UPS sells trucking unit(themiddlemarket.com)
themiddlemarket.com
UPS sells trucking unit
https://www.themiddlemarket.com/news-analysis/ups-sells-trucking-unit-for-800m
71 comments
So this is material on pallets, but not including household-type moving nor material needing specialized trailers?
Palletized shipping is an entirely different world. I recently bought an Optigan (Itself worthy of a HN discussion) and it was shipped on a pallet. Despite mediocre 1970s plastic construction it arrived alive. The shipping experience is hardly door to door. I had to drive to an opposite side of Houston in a ramshackle shipping area that could best be described as sketchy. That said, the folks working there while few were great and helped me load it up and get on my way... Point being I could see that UPS doesnt see a big future in that business. There isnt really a good way to last mile stuff like that cheaply.
Door to door LTL with lift gates is a thing. The shipper has to request that specific service. Basically, you bought from someone that either didn't know how, or didn't care, to do it the right way. Compared to regular UPS/Fedex, the big downside is that someone has to be there when it arrives. They won't just leave it at your door if you're not there.
The LTL market is ~$46B/year, and was growing prior to COVID. The COVID hit makes sense, as the big boys don't do a lot of LTL, having enough volume to do full truckloads.
The LTL market is ~$46B/year, and was growing prior to COVID. The COVID hit makes sense, as the big boys don't do a lot of LTL, having enough volume to do full truckloads.
I've also seen it where the customer doesn't really understand this shipping service. Jarvis desks have multiple warnings about delivering to your house. IIRC if you live in NYC they don't even let you chose that option, you have to pay $150 more for lift gate.
That's really a big issue. Lift gates are expensive, require maintenance.
Rando homeowner won't understand why that's 'extra' and such because we're used to things being adapted to hour home ... not a loading dock.
Rando homeowner won't understand why that's 'extra' and such because we're used to things being adapted to hour home ... not a loading dock.
Sometimes shippers just say "we assume you have a loading dock" because they can't be arsed to care about it. More than once I've unloaded a pallet a box at a time from the back of the trailer while the driver was pissed he had to tip the boxes over onto my shoulder. If you ever have to hire an excavator for other reasons, it isn't a bad idea to have an outdoor "hump dock" built... the other option is a forklift!
I believe the NYC case is somewhat unique. Lift gate is extra, but not $150 extra or anything near that for most places. Meaning the extra charge from the actual carrier.
Yeah, I ordered a power rack from Rogue last summer, and it got here a few months ago. We live a ways down a pretty narrow private road and despite talking to the UPS freight manager a couple of times, they kept sending full sized 18 wheelers which would have a hell of a time coming down the road and turning around, not to mention probably damaging the road. After 3 times of them sending a full sized truck over the course of 2 weeks I just rented a UHaul and drove across the damn metro to get it.
B2C freight is a bit of a shit show.
B2C freight is a bit of a shit show.
I forget exactly what it was because it was ages ago but it was some furniture that wasn't too big or heavy but was apparently (at least at the time) too big or at too expensive to ship by normal delivery. I live at the end of a 500 foot dirt driveway and some big truck pulls up at the end. I'm not sure if they could have got down my driveway and actually gotten back out but they sure didn't want to. Ended up unpacking at the side of the road and I got it down my driveway somehow.
There are three companies specialized at that kind of stuff in Germany (they also serve other EU countries): a DHL brancha service from Rhenus and Hermes (Otto's logistics arm, Otto is one of the oldest mail order companies in Germany and transitioned rather well to the "internet"). The latter also contracted to Amazon, but is working exclusively in-house for quite a while now.
Quite an interesting business, somewhere between standard parcel and LTL.
Quite an interesting business, somewhere between standard parcel and LTL.
Mostly palletized, but also crates...stuff like say, a pool table.
There's also some cases where boxes over LTL makes sense...big boxes that are lightweight. Normal UPS and Fedex charge "dimensional weight", where shipping a large box that's light is charged by size, not weight. Sometimes that pushes the price much higher than LTL.
There's also some cases where boxes over LTL makes sense...big boxes that are lightweight. Normal UPS and Fedex charge "dimensional weight", where shipping a large box that's light is charged by size, not weight. Sometimes that pushes the price much higher than LTL.
If you want something that is too big for a box (like crates or pallets) but not big enough to ship a whole truckload, then you ship LTL.
We build pallets of boxes to ship coast to coast. It ends up being less expensive, faster, and the boxes arrive in better condition. Our west coast customers are set up to receive pallets which is nice.
