UPS customers may have noticed a new face at their doorstep—one not clad in the familiar brown uniform. In a bid to cut costs, UPS has started relying more on gig drivers using their own cars to deliver smaller packages, shifting away from the company's traditional full-time workforce model. This change coincides with significant layoffs and buyouts, with 34,000 UPS drivers and warehouse workers let go as part of a broader effort to shave $2.2 billion from expenses so far this year, reports the Wall Street Journal. The company's old business model, which relied on full-time employees handling packages from pickup to delivery, once supported hundreds of thousands of well-paid jobs and robust margins.
But with the rise of e-commerce, the bulk of deliveries are now lightweight residential packages—a segment that simply doesn't generate enough profit to cover high labor costs, according to logistics experts. As a result, UPS' domestic operating margins have fallen sharply, dropping to just over 6% from more than 14% a decade ago. Leaders for the Teamsters union, which represent the majority of UPS' US workforce, view the shift as an attack on decent union jobs. The company has closed 93 facilities this year alone and offered buyouts to experienced drivers—moves the union claims are aimed at replacing higher-paid workers with cheaper labor.
UPS maintains the buyouts are voluntary and that it's honoring its labor agreements. For consumers, the changes may be barely noticeable, aside from seeing fewer brown trucks. As one customer puts it, as long as the package arrives on time and intact, they aren't concerned about who drops it off. UPS, meanwhile, is pushing ahead with its transformation plan, aiming to cut another $3.5 billion in costs this year and focusing future growth on more profitable sectors like health care and business-to-business deliveries. "We are executing the most significant strategic shift in our company's history," UPS chief exec Carol B. Tome said, per PYMNTS.
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