UPS expansions defy world economic woes

UPS expansions defy world economic woes

In fact, not only is the package and freight giant aiming high for the next few years, it is also gearing up for what it expects to be one of its best peak seasons despite a clear lethargy that much of the general air cargo industry is experiencing. Recognising that more than 95 per cent of the world’s potential customers are located outside the United States, Scott Davis, UPS chairman and CEO has not only urged US businesses to be more vocal in demanding better access to what he termed a “huge wave” of global consumers; his company is expanding to take advantage of world trade opportunities despite the recession.

Global expansion

In September, UPS announced plans for expanding its European air hub facilities at Cologne Bonn Airport. That expansion involves extending an existing building for processing larger freight shipments and equipping the existing facility with additional state-of-the-art technology. Together, these initiatives will significantly increase the hub’s package sorting capacity from today’s 110,000 to 190,000 packages per hour. The expansion is scheduled for completion in September 2013. The Cologne/Bonn operation is the second largest operation within the UPS system next to Worldport in Louisville, Kentucky. In 2010, revenues from the UPS Europe region totaled US$49.6 billion, while delivery volumes totaled a whopping 3.94 billion packages and documents. From Cologne/Bonn, UPS services 55 intra-Europe airports with 156 intra- Europe daily flights; 12 intercontinental airports with 136 intercontinental flights. In July UPS began daily service from the European hub to growing Chengdu, China, in its effort to expand its reach into inland China. As a result, UPS boosted its profit 26 per cent in Second Quarter 2011 largely though expanding its Asian air network to connect with Europe. The service stops in Warsaw, Poland, before flying to Chengdu’s Shuangliu International Airport, China’s sixth largest cargo and passenger hub. The service will end at UPS’s Asian hub in Shanghai. In Asia, UPS has improved more than 100 intra-Asia lane pairs since opening its Shenzhen hub in May 2010. Since then, UPS has operated more than 5,000 flights to and from this hub. The decision to move the intra-Asia hub to Shenzhen was prompted by developing trade flows that now see more than 75 per cent of intra-Asia business originating from the North Asian region. The improvements include faster transit times on key lanes between India and the rest of Asia and between S. Korea and other Asian destinations. For example: Beijing customers now benefit from improved time-in-transit and later cut-off times to cities like Hong Kong, Singapore, Sydney, Taipei, Tokyo and Osaka. The Indian cities of New Delhi, Mumbai and Bangalore have seen reduced time-in-transit to destinations like Australia, China, Hong Kong, Korea, Singapore and Vietnam. And shipments bound from Seoul to major cities like Guangzhou, Hong Kong, Mumbai, Singapore and Tokyo now benefit from later cut-off times. In June, UPS also launched a direct weekly flight from Guam to Hong Kong, which will service the express package, military and forwarder communities and provide capacity for the Asia export market. “Additionally, the recently announced expansion of the US Marine base on Guam is increasing requests for UPS services there,” says Derek Woodward, president of UPS’s Asia Pacific Region.

The Americas

With Latin American economies growing an average six per cent in 2010, and continuing to show solid growth, in June UPS significantly expanded the capacity of its express air network on 19 weekly flights into Central and South America. In the move, UPS replaced a Boeing 757 narrow-body aircraft with a new, larger B767 wide-body freighter. The B767 can carry a payload of nearly 60 tonnes, or about 50 per cent more than a B757. The flights originate from UPS’s Americas hub in Miami and operate into Quito, Ecuador; Guayaquil, Ecuador; Bogota, Colombia; Panama City, Panama; Guatemala City, Guatemala, and Managua, Nicaragua. “UPS has been one of the largest cargo carriers in the Americas for more than a decade, so when our customers asked for more capacity, we responded with this larger aircraft,” says Romaine Seguin, president of UPS’s Americas Region. Leading export commodities of interest for air freight are flowers and farmed fish in Colombia and Ecuador; fruits and vegetables in Guatemala; okra and automotive parts in Nicaragua, and fresh fish out of Panama. Technology and health care products also are increasing. The high schedule reliability rate of both the B757 and B767 is an attractive alternative for exporters with tight supply chain and cold chain requirements. To increase its reach into the Americas, Asia and other parts of the world, UPS continues to invest in new B767s with 20 currently on order.

Crown jewel

Worldport, which just completed an extensive expansion in April 2010, is the crown jewel in the UPS network. Today the complex, which is located next to the Louisville International Airport, operates as the company’s only all-points international air express hub; it is also the UPS Airlines headquarters and the company’s largest distribution campus. Especially noteworthy, Worldport is the largest fully automated package handling facility in the world. The operation currently turns over 130 aircraft daily, and processes an average of 1.5 million packages a day with a record 2.9 million packages processed on Peak Day 2010. Executives reveal that given the facility’s design, Worldport is capable of processing up to a half million packages per hour. The complex was expanded twice, with its second expansion completed in April 2010. Today the mammoth facility measures 484,000 square metres, with a perimeter of 11.6 km. Key to the Louisville operation is the speed by which it turns aircraft. “We only touch shipments twice,” remarks Mark Guiffre, UPS spokesman in Louisville. “All operations here are automated.” At the heart of the operation is the UPS Supply Chain Solution Center, which can process small packages in 11 to 16 minutes, parcels in 8 to 43 minutes, and incompatible shipments in 12 to 45 minutes. Sorting is done by a system of 33,245 conveyor belts spanning 250 kms throughout the Worldport complex. The system includes 546 camera tunnels and 19 tracks, each 4.2 kms long, for tilt tray sorters. High-speed conveyors and “smart labels” read by overhead cameras facilitate the processing of the documents, small packages and irregular-sized shipments. Key to making this work is the Smart Label System. “This system drives everything,” says Guiffre. “We call it our license plate.” Such smart labels, or “license plates”, are attached to every package, thus providing them with a identification number. This label is scanned to identify where the package is going and where it ends up ensuring it goes to the right container. “The label also captures all information,” he adds. Adding to the speed is automated equipment and overall process improvements that reduce the amount of time employees spend lifting and lowering packages while reducing the average package cycle-sorting span. A newly developed IT system rapidly transmits Customs information to expedite the movement of international shipments. Plus specially designed docks and hub floors let workers move package containers easily from one area of the building to another. Besides improvements to the UPS Supply Chain Solution Center, Worldport’s recently completed expansion includes two new aircraft load/unload ‘wings’ and associated aircraft staging ramps. The complex also now offers 70 aircraft parking positions. Additional ramp space accommodates UPS’s new line up of B747-400 cargo planes. The company operates about 220 planes, with 13 of them being B747-400s. “Besides being long range, and efficient aircraft, the B747-400 aircraft are the largest and newest aircraft in our fleet,” Mangeot says. In recent years, UPS has retired older models such as the B727 and DC-8 aircraft, and replacing them with B747- 400 and 767-300ER freighter aircraft. The widebody freighters can be used on routes to and from Europe and Latin America as well as on routes within Asia. UPS aircraft are supplemented with around 330 chartered flights. “UPS has sought to eliminate excess capacity from its system as demand for air cargo shipping has declined through the global recession,” Guiffre comments.