UPS 'very confident' in ability to handle peak volumes, executive says

A top UPS Inc. executive said today that the company should be able to adequately handle holiday peak season volumes that are expected to be about 6 percent higher than last year's peak, noting that UPS' peak capacity will flex to levels matching the expected increase in volumes.

Mark Wallace, senior vice president, global engineering and sustainability, said the Atlanta-based transport and logistics giant "feels very confident in our peak plans." Speaking at the JOC Inland 2017 conference in Atlanta, Wallace said UPS is projecting to deliver 750 million packages between Thanksgiving and Christmas, about 40 million more than it handled last year.

UPS will expand peak capacity by roughly 6 percent, with the increases coming from the addition of three Boeing 747-8 air freighters—two of which are already flying—to operate from Asia, the roll-out earlier this year of Saturday ground services to 220 cities, a service not available in such scope during the 2016 peak, and 1 million square feet of U.S. distribution center space that came on line during 2017, Wallace said.

As it has in years past, UPS has spent much of 2017 working with customers to nail down their holiday volumes as precisely as possible, Wallace said. The collaboration may take on added significance this year as UPS attempts to determine how much purchased truckload capacity it will need to handle package overflows in an environment where capacity in many markets is already tight. Good forecasting techniques will be critical to gauge what nodes will likely experience heavy volumes and position enough third-party capacity to ensure timely deliveries that can't be handled by UPS' own network, Wallace said.

This year's peak will be UPS' first that includes a delivery surcharge. The charges will vary in amount, and will be applied to residential ground deliveries made between Nov. 19 and Dec. 2, as well as the last week before Christmas. No ground delivery surcharges will be applied between Dec. 3 and Dec. 15, as UPS attempts to drive more holiday traffic away from the high-volume Black Friday and Cyber Monday shopping days, as well as Christmas week. Surcharges on its "Next Day Air," "2nd Day Air," and "3 Day Select" delivery services will only be imposed between Dec. 17 and 23.

Wallace said UPS was optimistic about the outlook for U.S. economic activity through the end of 2017 and well into 2018. The U.S. consumer is in good financial shape, business investment appears strong, and retailers are accelerating inventory replenishment efforts, he said. The economy is "on solid footing," he said.

UPS handles the equivalent of 6 percent of US Gross Domestic Product.