United Parcel Service has endured another difficult year. Shares of the company have fallen nearly 30 percent as U.S. revenue and parcel volumes dropped, and margins slipped far below the levels seen during the pandemic. Against this backdrop, UPS has pursued one of its most sweeping restructurings in recent history by eliminating tens of thousands of jobs, closing dozens of facilities, and embedding artificial intelligence and automation deeper into its global logistics network.
The scale of workforce reductions has been striking. In the first nine months of 2025, UPS eliminated about 34,000 operational roles and another 14,000 management positions. That followed a broader downsizing trend: headcount fell from 543,000 at the end of 2020 to 500,000 by the close of 2023, an 8 percent reduction. Management has tied these cuts to a cost-savings plan targeting $3.5 billion this year, with $2.2 billion already achieved by the end of the third quarter. Some of the reductions came through voluntary driver retirements, which cost under $75–80 million but are expected to recoup their expense within a year.
Pulling Back from Amazon
Alongside headcount cuts, UPS has reduced the size of its physical network. The company has shuttered between 90 and 95 facilities, reflecting a reduced need for capacity as it winds down a significant portion of its business with Amazon. Executives said UPS is three quarters into a six-quarter “glide down” of Amazon volumes, describing the contracts as lower-margin and lower-yielding. While the company continues to handle Amazon’s returns business which remains profitable, the retrenchment has created space to reconfigure its operations and increase automation.
Automation now represents a growing share of UPS’s package handling. The company expanded automation into 35 additional facilities this year, raising the proportion of packages processed through automated sites to about 66 percent, up 300 basis points from a year earlier. Labor hours have been reduced by nearly 10 percent through the redirection of volume away from manual facilities. Management has acknowledged that during negotiations with the International Brotherhood of Teamsters, when some customers temporarily shifted to competitor services, UPS accelerated the rollout of automation projects across its network.
Artificial intelligence is at the center of these changes. UPS has long used ORION, its route optimization algorithm, but newer systems have broadened the scope of automation. Computer vision is being deployed to improve the speed and accuracy of package sorting in hubs. Demand forecasting models are being used to balance route allocations and avoid underused capacity. In Velocity facilities, robotic arms guided by AI software are handling an increasing share of sorting and lifting tasks.
Talks with Figure AI and Dexterity
The company is also in discussions with startups developing more advanced robotics. People familiar with the matter said UPS has held talks with Figure AI about using humanoid robots in its warehouses. Figure released a demonstration video earlier this year showing its robot sorting parcels alongside a conveyor belt. While UPS declined to name specific vendor partners, it confirmed in a statement that it “regularly explores and deploys a wide range of technologies, including robotics.” In addition, UPS has partnered with Dexterity Inc., which builds industrial robots designed for more complex, dexterous handling.
Beyond warehouse operations, UPS is extending AI into customer-facing processes. Its Deal Manager tool, powered by machine learning, is used to generate pricing quotes and accelerate negotiations. The company reported that the tool has delivered a 79 percent win rate while allowing UPS to reduce its sales workforce. Industry consultants have noted that automated pricing systems for small and medium-sized customers are becoming a major driver of workforce reductions, replacing manual sales functions with consistent, faster automated workflows.
The financial strategy behind these efforts is explicit. CEO Carol Tomé has said the executive team has done a “masterful job of managing operational headcount to meet volume,” pointing to AI-driven tools that allowed UPS to close sortation shifts and reduce air cargo block hours. According to management, the 2024 reduction plan concentrated on management and contracted positions, with 75 percent of cuts completed in the first half of the year. That focus alone generated $1 billion in annual savings while maintaining service levels through AI systems capable of processing volume faster and more accurately than human teams.
Industry Pressures Mirror FedEx
UPS’s use of AI mirrors broader changes across the delivery sector. FedEx cut 29,000 jobs in fiscal 2023 while introducing similar automation technologies in its network. Both companies have recognized that AI-enabled systems can handle functions previously dependent on labor, from sorting and routing to pricing and scheduling. UPS, however, faces additional pressures. Its most recent contract with the Teamsters increased labor costs for remaining workers, forcing the company to rely more heavily on automation and machine learning to offset rising expenses.
Management has been clear that AI is not the direct replacement for employees. As reported by Forbes, UPS has said automation is intended to increase efficiency rather than eliminate jobs. Even so, the combined effect of workforce reductions, facility closures, and a growing share of automated processing highlights how tightly the company’s restructuring strategy is connected to its deployment of artificial intelligence.
UPS entered 2025 under pressure, with cautious investor expectations and low guidance. The company responded by executing one of the largest operational overhauls in its history, delivering billions in cost savings, pulling back from lower-margin business, and embedding automation throughout its network. With more than 66 percent of packages now moving through automated sites, AI systems guiding both logistics and sales processes, and active discussions underway with robotics startups, the company’s operations look markedly different from just a few years ago.
