UPS CFO: Dimensional Pricing Helps Us Operate Better And More Efficiently

United Parcel Service, Inc. UPS declared its first-quarter results earlier on Tuesday. While EPS for the quarter came above expectations of $1.09 at $1.12, revenues were a notch below the $14.27 billion estimate at $14 billion.

Kurt Kuehn, UPS CFO, was on CNBC post the reaults to discuss how dimensional pricing is impacting the company’s revenue and plans for this holiday season.

Dimensional Pricing

“The vast majority of our loads at UPS actually fill up with cubic capacity before the weight limits and so really the cubic size of the package is what drives cost in our network,” Kuehn said. “So, with the proliferation of growth in e-commerce and other things we have seen a gradual deterioration in the amount of weight per given size of a package.”

He continued, “So, this charge really is an incentive for our shippers to be more efficient, to make sure that they don’t put a small item in a large box. It did drive up revenue in the quarter, but ultimately the goal is just to help our customers shrink their package sizes down to make things more efficient and it helps us operate better and also more efficiently.”

Plans For Holidays

Kuehn was asked how UPS is planning to reduce the inefficiencies during holiday season this year. He replied, “Well certainly this ever increasing spike between our average volumes during the year and then the holiday season does create a great opportunity, there’s tremendous growth.”

 “But it is also a challenge to ramp up 60 or 70 percent with our airplanes and drivers and sorters. So, it is a challenge for us, but we have ramped up capacity, we are learning for better ways to handle that spike without over investing the other 11 months of the year,” Kuehn concluded.