United Parcel Service (UPS) is undergoing a significant operational overhaul, announcing plans to cut 20,000 jobs and shut down more than 70 facilities across the United States.
The dramatic cost-cutting move comes as the shipping giant scales back its partnership with Amazon and pivots toward more profitable sectors of its delivery business.
According to the Associated Press, UPS revealed the planned layoffs during its fourth-quarter 2023 earnings report, with the company citing declining package volumes and rising labor costs as key reasons behind the decision.
The company reported a 7.8% drop in revenue compared to the previous year, with domestic deliveries slowing post-pandemic.
UPS CEO Carol Tomé explained during the earnings call that the restructuring is designed to “align our network with current volume levels and focus more intensely on high-margin deliveries.”
She emphasized that the company is committed to reducing dependency on Amazon, which now accounts for less than 11% of UPS’s total revenue—a sharp decrease from over 15% just a few years ago (CNBC).
As part of its streamlining initiative, UPS plans to shut down or consolidate more than 70 sorting and distribution facilities.
The closures will be phased in throughout 2024 and early 2025.
Areas with overlapping service coverage or outdated infrastructure are being prioritized for closure, according to The Wall Street Journal.
While exact locations haven’t been disclosed publicly, industry analysts speculate that regions with dense UPS infrastructure—such as the Northeast and Midwest—may see the greatest impact.
The job cuts will largely affect non-union administrative and support roles, although some hourly workers may also be impacted as volume decreases.
The company reached a five-year labor agreement with the Teamsters in 2023, which secured substantial wage increases for union workers.
However, rising labor costs—coupled with declining package volumes—have placed pressure on UPS to improve operating margins.
UPS said it will offer severance packages and outplacement services to affected employees, and it is working with local governments in some regions to ease transitions.
The move away from Amazon deliveries is part of UPS’s broader strategy to focus on small- and medium-sized businesses and sectors like healthcare logistics.
Amazon, meanwhile, continues to expand its in-house delivery capabilities and logistics network, making it less reliant on third-party carriers like UPS and FedEx.
“UPS is no longer looking to be Amazon’s delivery truck,” said Satish Jindel, president of ShipMatrix, in an interview with Bloomberg. “They’re going after customers who provide better margins and long-term stability.”