Yeah, pretty much so. LTL is usually B2B, either for smaller shipments. Hence, less than a full truck volume vise. And it is a royal pain, also for businesses. You are mixing cargo with other clients, you are depending on a third party schedule and routing. There are multiple touch points increasing the risk of damage. Usually, there are multiple carriers involved.
And funny enough, there is close to zero synergy with an existing parcel network or an existing full truck load business. Besides being able to use the same trucks. And since most trucks are owned by third parties anyway, well even those synergies are small.
That being said, the LTL business is huge. It just seems that UPS is streamlining its own operation.
And funny enough, there is close to zero synergy with an existing parcel network or an existing full truck load business. Besides being able to use the same trucks. And since most trucks are owned by third parties anyway, well even those synergies are small.
That being said, the LTL business is huge. It just seems that UPS is streamlining its own operation.
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Generally pallets are most common, but it can vary.
I always thought LTL meant “load-transfer-load”. Like what they do at LTL warehouses.
That operation is referred to as crossdocking in the industry. Pretty silly that people would downvote you for that though.
I'm not sure why that got down voted. I kinda suspect the threshold for a given story and turning a comment grey is pretty low. That plus the horrible habit the internet has of down voting people who are 'wrong' is a bad combo.
It’s worse. All my posts are quickly downvoted, no matter the final count they always start with a downvote. I think someone I pissed off is running a bot.
Might be worth shooting DanG an email. If one particular someone is downvoting every one of your posts, that ought to show up loud and clear in the database. That kind of behavior is not something HN wants to allow, I would think.
Thanks but HN is rather toxic I don’t really think it would make a difference. I pray nothing I make ever gets posted here.
It's just HN. This whole community is more liberal with the downvote button than pretty much anywhere else on the Internet. It tends to even out over time though. Don't worry about it.
That sort of thing definitely happens sometimes on HN.
They once overnighted Tom Cruise' car https://youtu.be/Ok2NWF53bUY
The basic reason is the UPS trucking is unionized and its LTL competitors are mostly NOT unionized. This basically resulted in UPS trucking having higher costs than its competitors. So it ended up not being profitable.
So bought it for $1.25 billion, sold it for $800 million 16 years later. That's kind of painful. Of course, the execs who made the decision to buy it are almost certainly long gone...
Well, if this unit was making constant money over 16 years (directly and indirectly), and have paid for itself already, it is not a bad move.
Yeah the theory is that the price of a business reflects its future income.
I recently found that DHL, FedEx and UPS no longer offer express delivery services between the US and some Eastern European countries (or perhaps the whole EU) besides highly expensive next day air delivery.
Kind of sad for me, since I used to buy a lot of stuff on various American websites, notably eBay of course, and ship it within a week with DHL or Fedex for a reasonable price.
USPS/national post services are alright, but not the best. They take more time and lose packages more often.
DHL still has express shipping from China. I wonder if this is directly related to the shift in production. Everything comes from China/Asia these days, there's nothing I can't get there, there's no reason to buy from the US anymore.
Kind of sad for me, since I used to buy a lot of stuff on various American websites, notably eBay of course, and ship it within a week with DHL or Fedex for a reasonable price.
USPS/national post services are alright, but not the best. They take more time and lose packages more often.
DHL still has express shipping from China. I wonder if this is directly related to the shift in production. Everything comes from China/Asia these days, there's nothing I can't get there, there's no reason to buy from the US anymore.
These guys are absolutely amazing:
https://us-west.meest.com/services/service/international-par...
https://us-west.meest.com/services/service/international-par...
What countries? I recently ordered some motorcycle accessories from Perun Moto in Serbia (really nicely made stuff, btw) and they shipped DHL Express which was reasonable (about $50) and rather fast.
The Real Reason: "UPS is union busting".
I was wondering why Amazon is moving to its own delivery service and why UPS is selling. I did a quick search and noticed UPS Tucking is unionized
http://teamsterslocal638.org/local-work-sites/ups/
So UPS wants to dump the union before the new US admin starts looking at Labor.
I was wondering why Amazon is moving to its own delivery service and why UPS is selling. I did a quick search and noticed UPS Tucking is unionized
http://teamsterslocal638.org/local-work-sites/ups/
So UPS wants to dump the union before the new US admin starts looking at Labor.
The rest of UPS has a union as well. This is not the reason. Why make this reason up?
https://teamster.org/divisions/package-division/
https://teamster.org/divisions/package-division/
Have friends at UPS, can confirm it's all union, and it's really baked into their culture.
