Career
MBA Career Insights: 12,000 Jobs Cut at UPS
Last Updated on January 31, 2024 by Robert C. Hoopes
UPS Announces 12,000 Job Cuts in Effort to Reduce Costs
UPS, one of the world’s largest package delivery companies, revealed its plans to cut 12,000 jobs as part of a cost-saving strategy. The move comes after the company issued a disappointing sales outlook for this year, with expected global revenue between $92 billion to $94.5 billion. Analysts had anticipated revenue of at least $95.6 billion, highlighting the company’s struggle to meet market expectations.
The majority of the layoffs will affect managers and contractors, indicating a shift in the company’s operational structure. UPS lost business last year as customers turned to rival carriers amid concerns about a potential strike by the Teamsters union. Although the company was able to recover about 60% of the lost business, it still faced challenges in restoring its market share.
During the pandemic, UPS experienced a surge in business due to increased online shopping, achieving record sales surpassing $100 billion in 2022. However, the company witnessed a decline of over 9% in revenue in 2023, casting doubts on its ability to maintain that level of success. UPS CEO Carol Tome described the revenue decline as “difficult and disappointing,” emphasizing the need for strategic measures to stabilize the business.
The news of the job cuts had a negative impact on UPS’ stock price, which sank 7% following the announcement. The company had expanded its employee headcount to approximately 540,000 during the peak of the pandemic-induced surge in business. However, through attrition and reduced flying hours, UPS had reduced its workforce to about 495,000 prior to the recent layoffs.
UPS is facing various challenges, including a 12.1% increase in union wage rates and a forecasted growth of less than 1% in the overall US small package market, excluding Amazon, in 2024. In response, the company is implementing cost-cutting measures, with trimming the number of salaried staff being a significant part of its initiative. UPS, which has approximately 85,000 managers globally and over 300,000 hourly US workers represented by the Teamsters union, believes that these job cuts reflect a permanent change in its operations, even as business volume returns.
According to UPS CFO Brian Newman, the company anticipates that these jobs will not be restored despite any future recovery in business. The objective is to optimize operational efficiency and adapt to changing market dynamics. As UPS navigates through challenges and initiates strategic cost-saving measures, all eyes will be on the company’s ability to balance revenue growth and sustainable business operations.
