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As parcel carriers continue to contend with brutally low volumes across the parcel sector, executives are being forced to make difficult decisions in the name of operational efficiency.
UPS, plagued by especially low volumes compared to key competitors, announced last week that it would be implementing mass layoffs across its operational footprint, including both full and part-time staff, as well as contractors. The layoffs, which will go into effect during the first half of 2024, are a stark sign of the difficult financial conditions facing the parcel industry at large.
In this week’s newsletter, we’re diving into the headlines shaping the global transportation industry. From layoffs at UPS to continued fallout from the ongoing crisis in the Red Sea, we’ve got the information you need to stay relevant in a highly dynamic logistics landscape. Here's what you need to know in an industry that’s always moving.
As UPS continues to face stubbornly low volumes across its operational footprint, the carrier has announced upcoming layoffs of 12,000 employees and is reportedly considering selling its truckload business, Coyote Logistics. The layoffs will consist of both full and part-time employees, as well as contract workers, in an attempt to streamline operations as part of the carrier’s “Fit to Serve” initiative.
“The projected layoffs,” FreightWaves reported on Jan. 30, “[...] will affect less than 3% of UPS’ workforce of about 495,000, and are expected to save the company about $1 billion in 2024, executives said. About 75% of the layoffs are expected to occur in the first half of the year, executives said. The reductions will not impact unionized employees.”
As UPS contends with falling volumes, the carrier has reinstated key incentives to draw prospective air shippers to its air service. The company announced in a Jan. 30 website post that they would be reinstating the money-back guarantee on parcels shipped through their UPS 2-Day Air A.M. service, as well as other air services.
Under the money-back guarantee, shippers whose packages fail to arrive by 10:30 AM on the guaranteed delivery date are eligible for a refund. The guarantee, removed during the volume-rich pandemic-era e-commerce boom, has been reinstated to improve volumes throughout the carrier’s air services. UPS’ key competitor, FedEx, which offers a similar air service through FedEx Express, has not yet reinstated its pre-pandemic money-back guarantees.
As maritime carriers struggle to adapt to the disruptions plaguing the Red Sea, many are making significant changes to established routes. Maersk, a leading maritime carrier on the vanguard of adaptations to the crisis in the Red Sea, has announced plans to cut calls at the Port of Jeddah from its Asia-Europe services and Middle East services. MSC, another leading maritime transportation services provider, has made a similar decision, according to reporting from The Journal of Commerce.
“The situation in and around the Red Sea-Gulf of Aden is deeply volatile with all available intelligence at hand confirming that the security risk continues to be at a significantly high level,” said Maersk in a Jan. 5 update.
The International Monetary Fund, the world’s leading economic organization, has released its 2024 global economic growth forecasts, with global growth projected to reach 3.1% in 2024 and 3.2% in 2025. This growth is projected to be most notable among emerging markets and developing economies, with growth in these sectors expected to reach 4.1% in 2024 and 4.2% in 2025, compared to 1.5% and 1.8% in advanced economies, such as the Eurozone and the United States.
While the IMF’s forecast is relatively optimistic, the organization warns onlookers to expect continued disruption from the ongoing crisis in the Red Sea. “On the downside,” the report states, “new commodity price spikes from geopolitical shocks — including continued attacks in the Red Sea — and supply disruptions or more persistent underlying inflation could prolong tight monetary conditions.”
The Biden Administration has announced nearly $5B in transportation development funds as part of its ongoing efforts to revitalize transportation infrastructure nationwide. The President said $1B of the funds will be used to overhaul the Blatnik Bridge in northern Wisconsin.
Other key projects include:
“These historic projects will create good-paying jobs, make our transportation systems safer and more resilient, and unlock economic opportunity for communities across every corner of the country,” White House officials said in a fact sheet released Jan. 25.
In December 2023, the U.S. warehousing sector saw a notable drop in employees. During December, the number of employees in the U.S. warehousing and storage sector fell to 1.85B workers, the lowest since November 2021, according to reporting from Supply Chain Dive. The number of employees crested in June 2022, during the height of the COVID-19 ecommerce boom.
The precipitous drop in employees can be attributed to significant layoffs across the warehousing sector, including the upcoming layoffs of 274 employees by ecommerce apparel company Zulily, among many others. As a problematic inflationary environment all but ensures low ecommerce volumes for the foreseeable future, experts expect to see the number of employees working in the U.S. warehousing sector continue to decline.
U.S. cargo theft spiked 57% in 2023 compared to 2022. The increase is in line with a continued trend of increased cargo theft throughout the U.S. logistics sector; 2022 saw a rise in cargo theft incidents of 20% over 2021. In 2023, nearly $130M in goods were stolen during cargo theft incidents. However, experts warn that this number is likely an underestimation of the issue, as reporting of cargo theft is not mandatory in the U.S.
“Back in 2014, we were taking in 100 or so [reports] a month,” Keith Lewis, vice president of operations at CargoNet, told CNBC for a Jan. 22 article. “Now, we’re probably taking in about 220 plus a month of cargo theft events.”
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