By Lisa Baertlein
LOS ANGELES (Reuters) - United Parcel Service (NYSE:UPS)'s first outsider chief executive is zeroing in on lucrative healthcare business and package-tracking technology as she tweaks the world's biggest delivery firm's strategy to navigate a cooling global economy.
CEO Carol Tomé took the helm in June 2020 as UPS was grappling with a surge in pandemic-fueled e-commerce deliveries that were swamping drivers and hammering profit.
(Graphic: Softening U.S. e-commerce demand https://graphics.reuters.com/UPS-RESULTS/znvnbdzajvl/chart.png)
Her initial "Better not Bigger" strategy focused on using assets and workers more efficiently, wringing out unnecessary costs and shedding low-margin business.
Analysts and investors say that plan helped UPS weather COVID-19 business disruptions and ongoing political and economic tumult more deftly than rival FedEx (NYSE:FDX).
Now, with e-commerce demand ebbing and global economies downshifting, Tomé is revising the company mantra to "Better and Bolder." UPS teams are aggressively pursuing new revenue and zeroing in on more profitable industries and services designed to lower UPS delivery costs and bolster customer service.
Tomé, the first woman to lead UPS, said the 115-year-old company used to put volume ahead of value.
Now, Tomé told Reuters, the company's plan is to "lean in, and whatever comes our way, build enough agility into our operating plan that we can turn on a dime."
UPS shareholder Gary Bradshaw said Tomé had a successful track record as chief financial officer at Home Depot Inc (NYSE:HD).
"She delivers," said Bradshaw, a portfolio manager with Hodges Capital Management in Dallas, which holds about 20,000 UPS shares in different accounts. "As a shareholder, you feel like you could count on her."
HEALTHCARE TO RETAIL
UPS was on the front lines of super-cold COVID-19 vaccine deliveries and this year's purchase of Italy's Bomi Group will expand its footprint in the specialized and highly competitive global healthcare logistics segment.
The deal, valued at between $500 million and $1 billion, will bolster the company's position in Europe and Latin America. It will also accelerate growth in UPS's healthcare business which Tomé says is on track to top $10 billion in annual revenue by 2023 and could double that over the next several years.
UPS has a built-in cost advantage over FedEx. That is because it runs a single, unified network versus its rivals' disparate systems, analysts say.
UPS is embracing new technology to expand that lead and woo new business to shelter profit in a tougher operating environment.
It is adding radio-frequency identification (RFID) tags used on premium healthcare shipments to everyday packages. That will help UPS workers avoid millions of package scans per day - freeing up employees for other tasks and reducing lost and misdirected packages.
In a new project, UPS is using data to consolidate deliveries when a shopper has several orders from different retailers within a few hours. That could slash costs by cutting the number of trucks required to make those deliveries.
Those and other digital initiatives are expected to help UPS win roughly $2 billion in new business this year from retailers and small businesses that sell via platforms like eBay (NASDAQ:EBAY) and Shopify (TSX:SHOP), Tomé said.