Is UPS parcel pivot a strategic winner or a ‘Trojan horse’? A UPS package car is parked in Washington, D.C., while the driver delivers packages to an office building. Unionized drivers will be seeking a new contract, with even stronger benefits, in 2028. (Photo: Eric Kulisch/FreightWaves) Eric Kulisch Wed, October 14, 2026 at 9:23 AM EDT 13 min read UPS -0.50% AMZN -0.95% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
ORLANDO, Florida — For 18 months, United Parcel Service management has talked about shedding unprofitable e-commerce volume to concentrate on more complex, premium services in sectors like B2B distribution, healthcare, automotive and small enterprises. Many hear that to mean UPS intends to walk away from B2C final-mile delivery space, now crowded with lower-cost competitors, especially after phasing out 50% of its business with Amazon.
Meanwhile, the shipping giant recently issued a news release in which it described a new global operating model centered on providing integrated logistics services as the company continues its "evolution" from a small package carrier.
Analysts question whether UPS (NYSE: UPS) can successfully morph into an integrated logistics provider if it shrinks parcel volume. And industry consultant Satish Jindel suspects there are other motives behind the messaging, arguing the company has no intention of exiting any part of the parcel business.
"I think it's a very difficult needle to thread. They're a parcel carrier. Plain and simple," Richard Metzler, an industry veteran who has held high-level executive positions at companies like DHL Express, Greatwide Logistics, XPO and uShip, said in a phone interview. "Is Supply Chain Services a serious logistics business? For sure. But in my opinion, it will be tough to backfill what they exit in parcel with just logistics, small-and-medium businesses, heavyweight and healthcare."
And since Amazon is rapidly moving to serve those market segments with its third-party freight, distribution, fulfillment and parcel shipping service, under the Amazon Supply Chain Services banner, profit margins won't be safe in logistics either, he added
In early August, Jindel warned negotiations on the next contract for more than 300,000 van and truck drivers and package handlers will turn into a tectonic clash that reshapes the parcel shipping sector, with either UPS becoming the top dog or getting overlapped by rival couriers, depending on how the talks play out.
UPS's labor costs are so out of whack with the rest of the industry because of the lucrative 2023 contract the Teamsters secured that UPS is becoming unaffordable for retail shippers, according to many industry watchers.
Jindel is now going further, predicting that UPS will welcome a strike by the Teamsters union and its combative boss Sean O'Brien, who is already drawing red lines that could easily trigger a work stoppage in 2028, so it can reset its cost structure.
The emphasis on revenue quality over sheer parcel volume is actually a smokescreen to keep parcel delivery competitors, like FedEx and Amazon, off guard so they don't prepare for a driver exodus when Teamsters workers go on strike, enabling UPS to hire drivers from competitors and reset its cost structure. That would allow UPS to again dominate the parcel market like it did in the 1990s, he opined in an interview.
Although UPS downsized its domestic parcel network — eliminating 150 sort centers, 30,000 positions and 50 million labor hours — to align with lower volumes from shedding Amazon business, it wouldn't be investing more than $8 billion over four years to automate facilities, if it planned to stop delivering from fulfillment centers to consumers' doorsteps, Jindel explained.
UPS is trying to make people believe they are pulling out of short-haul parcel delivery. "They are not. This is a Trojan horse to misguide competitors and the Teamsters," the founder and president of ShipMatrix told FreightWaves.
ShipMatrix supports hundreds of shippers with parcel visibility, analytics, invoice processing, auditing and carrier selection. Jindel has a strong track record of predicting industry events or making recommendations that eventually are adopted, including the spinoff of FedEd Freight and retailers' overreaction to consumer interest in free, superfast delivery.
In the Aug. 31 news release downplaying the parcel operations, UPS also named Matt Guffey as chief U.S. domestic officer, with responsibility over all parcel and delivery business units: small package, non-union subsidiaries Roadie and Happy Returns, The UPS Stores and Mail Innovations (the company's consolidation program with the U.S. Postal Service for lightweight parcels).
UPS purchased Roadie in 2021 for $548 million. The carrier handles same-day, urgent shipments that don't go through the parent company's parcel sortation network. Instead, the crowdsourced delivery platform instead picks up orders from brand-name stores and delivers them to homes and businesses, with independent drivers providing their own vehicles.
