UPS to Consolidate 200 US Sorting Hubs by Automating

UPS has disclosed that it plans to close 200 sorting facilities in the U.S. by the end of 2028 as part of a $9B push to automate its shipping hubs, which the company is calling its “Network of the Future.”

During an investor conference this month, the shipping giant also said it would close 40 of its sortation facilities this year as part of the consolidation, up from the total of 30 facilities that were shuttered in 2023.

The automation push aims to save UPS an estimated $3B a year by the end of 2028, mainly by reducing a reliance on manual labor.

The logistics giant said it is aiming to triple the number of automated facilities in its network, bring the total to 400. Only 10 of the highly automated facilities will be newly built; the rest will involve the conversion of existing shipping facilities, including an investment in 63 automation projects throughout the country.

UPS said it wants to adjust its “volume-per-resource” ratio, a ratio that is calculated by dividing average daily volume by the number of U.S. employees. UPS wants to increase the ratio, which measured 51 in 2023, to about 59 in 2026.

The automation push is lowering the number of “feeder runs” needed to ship goods from locations, allowing UPS to consolidate sortation facilities. The carrier has consolidated facilities in Massachusetts, Connecticut and Rhode Island and is planning to shut it Chalk Hill facility in Texas and its New York Capital Village Center hub, Supply Chain Dive reported.

UPS’ Network of the Future involves end-to-end automation at sortation facilities, including robotic systems to help unload trailers and pick-and-place robots that move packages onto conveyor belts.

In an interview with CNBC, UPS CEO Carol Tomé said healthcare logistics, including delivering medicine to consumers, generated $10B for UPS last year—a revenue stream that the company projects will double by 2026.

“We’re leaning in to automation in 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,” Tomé told CNBC.

UPS announced Monday it has landed a deal with the U.S. Postal Service to become the agency’s primary provider of air cargo transportation, usurping FedEx Express. UPS said it will ramp up its activity with the USPS after a transition period, eventually moving the majority of the agency’s air cargo in the U.S.

“Together UPS and USPS have developed an innovative solution that is mutually beneficial and complements our unique, reliable and efficient integrated network,” Tomé said in the announcement.