UPS plans to cut 20,000 jobs and close some facilities due to a decrease in Amazon shipment volumes.

United Parcel Service Inc. (UPS) has announced a significant restructuring plan that includes the potential elimination of approximately 20,000 jobs and the closure of over 70 facilities. This move comes as part of the company’s strategy to adapt to changing market conditions, particularly as it reduces its reliance on Amazon, its largest customer. The company anticipates that these changes will be implemented by the end of June 2024 and has indicated that further evaluations of its network may lead to additional closures.

In a statement released Tuesday, UPS CEO Carol Tomé emphasized that these actions are essential for reconfiguring the organization’s network and reducing operational costs. Tomé expressed confidence in the company’s ability to emerge from this challenging macroeconomic environment as a stronger and more agile entity.

The decision to cut back services related to Amazon stems from a recently negotiated agreement that aims to lower the volume of packages handled by UPS from the e-commerce giant by more than 50% over the next few years, specifically by the latter half of 2026. This marks a significant shift in UPS’s longstanding relationship with Amazon, which has been a key partner for nearly 30 years. During the company’s fourth-quarter earnings call earlier this year, Tomé noted that while Amazon is a vital customer, its profitability does not align with UPS’s long-term financial goals. The CEO described Amazon’s margins as “dilutive” to the overall domestic business, prompting UPS to reassess its current operational strategy.

The company currently employs around 490,000 workers, according to data from FactSet. As part of its continued financial reporting, UPS recently disclosed its first-quarter earnings, recording a profit of .19 billion, or .40 per share, for the quarter ending on March 31. When excluding certain adjustments, the adjusted earnings were reported at .49 per share, slightly surpassing analysts’ expectations.

Despite the positive revenue figures, which totaled .55 billion—outpacing Wall Street projections of .06 billion—UPS has opted not to revise its previously stated revenue outlook for the upcoming fiscal year in light of ongoing economic uncertainties. The company had projected revenues of approximately billion for 2025. Following the financial disclosure, shares of UPS experienced a modest rise in morning trading, indicating some investor confidence despite the impending cuts and restructuring plans.

As UPS navigates this transitional phase, its future strategies will be closely monitored by industry analysts and stakeholders alike.