Shipping giant slashing nearly 500 locations

Americans ship more packages today than ever, and that number is expected to continue climbing.

"In 2024, U.S. parcel volume saw significant growth, reaching 22.37 billion shipments, a 3.4% increase from 2023’s 21.65 billion. This growth trend is expected to continue, with projections showing volumes reaching 30 billion by 2030," according to the Pitney Bowes Shipping Index.

Fulfilling those deliveries, however, has been a challenge for shipping companies, because revenue has not matched the increase in shipments.

However, revenue growth hasn’t kept up with rising volume. "In 2024, total revenue grew by just 2.7%, from $197.9 billion in 2023 to $203.2 billion — slower than the increase in parcel volume," the study showed.

Americans, myself included, now expect two-day, or even faster, shipping at no cost, which strains the economics of delivery. That has forced the nation's two largest carriers to make massive cuts in order to lower costs.

FedEx plans a transformation

FedEx recently shared its Network 2.0 plan to streamline its operations in order to lower its cost on each delivery.

"Network 2.0 is a years-long effort by FedEx to consolidate its historically separate Ground and Express operations. The initiative has already led to the closure of more than 200 stations," Supply Chain Dive reported.

FedEx shared the four pillars of the plan in a presentation during its 2026 Investors Day.

• Grow in High-Margin Verticals: The company will focus its commercial strategy on premium B2B and specialized B2C segments where customers value speed, precision, visibility, and reliability. Key target industries include health care, automotive, aerospace, data centers, and the premium end of e-commerce.
• Build on Data & Technology Advantage: Leveraging the two petabytes of data processed daily and its unparallelled physical network, FedEx will scale its digital backbone, AI, and automation to enhance customer value, improve network planning, and unlock new revenue streams.
• Transform the Network: FedEx will continue to modernize and optimize its integrated air and surface networks. This includes evolving its Tricolor air network strategy and advancing Network 2.0, both of which enable flexibility, increase asset utilization, and reduce structural costs while improving the customer experience.
• Deliver Ongoing Efficiency Gains: FedEx will continue to embed the One FedEx operating model, powered by the DRIVE process, to support durable value creation and enhanced profitability.

While FedEx highlights efficiency gains, analysts caution that broader market pressures may limit pricing benefits for shippers. Some question whether Network 2.0 will meaningfully ease parcel pricing pressure, noting that freight headwinds and competitive rate pressure could cap returns, according to Simply Wall St.

Additionally, independent experts note that rising parcel volumes outpacing revenue growth, coupled with increasing costs for labor and energy, may ultimately push shipping costs onto consumers, reinforcing the challenges facing the major carriers.

Some analysts question whether Network 2.0 will meaningfully ease pricing pressure for shippers, noting mixed industry views on its execution and the broader competitive environment. While some see efficiency gains supporting margins, others believe freight headwinds and rate resistance could cap pricing power and returns, according to Simply Wall St.

FedEx cutting more than 475 locations

These operational shifts, combined with broader market pressures, are already driving significant facility closures and workforce reductions at both FedEx and UPS, signaling that the changes may ultimately affect parcel pricing and service levels for consumers.

When you strip away the marketing language, Network 2.0 involves large cuts to people and facilities.

FedEx plans to close more than 475 stations by the end of 2027 as part of its Network 2.0 plan, or about 30% of its facility footprint, according to Scott Ray, the carrier’s COO-elect for U.S. and Canada surface operations.

These are changes forced by the competitive landscape.

"Carriers are increasingly offering competitive pricing to attract customers, leading to lower revenue," Freightwaves reported.

Carrier revenue per parcel ticked down to $9.09, down from $9.10 in 2023, according to Pitney Bowes.

UPS makes massive cuts, too

UPS has been closing facilities and laying off workers as part of its Network of the Future initiative. The company shared details of the plan.

• Network Consolidation: The "Network of the Future" plan, announced in 2024, targets closing roughly 200 facilities by 2028, with 93 closed in the first nine months of 2025 alone, Supply Chain Dive reported.
• Job Reductions: After slashing 48,000 jobs in 2025, the company plans to reduce operations by up to another 30,000 positions and 25 million operational hours in 2026.
• Facility Closures: Numerous locations have closed or are slated to close, including centers in Michigan, California, Kansas, Ohio, India(BHARAT)na, Pennsylvania, and Texas.
• Automation Focus: The company is focusing on automating facilities to handle higher volume more efficiently, rather than relying on older, manual locations or smaller, less efficient locations.
  Source: UPS

The company expects the changes to improve its bottom line.

"Over the next three years, we plan to make bold moves to create a growth flywheel in premium markets, while at the same time drive higher productivity and efficiency,” said UPS CEO Carol Tomé.

“The growth and productivity initiatives we are executing will result in higher revenue, expanded operating margins, and increased free cash flow to deliver long-term value to our shareowners.”

Smaller carriers have taken market share

Rival independent carriers include OnTrac, Better Trucks, Jitsu, Veho, SpeedX, Speedy Delivery, and UniUni. Many are startups or provide regional service with lower overhead than national carriers.

"The U.S. Postal Service’s new low-cost shipping option, Ground Advantage, has also contributed to the pricing pressure," Freightwaves reported.

“Since Pitney Bowes began tracking shipments a decade ago, the parcel market has been dominated by FedEx, UPS, and USPS. We are witnessing a turning of the tide, evidenced by the nearly 40% volume growth in the five-year compound annual growth rate of [alternative] carriers,” said Pitney Bowes Executive Vice President Shemin Nurmohamed.

“This disruption presents a unique opportunity for businesses to take advantage of competitive pricing.”  

More Retail:

• Costco sees major shift in member behavior
• Retail chain shuts all locations as legal changes hit industry
• Lululemon struggles to reverse concerning customer behavior
• T-Mobile launches free offer for customers after major loss

UPS has focused on phasing out its low-margin business, which has included dropping about half of its volume from Amazon.

“The agreement with Amazon to reduce volumes by more than 50% in 18 months is a surprise,” Evercore ISI analyst Jonathan Chappell said in a note shared by the Denver Gazette, adding that UPS’ dependence on emerging delivery rival Amazon was a long-term risk.

U.S. consumers may see higher costs

While FedEx and UPS are working to lower their costs, they're doing that to improve their bottom line, not to lower prices.

"Global supply chains are entering 2026 facing heightened instability, as procurement professionals warn that cost volatility across logistics, energy, and critical inputs is becoming a permanent feature of international trade rather than a temporary disruption," according to the latest CIPS (Chartered Institute of Procurement and Supply) Pulse Survey, conducted globally in Q4 2025, SupplyChainBrain reported.

The Pulse Survey, released on February 3, identified shipping and logistics as the category most likely to see significant price increases, with 22% of respondents reporting cost rises of over 10% by the end of 2025.

“Procurement professionals are often the first to see cracks forming in the global trading system. What this survey showed at the end of 2025 and what January 2026 has already confirmed is that volatility is no longer an exception. When logistics costs can swing by 20–30% in weeks, those pressures inevitably ripple through to businesses and consumers alike," CIPS CEO Ben Farrell said.

Related: Costco quietly changes its famous return policy