Pivoting from Amazon business, UPS looks to other areas for growth

UPS is far less likely to deliver your Amazon package than it was two years ago, after a significant reduction in volume from its largest customer.

Now that the 18-month Amazon drawdown is complete, Sandy Springs-based UPS executives say they are turning to other, more profitable areas of business — including healthcare logistics and temperature-controlled shipments.

“Amazon is our largest customer, but it is not our most profitable customer,” UPS CEO Carol Tomé has said.

The cut in Amazon volume by more than 50% at UPS has driven a monumental shift, driving it to reconfigure its shipping network. That includes job cuts and building closures.

Five years ago, UPS had more than 540,000 employees.

Now, it has slashed its headcount by some 80,000, closed hundreds of buildings, and cut vehicles and aircraft from its fleet. It offered buyouts to cut its driver ranks and reduced “layers of management” last year.

The shipping giant now has about 460,000 employees.

It’s part of a “better not bigger” strategy Tomé has evangelized for years. Now that the “not bigger” part is definitively a reality, the company faces the test of whether it will deliver “better.”

On Tuesday, the company signaled it is making progress on its financial goals. It reported a 7.6% improvement in revenue — charging more per package delivered to bring in a total of $22.8 billion in the quarter. Its average revenue per piece increased 11.3% in the quarter.

In the second quarter of this year, UPS carried an average of about 19 million packages a day. That’s down from about 19.7 million a year earlier, and down from more than 24 million five years ago.

The transition has been challenging. UPS saw its profit decline to $604 million in the quarter ended June 30, down 53% from nearly $1.3 billion a year earlier.

But that’s after incurring $891 million in costs, mainly to pay for driver buyouts. Without charges related to its transformation, the company’s profits would have been higher than a year ago, UPS said.

The company has also been investing in artificial intelligence within its logistics network and in RFID chips to track packages.

“Our second-quarter results marked an expected and significant shift in our performance,” Tomé said in a written statement. “We entered the second half of the year with strong momentum,” she added.