UPS Shifts Strategy With Amazon Exit, SMB Push Amid Cost Cuts

United Parcel Service (UPS) entered 2025 navigating the currents of a rapidly evolving logistics landscape.

“We are focusing on controlling what we can control and executing our strategy to improve long-term profitability,” UPS CFO Brian Dykes told investors on Tuesday’s (April 29) first-quarter 2025 earnings call.

“The macro environment may be uncertain, but with our actions, we will emerge as an even stronger, more nimble UPS,” CEO Carol Tomé added.

The company plans to shutter 164 operations and close 73 buildings by the end of June. These closures are designed to eliminate redundant infrastructure and realign capacity with evolving demand patterns.

Additionally, UPS expects to reduce operational hours by approximately 25 million and cut around 20,000 positions. While the closures represent a substantial reshaping of UPS’ footprint, executives emphasized that investments would continue in automation and technology to enhance throughput and reduce unit costs.

“We’re modernizing,” said Chief Operating Officer Nando Cesarone. “Fewer facilities, but smarter facilities.”

Another significant move is the acceleration of a planned volume reduction from Amazon, long a major customer. UPS now expects to slash Amazon package volume in its network by more than 50% by June 2026.

The decision, per executives, reflects UPS’ pivot away from low-margin, high-volume accounts and toward more profitable business. Amazon’s insourcing of logistics has been an industry-wide headwind, and UPS’ proactive recalibration could be a prudent step toward margin expansion, even if it results in near-term revenue pressure.

SMBs (small- to medium-sized businesses) now comprise 31.2% of total U.S. volume, the highest concentration in a decade, further diversifying UPS’ customer base away from major retailers.

Read also: UPS Expands Digital Transformation With RFID and DAP Tech

The Cost of Transformation and Repositioning

UPS’ first-quarter results that showed both the challenges and strategic shifts reshaping the logistics giant as it seeks to redefine itself in a volatile global economy.

Under its “Efficiency Reimagined” initiative, UPS is targeting $1 billion in savings in 2025, with broader restructuring efforts aiming for $3.5 billion in total cost reductions by year’s end.

“The reconfiguration is not just about cutting costs,” said COO Cesarone. “It’s about ensuring our network is faster, more flexible and better matched to the types of volume we’re seeing and expect to see in the future.”

U.S. domestic revenue rose 1.4% to $14.5 billion, driven largely by increases in air cargo and a 4.5% boost in revenue per piece (RPP) — the strongest RPP growth rate in eight quarters. However, average daily volume (ADV) fell by 3.5% year-over-year, primarily reflecting strategic shifts in customer mix and pricing.

International operations provided a bright spot in volume growth but revealed pressure on margins. Revenue climbed 2.7% to $4.4 billion, supported by a 7.1% increase in average daily volume across top markets. However, non-GAAP operating profit fell 4.1%, reflecting a shift toward more economical services in Europe, weaker demand-related surcharges, and expansion investments such as weekend service offerings.

UPS’ strategic overhaul comes against a backdrop of mounting external pressures, particularly the specter of shifting trade policies and tariff changes that could reverberate through global supply chains. The company is closely monitoring potential trade policy adjustments, especially in the U.S.-China corridor.

International revenues are expected to decline about 2%, mainly due to weakening demand on China-to-U.S. lanes.

See more: UPS to Expand Complex Healthcare Logistics Capabilities With Andlauer Acquisition

New Strategic Initiatives Take Flight

Amid the restructuring, UPS is rolling out new strategic initiatives aimed at bolstering its competitive position in the fiercely contested delivery market.

The company recently launched the in-sourcing of SurePost Final Mile delivery, a move that brings what had traditionally been the U.S. Postal Service’s last-mile segment fully under UPS’ control. By taking over these deliveries directly, UPS hopes to improve reliability, speed and customer satisfaction.

Simultaneously, UPS introduced Ground Saver, a new domestic economy shipping service targeted at cost-conscious customers. Ground Saver is designed to compete more aggressively with offerings from FedEx, the U.S. Postal Service and a growing cadre of regional carriers.

UPS also announced a pending acquisition of Andlauer Healthcare Group, which will bolster its healthcare logistics capabilities — a critical move as healthcare represents a growing share of global supply chain needs.

While UPS’s outlook remains cautious, management is optimistic about emerging stronger from today’s turbulence. The transformation initiatives could significantly boost profitability, provided execution remains on track.

Still, risks remain: global trade policy shifts, new tariffs, fluctuating fuel prices, labor dynamics and potential cyber threats could impact performance. Moreover, as UPS moves away from Amazon volumes — expected to decline by 25% over the course of 2025 — its success in growing SMB and healthcare segments will be critical to maintaining volume stability.

For all PYMNTS B2B coverage, subscribe to the daily B2B Newsletter.