United Parcel Service (UPS) is one of the leading logistics
company and is known for its efficient system. UPS is very active in research
and has recently designed a new mechanism for its transport vehicles. UPS has
found that they can save money if they only take right turn. This case study is
now being discussed heavily in supply chain areas. UPS has recently reported
its performance during the first quarter of 2014 for fiscal year 2014. The
earnings have gone down by 5.8%; the share price is now $0.98 instead of
estimates, which were of $1.08. Company has also reported a decline in revenue;
revenues reported a drop of 2.6%. Company reported that its total profits have
decline as compared to previous year, profits were down to $1.5 billion after a
decrease of $106 million. The major reason reported was harsh weather
conditions because of which expenses were increased and total profits went
down. Although the total number of deliveries were up by 4.2% and the number of
customers availing this service also increased. UPS’s stock price is down by
0.4%.
US domestic package segment reported an increase in revenue
by 2.6% and was reported to $8.5 billion with a daily volume improvement of
4.2%. However, there was a decline in operating profit of $158 billion. A
contraction of 220 basis points was reported in operating margin. The change in
product mix has also reflected a decline of 1.5% revenue per package.
International package segment revenue was up by 5% during
this quarter. The operating profits also showed an increase of 12% and were
reported at $438 million. This segment also showed an improvement in operating
profit margin and it was up to 220 basis points this was linked to improvement
in network efficiency.
Supply chain and freight segment also showed an improvement
in operating profits, it was up by 3.5% and were reported at $148 million.
Operating margins were also up by 30 bps. This improvement was a result of
better performance of forwarding and distribution unit. UPS freight’s unit also
reported an increase in revenue by 3.1% but total profits were adversely
affected because of harsh weather conditions.
Severe winter is directly related to decline in profits of
UPS. This condition effected the whole transportation and freight industry. This
is a classic example of how a company so successful in operations can be
affected just by some natural conditions according to UPS chairman the whole
economy has suffered because of these harsh weather conditions and several
companies have shown decline in profits in first quarter. He says that after
the streamlining of weather condition the expenses of the company will go down
and profit will increase and company is very likely to regain its original
position.
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