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UPS To Close 200 Sorting Facilities In Automation Push

UPS will shutter and consolidate upwards of 200 facilities, executives announced in March.

There will be far fewer humans in brown shorts working at UPS in the years to come.

Parcel delivery giant UPS plans to spend $9B over the next five years to shutter and consolidate up to 200 sorting facilities, the company announced at an investor conference this week. As it shrinks its real estate footprint, it also is investing in automation, an effort it expects to save the company $3B per year by 2028, UPS executives said.

UPS CEO Carol Tomé said during a CNBC interview on Tuesday that the 117-year-old, Atlanta-based company is modernizing its network as the company expects a rebound in small package delivery and healthcare logistics over the next three years. Last year, UPS generated $10B delivering medicines and other healthcare products to consumers and is aiming to double that by 2026, Tomé said.

“We have the highest margins in the industry because of the integrated nature of our network. But it’s old,” she said. “We’re leaning in automation into ways we never have before. We’re talking about automating every aspect inside of the buildings. We’re also going to collapse some buildings we don’t need any longer into larger, more automated buildings.”

As part of its “Network of the Future” initiative, UPS is also looking to shrink its reliance on workers at its sorting facilities, UPS Executive Vice President Nando Cesarone said during the presentation, as reported by Supply Chain Dive. After closing 30 sorting facilities in 2023, the company plans to shutter an additional 40 this year while automating package dispatching.

UPS secured a five-year contract with the Teamsters union last year, but in February, the company announced plans to cut 12,000 positions. It said the move would save $1B after the company reported a $9B drop in revenues in 2023. The company said the cuts would not come from union-represented positions, the Courier-Journal reported.

Thus far, UPS consolidated four facilities in Massachusetts, Connecticut and Rhode Island and announced plans to close its Texas Chalk Hill and New York Capital Village Center hubs while modernizing nearby facilities to accommodate the volume, Supply Chain Dive reported.

“These building consolidations and automations yield real savings,” Cesarone said.