Shipping and delivery have been completely reshaped, and if some issues aren't fixed, the impact could be devastating to retailers' and brands' bottom lines, according to a white paper released Wednesday by UPS Capital titled “The Future of Shipping: The Path Is Paved with Innovation and Personality.”
UPS Capital is a financial services division within UPS, which announced mass layoffs this week, underscoring changes in the industry noted in the white paper.
To pave the way, the report's authors said the e-commerce market has witnessed “an unprecedented surge in online shopping in recent years, with no signs of stopping as experts predict that retail e-commerce sales will increase by more than 10 percent annually from 2024 to 2027.” .
This additional growth and volume UPS Capital says will increase the risk of errors in the post-acquisition phase of implementation. “Shipping and delivery issues, such as lost, late, damaged, or stolen packages, not only threaten merchants’ bottom lines, but also jeopardize positive customer experiences,” the report stated.
The report showed that 54 percent of retailers surveyed said they saw a 30 percent increase in shipping volume due to the growth of online shopping over the past two years. “This is fully in line with expected customer behavior, with 48 percent of consumers surveyed stating they plan to increase online shopping in 2024,” the report authors said.
The survey showed that the top three capacity constraints facing retailers are challenges of speed of fulfillment, managing spikes in demand during peak periods, and enabling better tracking and transparency.
But there may be a white knight on the horizon to alleviate these problems.
“Technology is playing an increasingly pivotal role in supply chain and shipping dynamics – leading to the emergence of artificial intelligence as the best way to address growing challenges,” the report stated. “In fact, UPS Capital figured it out [77 percent] The SME decision makers surveyed have implemented some form of AI-powered technology.
The report showed that 67% of merchants surveyed expect AI-based solutions to “reshape the shipping industry by improving efficiency.” 58% of respondents expect that AI will reduce human errors, while 44% believe that it will improve inventory management.
On the topic of returns, UPS Capital found merchants citing processing time, reverse logistics cost, and identifying root causes as the top challenges along with inventory management and financial forecasting.
“Merchants surveyed believe that data analytics and automation can be potential solutions to mitigate some of the challenges posed by returns,” UPS Capital said. “Specifically, they see these technologies as helpful in improving inventory management (50 percent) and reducing returns processing costs through optimized returns shipping (37 percent).”
Meanwhile, parent company UPS let 12,000 workers go as part of a $1 billion cost-saving measure. Nearly 75% of the cuts will be implemented in the first half of the year, according to UPS Chief Financial Officer Brian Newman. Most of the roles that will be eliminated will come from management, along with some contractors.
UPS has about 85,000 full- and part-time managers as part of its global workforce of 495,000 employees. “It's a change in the way we work,” Newman said. “As volume returns to the system, we don't expect those jobs to come back. It changes the efficient way we operate.”
Since the peak of demand during the COVID-19 pandemic in 2021, the company's headcount has been reduced by 45,000 employees. The $1 billion savings come after 2024, which CEO Carol Toomey bluntly described as a “difficult and disappointing year.”
The layoffs represent another round of job cuts in the broader logistics sector and illustrate the pressures the company has been under since agreeing a new five-year contract with the Teamsters. That deal incurred $500 million more in expenses in the back half of 2023 than UPS initially expected, pushing the company's margins down even further.
