New York magazine recently polled the industry’s top freight companies and found that while many of them were expanding, the big ones were not.
Some, like UPS, were building new warehouses to ship their goods from their hubs to other cities, while others were just consolidating their operations into larger warehouses that were already built to handle their products.
And some were just rehiring workers from smaller companies.
For example, the UPS Freight Tracking Center in New Orleans has been in operation since 2012, but it’s now building a new warehouse in Atlanta, where it expects to ship about 20,000 packages per day by year’s end.
UPS’ chief executive, Jeff Bezos, said recently that the company is adding 200 jobs at the Atlanta site, and it’s expanding in some other parts of the country.
The industry doesn’t yet have a clear definition of what constitutes “freight,” which is why companies have to be creative about the way they define it.
“Freight is the industry we’re talking about here,” says Matt Miller, vice president of business development at the freight tracking and logistics firm TNC.
“The way you define it, the way you categorize it, you’ve got to figure out what the rules are for that.”
And it’s not just the logistics companies who need to be careful about how they define the term.
“Companies are going to look at every business as freight, because that’s the only way they make money,” says Chris Smith, vice-president of product at tracking service provider Hootsuite.
“But if you look at the industry overall, we’ve seen that in the past three years, the number of companies that have expanded and created new businesses, or are going into the business of moving people around the world has dropped dramatically.”
The number of UPS Freights is down, and the number that are expanding is up.
In the first half of this year, UPS was expanding in Atlanta; by the end of June, the company had about 1,300 jobs there, according to its financial statement.
But this year it’s shifting to another city, a move that could help to boost its profit margins.
UPS has been consolidating its warehouse operations, in part, to keep its customers as close to its hubs as possible.
But there’s another way UPS defines freight.
In a recent report, UPS executives estimated that the total value of UPS’s freight and delivery business is up about 13% since 2014, and that number is expected to increase to more than 50% by 2020.
That means UPS has about $1.7 billion in cash on hand, and $8.8 billion in stock.
That’s a lot of cash to invest in new warehouses, but not so much cash to spend on the kind of things that are typically considered “freighter” operations.
“We’re not a large warehouse, so we don’t need to invest a lot in new equipment,” says Smith.
“Instead, we invest in the technology, in the knowledge, in how we’re going to scale and how we manage our workforce, in what we’re doing in the supply chain.
That doesn’t necessarily mean a huge investment in new machines, but in what’s going to get us the most bang for our buck.”
Still, many of these new operations are just the latest example of the increasing reliance on big-box retailers, which have had an especially strong start to the year, as the holiday shopping season approaches.
“There’s been a lot more demand for warehouses in general and for UPS Freighters in particular,” says Miller.
“They are more competitive in that they’re going after the same customers, so there’s more incentive to have a good warehouse.”
But there is another way to measure the success of the UPS approach: revenue.
UPS says its revenue in the first quarter of 2020 was $838 million, up from $692 million the same period last year.
That increase came primarily from increased demand for the company’s shipping business, and an increase in its profit.
The company has also been expanding its warehouse network in other ways.
In early April, the Atlanta company announced that it would be adding a new facility to serve its customers who need more than one delivery service.
And on May 3, it announced that the first new facility would open in 2019 in Philadelphia.
“What’s happened is the demand for our products has gone up,” says Jeff Smith, UPS’s chief executive.
“So we’re seeing more customers requesting our products and getting them.
So that’s been our biggest challenge.”
That demand may be partly why UPS is expanding its freight tracking network in the Northeast and the Midwest.
In fact, it’s so much of a focus that the Atlanta-based company recently announced that its warehouses will be expanded to accommodate customers in the South and Midwest.
“With the demand in the U.S. for our freight, we need to find a way to get those customers to