UPS already is a union shop.
Selling an LTL business doesn't change anything...
Selling an LTL business doesn't change anything...
> (...) separate from the package deliveries for which UPS is known, is primarily a business-to-business enterprise hauling large industrial cargo in big trucks.
Same article on bloomberg.com which doesn't require to login
https://www.bloomberg.com/news/articles/2021-01-25/ups-to-se...
https://www.bloomberg.com/news/articles/2021-01-25/ups-to-se...
Switched from https://news.bloomberglaw.com/mergers-and-acquisitions/ups-t.... Thanks!
Edit: Actually, let's use the one that seems to have the least paywallness (https://news.ycombinator.com/item?id=25916965).
Edit: Actually, let's use the one that seems to have the least paywallness (https://news.ycombinator.com/item?id=25916965).
We'll use that instead. Thanks!
That one's paywalled for me, too.
However, from the snippet in the Bloomberg Law version, it sounds like this unit is separate from package delivery:
> Canada’s TFI International Inc. will acquire the unit, one of the largest less-than-truckload carriers in the U.S., UPS said in a statement Monday. The eight-decades-old operation, separate from the package deliveries for which UPS is known, is primarily a business-to-business enterprise hauling large industrial cargo in big trucks.
> Tome’s plan to get lean is a change from 2005, when UPS paid about $1.25 billion for...
However, from the snippet in the Bloomberg Law version, it sounds like this unit is separate from package delivery:
> Canada’s TFI International Inc. will acquire the unit, one of the largest less-than-truckload carriers in the U.S., UPS said in a statement Monday. The eight-decades-old operation, separate from the package deliveries for which UPS is known, is primarily a business-to-business enterprise hauling large industrial cargo in big trucks.
> Tome’s plan to get lean is a change from 2005, when UPS paid about $1.25 billion for...
That outline was only the two paragraphs, this outline is the full article: https://outline.com/bdAVGF
Thank you, I wonder why it only got 2 paragraphs.
Is this the "MBA school of divesting so they can become a service company that sell brand and outsources everything"?
I think it's closer to the "shed dead weight" theory of any common sense business.
TFI is a machine in this space and has acquired double-digit numbers of regional trucking services over the last 5 years. They own enough of them that there is government-level scrutiny when they acquire a new trucking company to ensure they don't have more than 50% of the business in a given region.
LTL trucking is a capitally intensive and margin-thin game, if UPS is getting a decade worth of profits of that unit from this deal, which they can allocate elsewhere to better effect, then by all means. Don't dismiss the organizational overhead of running such an entire division, even at the executive level.
>UPS Freight generated approximately US$3 billion in revenue in 2020 and was approximately breakeven from an operating income perspective.
https://tfiintl.com/en/press_releases/tfi-international-to-a...
TFI is a machine in this space and has acquired double-digit numbers of regional trucking services over the last 5 years. They own enough of them that there is government-level scrutiny when they acquire a new trucking company to ensure they don't have more than 50% of the business in a given region.
LTL trucking is a capitally intensive and margin-thin game, if UPS is getting a decade worth of profits of that unit from this deal, which they can allocate elsewhere to better effect, then by all means. Don't dismiss the organizational overhead of running such an entire division, even at the executive level.
>UPS Freight generated approximately US$3 billion in revenue in 2020 and was approximately breakeven from an operating income perspective.
https://tfiintl.com/en/press_releases/tfi-international-to-a...
If it's dead weight, why is someone buying it?
Selling is different from shuttering.
Selling is different from shuttering.
Efficiency.
Consider a semi truck as a server. Belonging to UPS it's a dedicated server - when UPS doesn't need it, it's idling for the most part. When it belongs to TFI it's offered as a VPS. If it's sitting in a parking lot because UPS doesn't have a need for it and can't rent it to someone else, it's a quarter million dollar lawn ornament.
If TFI can instead, through increased client demand and smarter routing/logistics management ensure that the fleet is moving and making money 85% of the time vs UPSs 60%, that 40% improvement is mostly margin. Throw in economy of scale for things like fleet maintenance, financing, fuel and workforce/driver management and you drive operating costs down on the same fleet doing the same work.
Add that up and of TFI can service UPSs demand for less + add their own on top as extra margin, they just created value.
Consider a semi truck as a server. Belonging to UPS it's a dedicated server - when UPS doesn't need it, it's idling for the most part. When it belongs to TFI it's offered as a VPS. If it's sitting in a parking lot because UPS doesn't have a need for it and can't rent it to someone else, it's a quarter million dollar lawn ornament.
