its readiness to “support COVID-19 vaccine distribution” which would help shore up its business-to-business shipping volume. Even without that added windfall, the company is poised to post solid financial results in 2021. We are raising our buy limit on UPS to $175.

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Coronavirus creates UPS, FedEx delivery van crunch as holiday shopping moves online

This holiday season is unlike any other in modern times. The coronavirus pandemic has left numerous restrictions in place that make it more difficult to plan a day shopping for gifts, and that’s led more people to turn to online retailers. And online retailers need someone to deliver their goods. It turns out, companies like UPS and FedEx are really starting to feel the crunch.



a car parked on the side of a road: More of these, please. Craig Cole/Roadshow


© Provided by Roadshow
More of these, please. Craig Cole/Roadshow

Bloomberg reported Wednesday that both of the parcel delivery companies are facing a serious delivery van shortage. In other words, both need more vans as soon as possible and its partners have started to either lease vans, or purchase used ones. Brendan Keegan, CEO of Merchants Fleet which provides vehicles to delivery companies, told the publication that any and every van that is for sale isn’t off limits. The company needs them now.

It’s been a perfect storm for a delivery van shortage. Every major automaker shut operations down earlier this year to slow the spread of COVID-19, and in the process, the automakers left a lot of supply off the table. At the same time, more people already started to lean on online retailers and home delivery for more goods as social distancing became the norm. Now, with holiday shopping in full swing, delivery companies don’t have many choices left.

It also means delivery charges are more expensive this year. According to the report, UPS implemented “peak surcharges” to help offset added delivery costs. UPS confirmed these surcharges with Roadshow and said, “While package volume and demand have created a tighter market for rental vehicles than in recent years, we are well-positioned to service the needs of our customers.” FedEx said in a statement, “FedEx has experienced a surge in package volumes due to the pandemic and now the holiday season. We have the ability to flex our network during periods of peak activity and have taken steps to secure our ability to deliver the best possible service this season.”



a van parked on the side of a road


© Craig Cole/Roadshow


Auto production is only now starting to return to pre-pandemic levels, but it might be a tad too late for companies that needed vehicles like the Ford Transit yesterday. If anything, the pandemic sped up the creation of a larger home-delivered goods economy, and it’s likely why startups and traditional automakers alike bank on electric commercial vehicles to boost EV adoption. Heck, Rivian and Amazon have a purpose-built electric delivery van coming in under two years.

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How Amazon quietly built a shipping operation that rivals UPS

It didn’t stop there. The e-commerce giant leased 12 Boeing 767-300 cargo aircraft, bringing its air fleet above 80 jets. It added 220 package facilities since the start of the year, ranging from urban delivery stations to giant warehouses, according to an industry consultant.

Amazon used the crisis, when prices on everything from commercial real estate to cargo jets plummeted, to amass an empire already beginning to rival the U.S. operations of United Parcel Service and FedEx, long the most dominant logistics companies, which helped the e-commerce giant get its start. But its ambition reaches well beyond delivering parcels to its own customers, according to former Amazon executives. The company is building a logistics system to one day deliver packages for customers to compete directly against UPS and FedEx, something it’s already doing in the United Kingdom.

“They are building the world’s biggest package-delivery company,” said David Glick, a former Amazon logistics executive who serves as chief technology officer at Flexe, which helps retailers warehouse and deliver goods. “If you believe the carrier network is tapped out today, and it is, there is no other option.”

Amazon said on a recent earnings call that it boosted its fulfillment capacity — the collection of warehouses, delivery stations and drivers it uses to get packages to customers — by 50 percent this year, helping fuel $30 billion in total capital spending.

While Amazon’s move into shipping its own packages and freight has been building for years, the implications will provide it a stark advantage this holiday season, when Amazon’s rivals will probably wrestle with getting packages delivered by a network already clogged with pandemic shopping.

That will probably hand Amazon a massive advantage in a holiday season in which U.S. e-commerce purchases will climb 35.8 percent to $190.5 billion, according to a forecast by the research firm eMarketer.

(Amazon chief executive Jeff Bezos privately owns The Washington Post.)

When the pandemic started, there were few e-commerce companies that seemed less prepared than Amazon. It went beyond just logistics. Warehouse staff around the globe sounded alarms that company policies put their health in jeopardy. Rogue third-party sellers gouged buyers on such hard-to-find items as hand sanitizer and listed products making dubious claims about virus protection.

Meanwhile, shipping delays led customers to gripe about third-party sellers at the highest levels ever. The clogged network, and the new hurdles caused by the pandemic, led Amazon to throw gobs of money at the challenge. It sped up spending it had planned for next year on acquiring new warehouse space, to supplement a logistics network straining under the weight of pandemic-fueled shopping.

“We are erring on the side of having too much capacity,” Amazon’s finance chief, Brian Olsavsky, said late last month during a conference call with analysts. Amazon spokeswoman Rena Lunak said the company is ready for the holidays.

Even so, the added surge in holiday shopping could pose a challenge. Olsavsky noted that Amazon’s capacity will be “tight” this holiday season, and that the company

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