Why UPS Is Betting $48 Million on Temperature-Controlled Logistics Growth
Yahoo Finance ·
United Parcel Service ( UPS +0.45% ) is in the middle of a turnaround, which management says is about to hit an inflection point. The goal is to modernize the business to make it leaner and more profitable. There are many moving parts, with a key focus on fostering the right customer relationships. Which is why the company is investing $48 million in its temperature-controlled logistics operations. Here's what you need to know. A big part of UPS' business overhaul has been to introduce new technology to make the company more efficient. That has required material investment and allowed the company to trim staff and sell off older, less efficient assets. But another part of the equation is the industrial giant's customer base. E-commerce is a big business, but UPS no longer wants to focus on just moving more packages. It is increasingly looking at how much profit it can generate from the packages it moves. This is why it has chosen to proactively reduce its relationship with Amazon ( AMZN -0.70% ) . Amazon used UPS to ship many packages, but the profit margins on those shipments were very small. Instead, UPS wants to move fewer, higher-margin packages. This is exactly what the medical sector offers because medications often must be kept at specific temperatures throughout their shipping process. This isn't a new initiative for UPS. It has been making this shift for a while now, and the results are clear. Even though its U.S. business revenues are falling, the profit it earns per piece it delivers is rising. This is the goal and a clear sign of progress in the company's turnaround effort.
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