UPS to Close at Least 200 U.S. Locations in Automation Push - Modern Distribution Management

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UPS to Close at Least 200 U.S. Locations in Automation Push

The parcel delivery giant's $9 billion "Network of the Future" initiative will involves 63 sortation sites with major automation projects.
Burlington, Ontario, Canada - October 26, 2019: Close up of UPS

Parcel delivery giant UPS is set to close several hundred U.S. facilities amid the company’s ongoing shift to having automated sorting facilities handle more volume.

In a presentation to investors and analysts on March 26, the company outlined its “Network of the Future,” which aims to add capacity through better productivity, less dependence on labor and additional flexibility.

Delivered at a massive new aircraft hanger at UPS’ new global air hub in Louisville, KY, the presentation detailed that the initiative involves a range of automation and consolidation projects that UPS forecasts will save the company $3 billion by the end of 2028.

Most notably, the “Network” involves the closure of about 200 conventional U.S. sortation facilities over the next five years, including 40 during 2024 — up from 30 in 2023. Elsewhere, UPS will consolidate operations in high-capacity spaces.

Overall, the Network of the Future represents an investment of approximately $9 billion across 63 sites with major automation projects. That would grow its network of automated sort facilities to 400. The vast majority of these automation projects will happen at existing facilities, while 10 will be greenfield builds.

“Network of the Future is targeting all activities for automation within our four walls,” UPS Executive Vice President and U.S. President Nando Cesarone said in the presentation. “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.”

The company expects the project to scale savings from 19% achieved in 2024, to 34% in 2025; 46% in 2026; and 76% in 2027 before achieving full savings during 2028. UPS said the plan has the company on a path to 12% adjusted operating margin by 2026.

UPS provided examples of automation and consolidation projects in four states. In New York, for example, the company plans to modernize its sortation hubs in Syracuse and Albany via retrofit, whole consolidating its NY Capital Village Center facility. In New England, the company plans to consolidate four facilities in Massachusetts, Connecticut and Rhode Island into other hubs nearby.

Ultimately, Cesarone said, UPS looks to improve its volume-per-resource ratio — the company’s average daily volume divided by U.S. employees headcount — from 2023’s 51 to about 59 by 2026.

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