Understanding and comparing carrier performance

With UPS and FedEx being in the same business, they both share common challenges like;

•       Profitably managing the growth of the ugly, low volume and costly, residential delivery.
•       Competing with low cost, on-demand last-mile delivery models.
•       Extracting cost from their legacy business models.
•       Adjusting to lower revenue, shorter distance deliveries originating from forward stocking fulfillment centers and big-box stores, driving lower revenue per package trends.
•       Managing the Amazon threat as this e-commerce giant spends billions on developing their parcel delivery capability and slowly morphs into a lower cost, direct competitor.

While both UPS and FedEx essentially perform the same service, their corporate strategies, business models and company cultures are very different and the way the two companies are adjusting to changes in the marketplace is also very different. However, while being very different enterprises, you shouldn’t assess quarterly financial performance in a vacuum and to truly understand financial performance, you need to compare operational performance metrics across both enterprises when these parcel mega-giants report earnings and remember that it’s the operational metrics that ultimately drive financial performance.   The challenge is to identify the most important metrics to focus on when assessing quarterly report data.  In that spirit, here are my recommendations for assessing UPS performance when they report on 10/24/19, without getting lost in the sea of metrics reported.

·      Revenue Per Ground, International and Express Package – This is the single most important factor that drives overall financial performance and profit margin.

·      Package Volume Growth/Decrease by Parcel Segment – Driving scale and resulting cost efficiencies via higher package volume is also critically important to financial success.

·      Packages Per Delivery Stop – This is another metric that drives operational cost savings that should result in improved margin.

·      Breakdown of B2B Versus B2C Delivery Packages and Stops – This is simple, B2B shipments are much more profitable than B2C shipments.

While not a pure operational performance metric, it’s also important to try and deduce market share changes from the quarterly earnings report. This number needs to be extrapolated from both carrier claims and comparison of operational performance indicators for both carriers.

There are obviously hundreds of metrics and performance indicators you could consider when interpreting a parcel carrier’s quarterly performance. I am hopeful that my recommendations help you to simplify your analysis process and enable you to differentiate operational performance between the two carriers that dominate the space.