Shippers Can Capitalize on Transformation Pains at UPS

In the UPS Q2 2025 earnings call, it was clear that the shipper is feeling some transformation pains as it moves to a leaner, higher-margin business strategy. As we reported in a previous blog post, UPS is reducing its business with Amazon by 50%, cutting thousands of jobs, and eliminating over 160 facilities as it shifts its focus to high-margin services and customers. 

As might be expected, those long-term strategic moves are causing some short-term problems for UPS. The carrier’s daily volumes were down 7.3% this quarter, driven by a 13% reduction in its Amazon business and a 23.3% drop in Ground Saver volume. China-to-U.S. volumes were down 34.8%, driven by tariff increases. 

Year-over-year revenue fell about 3%, to $21.2 billion. UPS reported an operating profit of $1.9 billion, which was below analysts’ expectations. Following the announcement, UPS shares fell by 8%, driving a loss of 25% since the start of 2025. 

On July 18, UPS announced a U.S. Driver Voluntary Program that incentivizes employees to take a severance package as it manages “the largest network reconfiguration in UPS history”. The move will help UPS streamline and soften the impact of cutting 20,000 total jobs this year. 

But the International Brotherhood of Teamsters union, which represents more than 340,000 UPS employees, has urged full-time drivers to reject the attrition package, which offers $1,800 per year of service, with a minimum payout of $10,000. During the Q2 earnings call, UPS said that interest in the program is meeting expectations, though we’ll certainly learn more in Q3. Driver exits will begin on August 31. 

What Are the Takeaways for Your Business? 

As UPS experiences negative impacts from its strategic shift, it’s only logical that its customers will experience some transformation pains as well. As the carrier closes facilities and loses drivers, you might see longer transit times in some regions, more handoffs and reroutes, and inconsistencies in pickup or delivery times.   

With Ground Saver volume down nearly 25%, UPS is shifting focus away from budget services and toward higher-margin premium offerings. As a result, economy-tier shipping may become less available, more expensive, and less predictable, with shippers facing higher base rates, tighter e-commerce pricing, and stricter weight and surcharge rules. 

But there’s also good news for shippers. Facing plummeting Wall Street valuation, cost pressures, and a loss of its Amazon business, UPS needs your shipments. The carrier said in its Q2 earnings call that many of its largest customers haven’t submitted their 2025 peak-season shipping plans yet. That’s a major red flag for UPS, but a green flag for your own UPS contracts, rates, and negotiations. 

Five Key Actions You Need to Take, Right Now 

Make no mistake, UPS needs cash flow. Driver exits won’t be finalized until November. You need to seize this chance to negotiate aggressively to drive a profitable peak season for your business. But you also need to consider partnering with other carriers. Start locking in your peak-season plans and forecasts now, so you’ll be able to gather lots of bids and examine all your options. 

Based on our hundreds of customer success stories in parcel shipping, Redwood has created a list of five simple actions you can take, right now, to thrive in the second half of 2025: 

1. Audit your service mix.  Are you overly dependent on UPS economy shipping options like Ground Saver? You might be most impacted by the carrier’s shift to higher-margin business. You need to conduct deep analysis to understand your shipping patterns, services, and costs—and your perceived value to UPS as a long-term customer. 

2. Review your pricing and contracts. The second part of your deep-dive analysis should look at your current carrier contracts and rates. Every carrier posts base rates, but don’t forget their frequent surcharge announcements that could make your actual pricing much higher. Look closely at clauses on regional surcharges, density limits, or volume thresholds. 

3. Diversify carriers. You’ve learned a lot by this point. Now take a look at what new carriers can offer. Especially for peak season and low-margin shipments, you might find that UPS is no longer a good fit. Look beyond your incumbents for a better match with your shipment types and behaviors. 

4. Engage with your UPS account rep. Don’t feel you lack power or need to figure everything out for yourself. Talk to your UPS account rep about how the company’s network and pricing reconfigurations will affect your specific needs. 

5. Plan for volatility in Q3 and Q4. In today’s unpredictable shipping landscape, expect more developments during the second half of the year, from tariff-related shipping delays and cost swings to new surcharges. Your analysis will prepare you to pivot intelligently and profitably as conditions change. 

Need Expert Help? Turn to Redwood  

At this point, you may be thinking, “How can I conduct analysis, negotiate with carriers, and plan for peak season—when my team is already overwhelmed just getting shipments out the door?” 

That’s the value Redwood delivers to parcel shippers. We have the tools and expertise to study your needs and create optimized plans that include the right carriers, the right services, and the right rates. Our Parcel Advisory team continuously monitors developments and counsels our customers. We also coach your team members on how to best negotiate with carriers, large and small. In addition, we offer a proprietary all-in-one execution toolkit—Redwood Parcel Cloud—that helps you optimize and automate all your parcel shipping activities. It’s simple: We’ve invested in creating industry-leading parcel expertise, so you don’t have to. 

If your parcel carrier mix includes UPS, you owe it to yourself to meet with Redwood. We can help you understand what their overall strategy means for your business. Reach out to Redwood and start taking some of your power back today.