UPS Reassesses Strategy Amid Amazon Pullback

In its latest earnings call for the fourth quarter, UPS shed light on its ongoing transition away from Amazon, a strategic pivot that is significantly reshaping its U.S. network and associated costs.

Volume Reduction Achievements

CEO Carol Tomé reported that UPS has successfully met its goal for volume reduction, targeting a decrease of approximately 1 million packages per day from Amazon by the end of 2025. This initiative is projected to yield about $3.5 billion in savings through network reconfiguration and the company’s Efficiency Reimagined initiatives.

This reduction strategy, which commenced a year ago, is now entering its final six months. Tomé emphasized the company’s commitment to strategically minimize its reliance on Amazon’s volume.

Financial Insights

Brian Dykes, UPS’s CFO, expressed satisfaction with their current progress, revealing that the forecasted savings stem from lower variable costs related to volume, a decrease in operational positions, and reduced fixed costs. This includes the closure of 195 operations and 93 buildings.

“We aim to reduce another million packages per day from Amazon,” Dykes stated, highlighting plans for further cuts in labor hours, operational roles, and facilities in 2026. The company also intends to enhance automation within its network, targeting an additional $3 billion in savings.

Looking to 2026 and Beyond

As UPS prepares for 2026, Dykes mentioned that it will serve as a transition year for its domestic operations. The company anticipates flat full-year domestic revenue, with average daily volume projected to decline by mid-single digits due to the continued reduction of Amazon deliveries, albeit partially offset by an increase in revenue per piece.

“Revenue and our cost structure will look very different in the second half of the year compared to the initial months,” Dykes explained. He cautioned that transition costs may pressure first-half margins, but the latter half should reflect a more agile network and improved profitability.

Market Perspectives

Robert Persuit, Sr. Director of Business Development at ShipMatrix, assured that the anticipated reduction of up to 30,000 operational positions will not equate to mass layoffs. “With a decreased volume of packages to sort, UPS will require fewer personnel in sorting operations,” he stated. He noted that high turnover rates in package handling jobs facilitate workforce reductions through attrition rather than direct layoffs.

Conversely, University of Tennessee Assistant Professor Alan Amling offered a more cautious perspective, articulating concerns regarding broader market trends on LinkedIn. “While UPS’s execution is improving, the U.S. parcel market is projected to expand by 36% by 2030, with Amazon expected to become the largest carrier by 2028,” he noted. “UPS may be achieving higher revenue per piece, but this should be viewed through the lens of a contracting market.”

Further Reading

For more coverage of this evolving story, visit Logistics Management.