Jindel said the reorganization under Guffey suggests that UPS intends all five units will eventually utilize non-union workers because, for the first time, management has brought all the parcel services under one executive. It will allow use of a fully integrated parcel network to meet customers' needs at the lowest cost by placing the right parcel in the right network.
The reorganization aligns with a scenario he floated last November, in which UPS proposes that Roadie carry out all B2C deliveries from UPS Stores, while Teamster drivers handle shuttle runs between package hubs and the UPS retail outlet — a nonstarter for the Teamsters that would likely tee up a strike. UPS will be able to manage a strike without huge damage if Roadie has plenty of freelance workers signed up on its app in advance to deliver packages and management bringing packages to the UPS Stores.
UPS officials privately caution not to read too much into the Aug. 31 statement: Small package is not going away. Core competency is now directed at transportation moves that require multiple services, but also feed into the small package network, where the driver still needs to deliver the product to a home or business, and customers view UPS as a partner in the end-to-end logistics process.
"Our number one priority is to move the right packages and the right mix of volume through our network. The market has changed and we're adapting to it," CEO Carol Tomé said in the company's second quarter earnings briefing.
"We're overturning the old industry assumption that scale alone drives profitability. Instead, we're focused on premium segments. … Our strategy is working. We're seeing favorable mix improvements with small-and-medium business and B2B volume representing a larger share of total U.S. volume and … meaningful revenue per piece growth. … We're winning through innovative and differentiated capabilities," she said.
Being selective about which shipments to accept means lower revenue, but UPS — and FedEx, for that matter — is partly making up for that money by frequently introducing a broad range of surcharges throughout the contract year, a relatively new tactic for increasing revenue-per-package.
The fact that Teamsters chief Sean O'Brien has used inflammatory language to disparage UPS and insist it accept more union demands in the next contract, while suggesting a labor stoppage is almost inevitable, is striking two years before the current labor contract expires.
Not everyone is convinced as Jindel that a strike will occur, while seeming to acknowledge it will be a close call. Their comments reflect a broader nervousness across the carrier and shipping community that a UPS shutdown is possible.
James Cochrane, chief executive officer of the Package Shippers Association, said UPS has to do something to rebalance its costs with the market.
"The last [contract] didn't end well for them. Their cost to serve went very high. The people that deliver are hardworking individuals, but there's such a difference between people that are delivering packages making $50,000 a year and those making $150,000. I don't know how sustainable that is," he said during a keynote address at Parcel Forum 26 here last month.
The Teamsters strike of UPS in 1997 was damaging to the company because it took time to regain business from FedEx, he recalled.
"I don't think there'll be a strike, but I don't envy UPS having to negotiate that one because very rarely do things [contract terms] move backwards. They're at a high number now, and so I worry about their long-term longevity with that kind of cost. I would love to see them maybe get a distributed environment where some of the new employees have a lower base for a period of time," Cochrane said.
Teamsters drivers cost about $65 per hour — total compensation when all healthcare and other benefits are included with the $49 hourly rate for senior drivers — compared to FedEx drivers who earn about $35 to $39 per hour on average for total compensation.
Regional carriers that heavily rely on contract fleets or gig workers spend about $15 per hour, or less, on last-mile delivery drivers, experts say.
"The real battleground in 2028 might be a show down over Roadie. UPS spent $548 million to buy Roadie and the time may be approaching to pull it off the shelf. Decoupling middle-mile Teamster haulage from gig-based final-mile delivery isn't just an option for UPS — it is probably the only mathematical reality that allows them to remain competitive," wrote Metzler in the comment section of a FreightWaves article about UPS.
Vincent D'Amato, chief sales officer at startup carrier Gofo, said his attitude toward a potential strike is colored by previous cries of wolf that never materialized when UPS contracts came up for renewal.
"I'm not saying there's zero chance. I"m saying I don't really buy into the hype because I spent 17 years at FedEx and every cycle it would come up and we'd be told to go out to the customer base and tell them they need to lock in volume now because if it gets closer we're not going to take volume. And it never really happened," he said on the sidelines of the conference. "I just feel as though there's always talk about the strike. I just don't think it's a significant likelihood that it would happen, enough where it would create a panic in the market."
