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UPS Says It Has Sorted Out Holiday Snags, 'Will Deliver' This Year

by Reuters /

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CHICAGO - After having difficulties getting the holiday peak season right for the past two years, executives at United Parcel Service insist they have a winning formula this year.

"We are ready for peak season and we will deliver," Chief Financial Officer Richard Peretz told Reuters on Tuesday.

Peretz spoke to Reuters after the world's largest package delivery company posted a better-than-expected quarterly net profit despite the impact of a strong U.S. dollar.

The company's CFO said closer collaboration with an increasing number of retailers will allow UPS to better manage demand. And by staggering its seasonal workers it should be able to better manager costs associated with ecommerce packages in the run-up to the holidays, he said.

In 2013, a late surge of online packages hit both UPS and main rival FedEx Corp., leaving an estimated 2 million packages undelivered on Christmas Eve – most of them in UPS's network.

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Last year, the company overcompensated and spent too much planning for packages that never materialized, hurting fourth-quarter earnings.

This year UPS said it expects holiday volumes between Black Friday - traditionally the busiest U.S. shopping day of the year - and New Year's Eve to rise 10 percent to 630 million packages.

On its expected peak day of Dec. 22, UPS expects to deliver 36 million packages, or double its daily average of 18 million.

Memphis-based FedEx said on Monday it expects volumes to rise 12.4 percent to 317 million packages from Black Friday to Christmas Eve.

FedEx Forecasts Record Shipments Over Holiday Season

Handling rising ecommerce volumes is a challenge for the industry, as UPS says it costs three times as much to deliver to a home as to a business. The National Retail Federation says 2015 online holiday sales could rise up to 8 percent.

UPS CFO Peretz said by working more closely with a larger number of retailers the company will have a clearer picture of pending package volumes, augmented with "some ad hoc decision making."

He said UPS will "help to shape demand" by working with a network of small retailers who can hold packages for consumers in busy urban areas. The network also will allow the company to to stagger volumes wherever possible rather than have them all enter its network at the same time, he said.

Peretz also said the 95,000 seasonal workers UPS plans to hire this year will be hired in waves to match the increase in demand as the holidays near.

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