United Parcel Service plans to realign its operations in the coming months, consolidating its regional and district officers while eliminating about 1,800 management and administrative positions.
The freight transportation giant said it expects to incur a one-time charge this year to pay for the reorganization. However, UPS said it expects that expense will be offset by cost savings achieved by realigning its U.S. package carrier business.
“The decision to reduce our workforce is difficult and we appreciate the significant contributions of those who will be affected by this change, but we believe this will allow us to sharpen our focus on profitable growth while being even more nimble in serving our customers,” said UPS Chairman & CEO Scott Davis in a statement.
“The new management structure creates regions and districts that are better aligned geographically,” he added. “In turn, this will enable more local decision-making and resources to be deployed for our customers.”
Effective in April, UPS said it will reduce its U.S. regions from five to three and its U.S. districts from 46 to 20. The restructuring will eliminate approximately 1,800 management and administrative positions across the country, with normal attrition minimizing some job displacements, while approximately 1,100 employees will be offered a voluntary separation package.
UPS stressed that there are no plans to close any operating facilities and the consolidation of offices will not affect the unique relationship between customers and its sales and operations team, including drivers.
“UPS is getting its ducks in a row in anticipation of a rebounding economy to emerge as a leaner and meaner force in the North American and global logistics market,” Sandeep Kar, global program manager and analyst with consulting firm Frost & Sullivan’s automotive and transportation practice, told FleetOwner.
“Once the economy begins to expand again, decisions like these coupled with its focus on integrating various operating cost reduction and mobile resource productivity enhancement technologies will
enable it to emerge as a more profitable organization,” he said.
UPS also noted that its 4th quarter 2009 earnings were better than expected and should reach 73 to 75 cents per diluted share compared to previously projected earnings of 58 to 65 cents per diluted share.
“The stronger earnings stem from better-than-expected results in both domestic and international operations and savings through cost management,” said Kurt Kuehn, UPS’s CFO. “However, we still anticipate a gradual economic recovery with improvement more evident as 2010 progresses.”
Frost & Sullivan’s Kar pointed out “That’s why this new announcement underlines the long-term growth strategy of UPS, where on one side it is consolidating operations, and on the other side it is incorporating hybrid and other fuel-efficient powertrain technologies to its fleet reducing fuel costs and its carbon footprint.
“Also,” Kar added, “on another front, UPS is actively leveraging mobile resource productivity enhancement technologies such as telematics and IT [information technology]. “When you
start joining the dots, it becomes clear that UPS is preparing for the next decade, and doing so very actively and with a sense of urgency.”