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UPS’s Focus on 3D Printing

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UPS’s focus

On September 16, 2016, UPS (UPS) disclosed its plans to take its 3D printing business beyond the United States. In May of this year, the company launched its 3D printing service with Fast Radius, which has a 3D printing factory at UPS’s hub in Louisville, Kentucky.

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Why is UPS wary of 3D printing?

3D printing is also known as additive manufacturing. In this computer-controlled process, successive layers of material, usually plastic, are formed to create an object.

This technology is best for creating components that aren’t required in large numbers. Since 3D printing takes longer than conveyor belt assembly, it’s not appealing to mass-requirement clients.

UPS includes revenues from storing and shipping parts for manufacturers in its Supply Chain & Freight revenues. As 3D printing technology is new in the market, it is an expensive proposition for UPS’s clients. However, with further breakthroughs in additive manufacturing, the cost of 3D printing could come down significantly. When this happens, UPS’s customers may start 3D printing their own parts rather than storing them, making the company’s warehouse offerings redundant. Therefore, UPS is aggressively pushing itself on the 3D printing side and plans to expand to Europe after successful starts in Asia.

What are the competitors doing?

UPS’s main competitor, FedEx (FDX), is not as involved in supply chain and freight services and hasn’t forayed into 3D printing business. However, it may copy the global parcel delivery service leader in the future. Investors should note that 3D printing has the potential to affect the conventional mass-production business in select merchandise.

UPS makes up 4% of the holdings of the Industrial Select Sector SPDR ETF (XLI). This ETF also invests 2.3% in rival FedEx (FDX). Other major logistics companies included in XLI are CSX (CSX), Union Pacific (UNP), and C.H. Robinson (CHRW). In the next part, look at UPS’s supply chain and freight business and revenues.

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