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Newly-Appointed UPS CFO Faces Shipping and Cost Challenges

by Daisy D.
07/15/2024
in Industry, Supply Chain

United Parcel Service (UPS) has appointed Brian Dykes as its Chief Financial Officer (CFO), effective immediately, according to a Tuesday securities filing. Dykes, a 25-year company veteran, has served as UPS’s Senior Vice President of Global Finance and Planning since April 2023.

This appointment follows the resignation of former CFO Brian Newman, who stepped down on June 1 to focus on his personal health, as previously reported by CFO Dive. UPS is moving forward with strategic initiatives aimed at achieving consolidated revenue between $108 billion and $114 billion by 2026. A spokesperson confirmed that the company’s financial priorities and strategy remain unchanged and will be further discussed during the upcoming Q2 2024 earnings call on July 23.

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As CFO, Dykes will receive an annual base salary of $725,000, a “Management Incentive Program” award targeting 115% of his base salary, a long-term incentive performance award targeting 450% of his base salary, and a stock option grant equal to 50% of his base salary, according to the filing with the Securities and Exchange Commission.

Jeremy Tancredi, partner at West Monroe and head of their supply chain solutions, noted that UPS’s decision to promote an internal candidate was unexpected, given the significant changes in the shipping and freight industries. Tancredi highlighted the competitive pressures from companies like Amazon, which have increasingly managed their own shipping, affecting UPS’s shipping volumes. He also pointed out the rising labor costs due to UPS’s five-year contract with the Teamsters Union, which included substantial wage increases.

Tancredi suggested that UPS might have benefited from hiring someone with a background in growth-oriented companies to address these challenges. Newman, the former CFO, was an external hire during UPS’s push for growth following a disrupted deal between Amazon and FedEx. Newman departed with a $1.8 million cash payment and potential additional incentives, which could total up to $5.9 million in severance, according to UPS’s latest proxy statement. In 2023, Newman received approximately $7.3 million in total compensation.

Dykes’s extensive experience at UPS, including his time in the European division and involvement in mergers and acquisitions, provides him with deep insights into the company. This background is expected to aid him in navigating the complexities of managing rising costs. One of the key challenges he faces is increasing shipping volumes without proportionately increasing costs. UPS reported a 3.2% decline in average daily shipping volumes in the U.S. for the first quarter, with a 36.5% year-over-year drop in operating profit to $1.6 billion.

Tancredi emphasized that while UPS is structured to handle additional volume, the increase in volume will necessitate hiring more drivers at higher wages, as negotiated last year. This creates a significant challenge for Dykes in balancing growth with cost management.

Your go-to for supply chain report news updates: The Supply Chain Report. For international trade tools, see ADAMftd.com.

#UPSFinanceStrategies#ShippingCosts#LogisticsChallenges#SupplyChainManagement#SupplyChainNews

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