UPS has agreed to reduce its volume of deliveries for Amazon by more than 50% by the second half of 2026, according to a deal in principle reached with the e-commerce giant. The move is part of UPS’s efforts to diversify its customer base and increase revenue per package.
The reduction in volume will lead to fewer packages being delivered, but at higher rates. According to CEO Carol Tomé, Amazon is not the carrier’s most profitable customer, citing “margin dilution” in the US domestic business. The company has struggled with maintaining a strong presence in the market due to operational challenges and increased competition from other logistics providers.
While this reduction will impact UPS’s revenue and volume, executives believe it is necessary for long-term growth. Amazon had previously offered to increase UPS’s volumes, but the carrier decided to prioritize profit over quantity. The deal marks an acceleration of UPS’s push to reduce its reliance on Amazon and capture volume from more profitable segments like healthcare product shippers and small- and medium-sized businesses.
The reduction in Amazon volume is expected to lead to a 6% year-over-year increase in revenue per package, according to an earnings presentation. However, the decline in overall volume levels will likely have an impact on UPS’s network capacity and require adjustments to be made in the future.
Source: https://www.supplychaindive.com/news/ups-amazon-volume-reduction-q4-2024-earnings/738749