UPS Announces Plans to Close Around 200 US Facilities

Delivery giant UPS has announced plans to shut down around 200 of its distribution centers throughout the United States. This move is part of its strategy to save $3 billion over the next four years. The plan, known as the “Network of the Future,” was unveiled during an investor conference at UPS's new air hub in Louisville, KY. It heavily relies on automation to improve operational efficiency, reduce reliance on labor, and enhance adaptability.

As part of this initiative, UPS is investing $9 billion in network upgrades, with 63 automation projects planned between now and 2028. This investment aims to increase the total number of automated sorting facilities in the UPS network to 400.

“Network of the Future is targeting all activities for automation within our four walls,” said UPS Executive Vice President and U.S. President Nando Cesarone. “These building consolidations and automations yield real savings. For example, we’ll have fewer feeder runs. We’ll be able to eliminate both a.m. and p.m. ground and air feeds in many, many locations.”

Despite potential concerns regarding employment and the economic impact on communities, UPS argues this transformation is essential for maintaining competitiveness and adapting to a rapidly evolving business landscape. By centralizing operations in larger hubs, UPS anticipates improvements in efficiency and service quality.

Financial implications

The financial implications of these initiatives are significant. UPS projects a 19% increase in savings by 2024, potentially reaching 76% by 2027, with full realization expected by 2028. This strategy aims to achieve a 12% adjusted operating margin by 2026.

Automation-Focused Podcasts:

In announcing the plan, UPS outlined specific automation and consolidation plans for various states. For example, in New York, efforts are underway to modernize sortation hubs in Syracuse and Albany, while consolidating the NY Capital Village Center facility. In New England, the company plans to merge four buildings in Massachusetts, Connecticut, and Rhode Island with nearby centers.

UPS claims its “Network of the Future” strategy represents a significant step towards better integrating technology into its operations and maximizing efficiency and scalability in its delivery services.