A Brief Primer on UPS's Distribution Network

From shrinkage in "The Network of the Future" to expansion in Healthcare logistics

UPS is the fourth company about which On the Seams has done a brief primer that started in Seattle, WA (the others being Amazon, Costco, and Starbucks). Supposedly Paul Allen originally pushed to move Microsoft to Seattle from Albuquerque because he thought the rainy weather would keep programmers from getting distracted. There does seem to be something about the city that is essentially business-minded, and from the Boeing years to the Amazon years, there’s a good argument to be made that it is the quintessential company town in the US. In his great history of the city, Seattle Past and Present, Roger Sale argues that Seattle was “bourgeois from its very first breath.” It’s not exactly right, but you don’t have to spend long in the place to know what he means.

For its first fifty years, UPS was a ground transportation service. In 1957, it introduced its Blue Label air service in nine cities, but it wasn’t until the 1980s, thanks to airline deregulation, that its air game really took off. In 1981, it owned one plane, and in 1989, it had 110. Louisville was established in 1980 as its central air hub, which has continued to expand and was dubbed its “Worldport” facility in 2002.

UPS has a tough road ahead. In 2023, Amazon leapfrogged it in terms of package volume—an unimaginable feat just a decade ago, when Amazon first started building out its outbound network. It has been “right-sizing” its network, shuttering hundreds of package centers and building newer, more automated hubs to compensate. If current trends continue, the Teamsters will be in a very different bargaining position with the company in 2028 than they were in 2023.

As with all of our brief primers, this one comes with a map of UPS’s distribution network. Please do email us at ontheseams.newsletter@gmail.com with any updates to the map.

Open the Map of UPS’s Distribution Network Here

Hubs and Centers

UPS Hubs sort packages either to be sent to another Hub or to a Center for delivery. UPS Centers are the delivery station facilities from which trucks deliver packages and where they bring packages that have been picked up on their route. Both are labeled “Customer Center” on the outside, and they can be and often are co-located.

UPS’s hub-and-spoke system is quite different from that of Fedex Ground. In the latter, there are a limited number of large hub facilities (40) that serve almost 700 spoke facilities. By my current count, UPS has 745 spoke facilities and 264 hubs (given the recent closings described below, these numbers are in rapid flux). This comparatively high hub to spoke ratio is a clear inefficiency: Fedex hub-to-hub linehaul runs are guaranteed to be in full truckloads given the limited number of hubs. With so many sortation hubs, UPS’s network does not benefit from the same economies of scale, but perhaps certain redundancies serve them in other ways (more below).

My guess is that this key difference between the two companies’ networks can be attributed in part to age. UPS was founded in 1907, Fedex in 1971, and then only as an air service. It’s somewhat like breaking into the walls of a house built 100 years ago vs. one built 40 years ago.

Recently UPS announced that it will be closing 200 sort centers by 2028 in a modernization push dubbed “The Network of the Future.” Unlike Fedex’s “Network 2.0” announcement, “The Network of the Future” is really about cost reductions. In this slide from a recent UPS Investor Day presentation, you can see what’s going on: building new larger hubs, automating existing hubs, and eliminating those whose capacity will be taken on by the larger and more efficient facilities.

The execution of what’s depicted here means a lot of closures and layoffs, and UPSers have been keeping track of them on various Reddit threads. I’ve compiled those facilities on the spreadsheet linked below. The links to closure announcements are in the spreadsheet, and I am in the process of verifying these with WARN notices.

UPS is planning automation upgrades for 53 hubs and is planning to build 10 new, automated hubs, involving an investment of $9 billion. One of the companies UPS has been working with is Pickle, whose trailer unloaders are depicted here:

For package sorting, they’re working with Dexterity, Fortna, and Plus One Robotics. Their systems all kind do the same thing, so here’s Dexterity’s as an example:

Dexterity and Plus One have also been working with Fedex. My guess is that we’re still in something of a trial period, and that more established partnerships will soon emerge.

UPS is also working with a variety of companies on their autonomously guided vehicles, including Dane Technologies, Geek+, Locus Robotics, Crown Lift Trucks, and Toyota-Raymond. The first three are basically Amazon Kivas. The latter two are kind of cool because they incorporate the forklift function. Once again, there’s a lot of functional overlap here, and it’s likely that UPS has already settled on certain partnerships and is in the process of shedding others.

One clear sign that all of this stuff is still really in its nascent stages is that a new “automated hub” in Bayonne, NJ opened in October 2023, and as you can see here, precisely none of the technologies just mentioned are present:

“Automated hub” seems simply to mean a hub with automated sorting belt technologies and camera tunnels.

Finally, it’s not warehouse automation, but worth mentioning here: UPS has been working with TuSimple to automate long-haul trucking for longer runs between hubs.

Again, all of these technological rollouts are still in their infancy. If they are adopted system-wide, it would indeed entail a massive reduction in UPS’s workforce, but it’s not certain that the investment is going to be made at that level.

Air Gateways

Unlike Fedex, which only last year announced an integration of its Express (Air) and Ground networks, UPS’s air and ground networks have always been integrated. That means that there is a great deal of flexibility built into their system. At the same time, for the reasons detailed in this thread, its air service likely suffers from certain inefficiencies. But as I review in the brief primer on Fedex, Fedex Ground had become so efficient that it was unwittingly rivalling Express, which is one of the reasons they chose to integrate the networks. So it’s possible that UPS’s integration of its air and ground networks is becoming more rational as ground operations improve.

Aside from its massive Louisville Worldport air hub, which processes upwards of 400,000 packages/hour, UPS also has regional air hubs in Rockford, IL, Columbia, SC, Dallas/Fort Worth, Miami, and Philadelphia.

Just this past year, UPS snagged USPS’s air cargo contract from Fedex: at the end of September, it took on all first-class mail, Priority Mail and Priority Express volume. One of the reasons cited for this shift was the very fragmentation of UPS’s network: unlike Fedex, which runs everything (or mostly everything) through central hubs, UPS can do more point-to-point kind of runs.

Rail Facilities and Meet Points

For travel across the country, UPS often uses rail instead of trucks, and it maintains a network of approximately 34 rail facilities. At its giant Chicago Area Consolidation Hub (CACH), which processes about 10% of total UPS volume, about half of all inbound and outbound volume is going by rail.

The Meet Points are simply giant parking lots where trucks will switch trailers.

Supply Chain Solutions/Healthcare Logistics

UPS has three basic revenue streams: domestic packages (about 65%), international packages (20%), and Supply Chain Solutions (15%). SCS is a combination of a Freight Forwarding service and a warehousing/distribution operation. UPS Freight was sold to TFI International in 2021 for $800 million, so UPS no longer operates its own Freight service, as does Fedex (though Fedex recently announced that they are spinning off their Freight segment into its own company, an indication of how different the package and freight markets are).

In 2019, UPS got into the E-commerce fulfillment game, mainly operating out of hubs in Mira Loma and Louisville. In 2022, it acquired two cold chain logistics companies, Bomi Group and MNX Global Logistics, as part of its focus on UPS Healthcare. It describes its Healthcare logistics work in its 10-K as part of its broader logistics work, and given the fact that many Supply Chain Solutions facilities are also UPS Healthcare facilities, it’s safe to say that UPS Healthcare is functionally under the umbrella of Supply Chain Solutions, even though they have separate websites. If it’s true that UPS Healthcare accounted for 10% of overall company revenue in 2024, then the bulk of SCS work is now in Healthcare logistics.

*Updated 05/28/25