UPS’ B2B Recalibration Trades Shipping Volumes for Logistics Value

UPS has always called itself the “United Problem Solvers.”  And the problems the company is solving now aren’t about porch deliveries or package counts, but about providing a foundation for supply chain stability in a world defined by uncertainty.

Beneath the surface of UPS’ Q3 2025 results, announced Tuesday (Oct. 28), lies a deeper strategic realignment toward industrial shippers, healthcare clients and supply-chain services that form the company’s most resilient 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 driven by an intentional pivot away from the relentless pursuit of residential volume that defined the pandemic years. Domestic revenue for the third quarter fell 2.6%, largely due to “an expected decline in volume,” though higher yields per piece and strong air-cargo demand partially offset the softness.

At the same time, international operations posted better volume trends, with a 4.8% increase in average daily volume cited by company disclosures. The company achieved adjusted consolidated operating margin of about 10% for the quarter.

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

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

The B2B Engine Behind UPS’ Reinvention

In an era when consumer-facing eCommerce headlines dominate the logistics landscape, UPS’ real growth story is being rewritten in the boardrooms, warehouses and data centers of its business-to-business (B2B) customers.

UPS is re-tooling its massive network to fit a world where industrial and healthcare shippers want end-to-end logistics partnerships rather than simple transportation contracts. In the process, UPS is reducing exposure to its largest eCommerce customer, Amazon, whose share of UPS’ total volume has steadily fallen since 2022.

Through initiatives like its internal “Transformation 2.0” and “Fit to Serve,” UPS continues to dismantle legacy layers of management and invest heavily in automation, data systems and network optimization. By closing 93 facilities and eliminating 34,000 operational positions during the first nine months of 2025, the company realized $2.2 billion in cost savings, numbers that underscore both the scale and urgency of its reinvention.

Those savings, in turn, are being funneled into reinvestment in B2B service offerings — supply-chain visibility, cross-border freight and healthcare logistics — that command higher margins and deeper customer relationships.

Industrial-Strength Efficiency

The company’s transformation strategy isn’t just a cost exercise; it’s a structural repositioning for a logistics environment increasingly defined by digital integration, data visibility and supply chain resilience.

While U.S. Domestic Package remains the company’s largest division by revenue, its operating margin of 4.2% (6.4% on an adjusted basis) trails far behind that of its International and Supply Chain Solutions units.

The latter, which includes freight-forwarding, contract logistics, and brokerage services, delivered a robust adjusted operating margin of 21.3% despite a 22% revenue decline following divestiture of Coyote Logistics in 2024. That margin resilience reveals something profound: UPS’ B2B businesses — though smaller and less visible than the brown trucks that define its brand — are vastly more profitable.

At the same time, by consolidating sorting centers and automating workflows, UPS is improving asset utilization and aligning capacity with customer demand profiles. The company expects $3.5 billion in total year-over-year cost savings for 2025, which rivals its annual capital expenditure budget.

UPS’ Supply-Chain Solutions customer relationships are longer-term and more integrated than traditional shipping contracts. The division operates in a world where UPS designs and runs entire logistics ecosystems — warehousing, fulfillment, customs-brokerage and supply-chain analytics — often embedded directly into clients’ operations. These services not only generate recurring revenue but deepen UPS’ competitive moat in industries where switching providers would be operationally risky.

As Tomé has emphasized, healthcare remains a cornerstone of that growth. This high-value segment has turned UPS into a critical infrastructure player for pharmaceutical companies, hospitals, and biotech firms — customers that are far less price-sensitive and more loyalty-driven than eCommerce retailers.