In February, UPS announced that it would decrease the volume of Amazon parcels delivered by 50%. In the carrier's Q1 2025 earnings call, Executive Vice President and CFO Brian Dykes said that with the volume reduction, UPS is "undertaking the largest network reconfiguration in our history."

We're sharing everything we know about the reconfiguration, its potential impact on your business, and how partnering with ShipRx can reduce implications for your shipping costs and revenue.

Building closures, layoffs, and more

In the earnings call, Dykes laid out UPS's reconfiguration process. The carrier's upcoming moves include reductions in variable (35%), semi-variable (35%), and fixed (30%) costs:

●       164 operational closures, including 73 building closures by the end of June, "with more to come"
●       Reduction of total operational hours by 25 million
●       Cutting 20,000 positions

He explained, "Position changes are not only connected to the buildings we are closing, but will also be made across the entire US network. Our planned reductions are in line with the total Amazon volume decline."

Through its Efficiency Reimagined initiatives, the carrier expects to reduce its 2025 costs by $3.5 billion.

Why now?

Despite a consolidated operating profit of $1.8 billion, marking an increase of .9% over last year, month-by-month numbers aren't looking so good. For example, the rebranding of UPS SurePost into Ground Saver led to the economy offering's first decline in five quarters. Dykes said the decline was "primarily due to pricing actions we took to grow yields on e-commerce volume."

When UPS announced its plan to cut Amazon's volume by half, it reasoned that they were making room for more parcels from small- and medium-sized businesses and healthcare companies. And they're making steps toward those goals. Dykes said that in the first quarter, "SMBs made up 31.2% of total US volume. This is the highest SMB concentration we've seen in 10 years, and it is driving meaningful change in overall volume and revenue quality."

And CEO Carol Tomé announced that UPS had acquired Andlauer Healthcare Group, "a move that will bolster our healthcare capabilities in Canada by adding 39 dedicated healthcare facilities across the country, along with cold chain packaging and specialized transportation solutions."

What happens when a reduced workforce leads to errors?

UPS, like FedEx, offers service guarantees, promising on-time delivery or a refund. With a significant reduction in its workforce, UPS may struggle to uphold these guarantees consistently

A leaner workforce and a reduction in facilities could lead to:

●       Delays: Fewer employees might translate to longer processing and delivery times.
●       Increased Errors: A stretched workforce might be more prone to mistakes in sorting and handling packages.
●       Customer Service Challenges: Increased volume per employee could impact response times and the quality of customer support.

Sign up for automated parcel audits with ShipRx to catch errors in real time and automatically request refunds. Getting started is free, and you only pay a fraction of the refunds secured. UPS's reconfiguration is sure to help their bottom line— don't let their cost-cutting strategies affect yours.