UPS's Robot Army Just Cut Package Costs by 28%

Logistics elephantine UPS (NYSE: UPS) is facing an array of challenges, including macroeconomic headwinds and rising contention from Amazon. On apical of cutting retired low-margin Amazon packages from its network, UPS has different instrumentality up its sleeve to little bundle transportation costs and instrumentality to sustainable growth. The institution is betting large connected automation, and it's already paying off.

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UPS is successful the process of downsizing its web of facilities successful the U.S. to relationship for its ongoing program to greatly trim Amazon bundle volume. While this is hurting gross close now, it allows the institution to chopped costs successful aggregate ways.

The buildings being closed thin to beryllium aged and necessitate extended attraction spending. As UPS CEO Carol Tomé noted during the fourth-quarter net , those outsize attraction expenses vanish erstwhile these bequest facilities are unopen down. Beyond those nonstop outgo savings, UPS is realizing further benefits by routing bundle measurement to different facilities that person already been automated.

UPS has deployed a assortment of robots and automated systems crossed the 127 facilities it has automated to date. The institution uses pick-and-place systems to assistance employees successful sorting tiny packages, Pickle Robots to unload trucks, and autonomous guided vehicles to determination packages done facilities. In 2023, 57% of packages went done automated facilities. That fig is expected to scope 68% by the extremity of 2026.

While installing automation technologies requires upfront spending, the payoff is significant. Tomé said that the outgo per portion successful automated buildings is 28% little than successful conventional, non-automated buildings. Automation is 1 reason, on with the program to wean itself disconnected Amazon packages, that UPS tin slash its workforce. UPS eliminated 48,000 positions successful 2025, and it plans to slash different 30,000 positions this year, mostly done attrition and a voluntary separation programme for full-time drivers.

Another 24 facilities volition beryllium automated successful 2026, adding to the company's low-cost fleet.

UPS's gross is successful diminution arsenic it purposely reduces Amazon bundle volume, but the semipermanent representation doesn't look astir arsenic bleak. By eliminating low-margin packages and automating to trim per-package costs, UPS is positioning itself to instrumentality to maturation and grow its nett margins successful the years ahead.