UPS is investing $2B in 27 cold-chain facilities and a robotics Taiwan hub as it cuts Amazon volume. The margin payoff may hinge on the next quarterly report.
UPS will invest more than $2 billion in its international, healthcare and supply chain operations between 2024 and 2028, Scott Szwast, vice president of international strategy, told CNBC in a report published Monday.
The money will go toward new hubs in the Philippines and Canada, with a separate facility in Hong Kong. The company is also building a tech-enabled logistics center in Taiwan and a supply chain solutions facility in the Netherlands. On the healthcare side, UPS plans 27 temperature-controlled facilities across its network, Szwast said.
“We’re investing to give [businesses] tailored capabilities aligned to the needs of their specific industries that cover the markets they’re increasingly sourcing from and distributing to, and do it in a way that they can make commitments to their customers,” Szwast said in the report.
The Taiwan center’s automation and robotics have already shortened the supply chain by a day, the report said.
The investment builds on UPS’s push to cut its reliance on low-margin Amazon package volume. The company said earlier this year it was nearing a 50% reduction in Amazon shipments. Instead, UPS is chasing growth in healthcare, small-to-medium businesses, automotive and international B2B shipping.
CEO Carol Tomé said in July that UPS is rebuilding parcel delivery economics around less low-return volume, more automation and a technology layer that makes the physical network visible and adaptable in near real time.
The shift toward higher-margin segments comes as CFOs across industries flag supply chain integrity as a top concern, according to a PYMNTS Intelligence report. “These challenges require robust, strategic planning to mitigate uncertainty and maintain business stability,” the report said.
For UPS, margin improvements from the Amazon cutbacks are competing with the costs of the new investments. The company’s stock page on AlphaScala carries an Alpha Score of 53 out of 100, a “Mixed” label, reflecting the uncertainty around the timing of the payoff.
The next quarterly report will show whether the margin math is working. The $2 billion investment runs through 2028, with the Taiwan center already showing a one-day supply chain gain.
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