American Logistics Company UPS to Lay Off 12,000 Employees, But Why?

American logistics giant United Parcel Service (UPS) recently made a decision that disappointed thousands of its employees.

The company decided to lay off a massive 12,000 employees, or about 2.4% of its global workforce.

So, what actually led to this decision?

1. A significant downturn in shipping volumes: UPS witnessed a notable decline in shipping volumes both domestically and internationally, affecting the company's overall performance.
2. Difficult financial year: Carol Tomé, described 2023 as a "unique and difficult year," with declines in volume, revenue, and operating profits across all business segments.
3. Decline in revenue and shipping volumes: UPS reported a 7.8% decline in revenue to $24.9 billion, missing the projected $25.43 billion. Net income also significantly dropped to $1.61 billion from $3.45 billion a year earlier. International shipping volumes decreased by 8.3%, with particular softness in Europe and freight complications in key global regions.
4. Macroeconomic factors: The company also highlighted broader macroeconomic factors as key contributors to the disappointing year.
5. Increased labour costs: The new labour contract with the Teamsters, effective from August 1, increased labour costs for UPS. The deal, which covers approximately 340,000 workers, includes significant wage increases and is expected to impact the company's profit margins in the first half of the year.

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