UPS has announced plans to eliminate approximately 20,000 jobs and close 73 facilities as it reduces its handling of Amazon shipments.

These changes are expected to take effect by the end of June 2025, with further adjustments to the company’s network still under review.

This decision follows a restructuring of UPS’s partnership with Amazon, its largest customer, earlier this year.

Under the revised agreement, UPS will decrease its Amazon shipment volume by more than 50% by the second half of 2026.

🔗 Source: Associated Press

🧠 Food for thought

1️⃣ A strategic pivot from volume to profitability in logistics partnerships

UPS’s decision to drastically reduce Amazon shipments reflects a transformative industry shift toward prioritizing profit margins over pure volume.

The company explicitly acknowledged that while Amazon is its largest customer, it’s “not our most profitable customer” and its margin is “very dilutive” to the domestic business, signaling that high-volume, low-margin relationships no longer align with carrier strategies 1.

This mirrors FedEx’s earlier 2019 decision to completely sever its ground delivery contract with Amazon, as both carriers recognize that handling massive volumes without corresponding profitability undermines long-term business health 2.

UPS’s pivot is already showing results, with small to medium-sized businesses now accounting for 31.2% of UPS’s U.S. volume—the highest level in a decade—representing a deliberate customer base diversification toward higher-margin segments 3.

The company’s transformation goes beyond just dropping Amazon, encompassing a comprehensive $3.5 billion cost reduction initiative with automation investments and network reconfiguration to better serve the most profitable market segments 1.

2️⃣ Amazon’s evolution from key customer to formidable competitor

UPS’s job cuts represent the culmination of a decade-long power shift, as Amazon transformed from a dependent customer into a logistics powerhouse that threatens traditional carriers.

The pivotal “Christmas Fiasco” of 2013, when UPS failed to deliver many holiday packages on time, catalyzed Amazon’s decision to build its own delivery infrastructure, marking the beginning of this transformation 4.

Amazon’s logistics evolution has been remarkably swift—from having virtually no delivery infrastructure in the early 2010s to delivering 3.5 billion packages in 2019, while expanding to a fleet of 50 cargo planes and establishing an extensive ground network 5.