UPS Adds More Gig Drivers to Offset eCommerce Surges

UPS is reportedly increasing its use of gig delivery drivers as eCommerce volumes grow.

As The Wall Street Journal (WSJ) reported Wednesday (Oct. 29), these drivers use their own vehicles to deliver smaller, low-volume parcels.

The report adds that the company has long-used gig drivers during the busy holiday season, and has worked with the U.S. Postal Service for last-mile delivery of smaller packages.

However, the modern eCommerce landscape is one in which surges of package volume are more common, the report added, whether it means planned events like Amazon’s Prime Day or unplanned upticks, like a product going viral on social media.

It’s left UPS facing a mismatch between the number of orders and drivers, leaving UPS to hire more gig drivers to drive more profit as the world becomes more “delivery-obsessed,” as the WSJ put it.

“UPS’s Achilles’ heel is lightweight residential packages that don’t offset the labor expense,” said Glenn Gooding, president of iDrive Logistics and a former UPS executive.

The report adds that this is part of a broader effort by UPS to cut expenses, along with things like  buyouts and layoffs of 34,000 drivers and warehouse workers, helping the company reduce about $2.2 billion of costs so far this year.

In its quarterly earnings report on Tuesday (Oct. 28), UPS revealed a strategic realignment toward industrial shippers, healthcare clients and supply-chain services that make up its most durable profit base.

“We are executing the most significant strategic shift in our company’s history, and the changes we are implementing are designed to deliver long-term value for all stakeholders. With the holiday shipping season nearly upon us, we are positioned to run the most efficient peak in our history while providing industry-leading service to our customers for the eighth consecutive year,” said UPS CEO Carol B. Tomé.

UPS’ transformation is being fueled by an intentional pivot shift away from “the relentless pursuit of residential volume that defined the pandemic years,” PYMNTS wrote.

Domestic revenue for the third quarter declined 2.6%, chiefly due to “an expected decline in volume,” though higher yields per piece and strong air-cargo demand partially helped to mitigate the softness. At the same time, international operations recorded better volume trends, with a 4.8% uptick in average daily volume.

“But the decline isn’t accidental,” PYMNTS added. “It reflects UPS’ decision to walk away from low-margin consumer shipments in favor of strategic, contract-based business from enterprise customers.”