If TFI can instead, through increased client demand and smarter routing/logistics management ensure that the fleet is moving and making money 85% of the time vs UPSs 60%, that 40% improvement is mostly margin. Throw in economy of scale for things like fleet maintenance, financing, fuel and workforce/driver management and you drive operating costs down on the same fleet doing the same work.
Add that up and of TFI can service UPSs demand for less + add their own on top as extra margin, they just created value.
>UPS Freight generated approximately US$3 billion in revenue in 2020 and was approximately breakeven from an operating income perspective.
800mm for that kind of business seems like a very very good deal for UPS then!
800mm for that kind of business seems like a very very good deal for UPS then!
It looks like the value of this business unit has dropped though, UPS acquired their LTL operation for $1.2 billion in 2005. Maybe they just about broke even with the operating profit?
They essentially operated it at cost with themselves as the main client.
As is often the case with internal business units operating as cost centers and not forced to be externally competitive, they attrition over time and become less attractive vs external alternatives which competed and improved over the same time.
I suspect this is the case here and after 15 years they calculated it would be more efficient to have it run externally. UPS already uses TFI for a lot of these needs and the deal sees them continue to do so for the next 5 years.
It's not uncommon for businesses who own their building to sell the building to a real estate company and lease it from them when they can better allocate that capital for growth.
As is often the case with internal business units operating as cost centers and not forced to be externally competitive, they attrition over time and become less attractive vs external alternatives which competed and improved over the same time.
I suspect this is the case here and after 15 years they calculated it would be more efficient to have it run externally. UPS already uses TFI for a lot of these needs and the deal sees them continue to do so for the next 5 years.
It's not uncommon for businesses who own their building to sell the building to a real estate company and lease it from them when they can better allocate that capital for growth.
It is. And the business will be wound down and the excess business integrated into current capacity by the purchaser. Kind of a win/win in that way.
It may have been a good deal to the buyer as well. Assuming UPS put little effort into making it profitable (likely), there's little risk and lots of potential upside in 3B/year breakeven.
The other end of the deal is definitely the “fewer jobs, higher prices” school of acquisitions.
They explicitly say they plan to cut operating costs and simultaneously hike prices post-acquisition. Some, but not all of the cost savings will be fuel efficiency.
Saying you’re acquiring competitors so you can hike the prices and margins of both businesses is surprisingly honest. However, if that won’t raise regulatory scrutiny, I’m not sure what will.
They explicitly say they plan to cut operating costs and simultaneously hike prices post-acquisition. Some, but not all of the cost savings will be fuel efficiency.
Saying you’re acquiring competitors so you can hike the prices and margins of both businesses is surprisingly honest. However, if that won’t raise regulatory scrutiny, I’m not sure what will.
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That depends on whether LTL crates/pallets and parcels were ever on the same trucks at the same time.
This makes sense. There's far more competition for LTL than parcel shipping, and usually, UPS LTL rates aren't the best. (My employer audits and provides contract optimization for UPS parcels; we also have an LTL rate shopping product)
Please recall that this is the same company that "fumbled" one of the largest public-offerings in its day, to go "global".. followed years of personnel turmoil and missed goals after blaming the teamsters for everything
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UPS Freight has never really been “UPS” even though they sort of share the same computer systems and branding. Their quality of service has also always been much lower (at least in our region).
UPS Freight was an acquisition of Overnite Transportation several years ago. Not sure how much real integration between the companies ever happened beyond branding.
As someone who ships a decent amount of freight via UPS Freight (six time a year, at least), the integration is surface level at best. Yes you can go to the unified billing, but freight was it's own separate section. Yes you can get consolidated package/freight quotes but each had it's own website workflow. Yes you can generate a BOL on the ups.com website but it was way better to use the upsfreight.com website. The Freight API used the same ups.com API server and login, but it was it's own path with it's own xml schema.
It was pretty clear that the integration was, at best, surface level. Especially when the package reps and the freight reps had no clue what the other was doing, letting me know that it was just a siloed org.
It was pretty clear that the integration was, at best, surface level. Especially when the package reps and the freight reps had no clue what the other was doing, letting me know that it was just a siloed org.
At least when I was involved in shipping you could do both from a UPS account - but every company doing major shipments has more than one shipment supplier anyway.
This is the former Overnite transportation business that UPS purchased.
https://en.wikipedia.org/wiki/UPS_Freight
https://en.wikipedia.org/wiki/UPS_Freight
This wouldn't necessarily indicate anything about UPS's parcel business.