January 15

Wall Street & UPS

In the long run, Wall Street is the most rational place on earth. It rewards one thing: earnings and more earnings. Think GE in the Jack Welch era. In the short run, Wall Street is the most irrational place on earth. It trades on rumor, innuendo, hunch, wild ideas concocted over drinks or other mind enhancing agents and the opportunity to kick someone while he’s down or apparently so, commonly called short selling. Think Enron.

What does this have to with UPS, you ask?

UPS, a great company, is caught between the rock of needing to lower its expenses (to the tune of letting almost 2,000 middle managers go even though its Q4 profits for 2009 are apparently higher than expected — note the key word “profits”, not losses); and the rock of lowering its reputation for excellent service at a time when new competitors, most of them not yet household names, abound and new technologies are changing the face of shipping… just as they are upsetting/adding value to everything else we do.

Why? Because Wall St. will kill UPS if it doesn’t. Well, “kill” may be overkill here but “damage” is not.

Whaddyah mean?

In a rising stock market that’s rewarding increasing earnings, many of which are based on lowering costs rather than increasing revenues, Wall St. will feast on the bones of UPS if it doesn’t step up and play the short term game. It will drive their stock price down and that has a real dampening effect on any company no matter how big or dominant it is in its space.

What does all this mean to you?

If you’re a corporate shipper, evaluate your options. Take a good, long look at the newer technologies, the kinds that save you money, from lower, aggregated rates to proof of on time delivery; from the newer OnDemand models that lower or cut out completely your initial Cap X outlays to seeking better rates with LTL, regional carriers… and more.

You will still use UPS throughout this whole ordeal. They’ll ride this out and may even emerge stronger — short term thinking notwithstanding. But as for you, avoid short term thinking. Take the more rational Wall St. view, the longer term approach for your business, while watching out for any and all of your suppliers, business partners or vendors that are laying off a lot of their expenses (that’s what they call it) while cutting back or out huge amounts of service you’ve come to depend on. Whatever they choose to call it, that should be what you’re looking out for. No one else will do it for you.

Joe Mulready is Executive Chairman of the Agile Network, LLC