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Parcel carrier Estafeta handles 300,000 shipments per day from 145 locations in Mexico . Hafit Irawan / Shutterstock . com border . Trucking companies , third-party logistics ( 3PL ) providers and intermodal service providers are all racing to grab a greater share of cross-border freight .
US-Mexico bilateral cross-border trade by truck measured in dollar value increased 7.3 % year over year to $ 353.58 billion from January through July , the latest month for which data is available from the US Bureau of Transportation Statistics ( BTS ). UPS ties that growth to nearshoring .
“ As we continue to see the trend toward nearshoring take hold , our acquisition of Estafeta will further increase our capabilities in Mexico ,” said UPS CFO Brian Dykes . Among the beneficiaries will be automotive manufacturers and healthcare customers .
E-commerce explosion
The acquisition comes as an influx of e-commerce shipments boosted volumes in UPS ’ US package network . Total domestic daily package volume increased 0.7 % year over year in the second quarter , UPS said , led by a 2.3 % increase in ground packages .
“ We returned to volume growth in the US in May ,” Tomé said . “ We experienced a shift toward our value products , with shippers choosing ground over air and SurePost over ground .” SurePost delivers UPS packages using the US Postal Service .
Tomé and Dykes tied the increase in US package volume to changes in shipment mix , a larger number of smaller packages and the addition of two large “ non-traditional ” e-commerce customers whose package volumes “ blew up on us ,” Tomé said .
Although UPS did not identify those customers , one is believed to be Chinese e-commerce marketplace Temu , whose US sales revenues are believed to have topped $ 5 billion in the second quarter , according to a report from the South China Morning Post .
Tomé and Dykes said UPS expects the volume from
its new customers to moderate as it works to get better forecasting from them . “ We are also working with the new customers to normalize the volume ,” said Dykes .
Higher peak ahead
UPS expects its revenue to rise about 5 % in the second half of 2024 , supported by stronger package volumes , company executives said . In the US , average daily volume growth will be in the “ mid-single digits ,” Tomé said . “ We expect a strong peak driven by demand growth .”
“ We continue to see the trend toward nearshoring take hold .”
She said the 2024 holiday season “ is the most condensed peak since 2019 ,” noting there are only 27 days between Thanksgiving and Christmas this year . UPS expects “ the highest volume in our network ever ” during that holiday peak , Tomé said , and higher prices to stick .
UPS in July announced a series of peak season surcharges that will run from Oct . 27 through Jan . 18 , 2025 , one week longer than last year . The highest surcharges will be in effect from Nov . 24 through Dec . 28 .
“ We ’ re not chasing volume ,” Tomé said . “‘ Better not bigger ’ has not gone away .”
UPS has closed several US facilities and plans to close more as it realigns its network , she said . “ We ’ ve committed to five additional closures in the back half of the year ,” Tomé said .
Journal of Commerce analyst Cathy Morrow Roberson contributed to this report .
email : bill . cassidy @ spglobal . com
20 Journal of Commerce | October 21 , 2024 www . joc . com