If UPS workers did walk off the job it would severely hurt businesses and create shipping delays, he added.
"It would be catastrophic for the parcel market. Most of these alternative providers can't handle that volume. They would be inundated. FedEx would be very disciplined about what they would and wouldn't take at what price," said D'Amato. "Maybe Amazon or the USPS could absorb some of it."
Despite UPS's public position about being very intentional in only accepting high-margin, multi-zone, specialized shipments that fit their profile, analysts say the company can't afford to abandon a key segment of the market when its goal is to provide integrated logistics solutions.
Integrated logistics, by definition, means having one's own assets and network, said Jindel.
"It can't be either, or, especially because consumers and businesses require both" B2C and B2B shipping capabilities that, for example, can get pharmaceuticals to someone's house or to a hospital, said Joanne Strong, senior manager and warehouse management system practice lead at Deloitte, during a panel discussion. "The market is very dynamic and there are all these operating models going after the same customer based on what that means for them at that moment."
Metzler agreed that cherry picking a big piece of the market won't work because shippers won't give all of the quality packages to one carrier.
"Carriers are going to go after where the biggest margins are. But you have to be able to offer those [last-mile] services to really make it work. They have got to build their physical networks with freight. They need volume to make those operationally successful," Chris Kina, senior director analyst for logistics, customer fulfillment and network design at Gartner, said at the event. New technology, added, is going to enable more carriers to expand their service offerings.
Focusing on premium market segments is risky when the line between commerce and package delivery is disappearing, as platforms like DoorDash and Uber expand from restaurant and grocery delivery to deliver orders from big and small stores, including brands like Costco and Ace Hardware, while retailers like Walmart deliver more packages on their own, said Nate Skiver, the founder of LPF Spend Management, on LinkedIn.
The amount of available package volume for pure-play couriers will shrink, as a result. "Which begs the question: Is there enough 'premium' volume for both UPS and FedEx?" he said.
D'Amato said that UPS would have to significantly scale down its network if it were going to push out B2C delivery.
"They may have painted themselves into a corner with the last Teamsters contract. Plus, Sean O'Brien has made it abundantly clear the next contract will be no fun and will close the gaps on Roadie, UPS Stores and Supply Chain Services" Metzler said. "With the fixed cost of the UPS network, it is hard to see how they can get to the Promised Land with lower package density on any given route."
Some businesses are beginning to realize the need for contingency plans as awareness increases about the strong potential of a strike at UPS, and the chain reaction it could set off across the parcel industry, parcel shipping consultants say.
Jindel said customers are asking about how to prepare for any potential labor disruption, including how to incorporate alternative carriers in their automated manifesting and label-generation systems, after reading his Aug. 11 commentary warning about the UPS-Teamsters negotiating cliff.
Analysts say the proliferation of surcharges for peak season, fuel, large packages, non-urban delivery areas and other conditions has irritated shippers, making them more open to using alternative carriers.
"Carrier diversification is already a focus for many shippers because of rising costs and service concerns, and the potential for another UPS strike adds to that conversation," Robyn Meyer, senior vice president, parcel strategy and solutions at Transportation Insight, told FreightWaves.
"It's not a major concern just yet. I think the biggest lesson from 2023 is that shippers can't wait until the last minute. Alternative carriers have limited capacity, and building those relationships takes time," she said.
Shippers should be engaging with other carriers so that their warehouse management and transportation management systems are integrated and ready to exchange information if that becomes necessary, the ShipMatrix chief recommended. Carriers will be overwhelmed onboarding new accounts if shippers wait until 2028.
"Your packages will be piling up. You won't be able to ship," Jindel said.
Parcel shippers also have to worry about the financial impact of shifting volume away from UPS and potentially affecting existing contract incentives.
"I expect we'll see more conversations around this throughout 2027, especially among larger shippers with significant UPS volume," said Meyer.
Some shippers, in an effort to maintain flexibility to divert packages if a labor disruption occurs, are asking UPS to include clauses in contract renewals that waive volume requirements for discounted rates, Jindel said.
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