Dive Brief:
- A combination of service risks and price concerns led UPS to break away from the U.S. Postal Service for SurePost deliveries, UPS CEO Carol Tomé said on an earnings call Thursday.
- UPS was worried about "service deterioration" for SurePost packages delivered by the Postal Service due to changes incentivizing the drop off of packages further upstream in the agency's network, Tomé said. She also noted the Postal Service wanted to increase rates for delivering SurePost packages.
- "That value proposition of an increased cost as well as deteriorating service, that didn't work for us," the CEO said. Postmaster General Louis DeJoy defended the moves in a recent interview with Supply Chain Dive, saying they were necessary for the agency’s future and expressing confidence in service reliability.
Dive Insight:
UPS began making all SurePost deliveries in-house at the start of 2025 and raised rates on the service shortly after by an average of 9.9%, EVP and CFO Brian Dykes said on the call.
The combination caught many shippers off guard and has sparked increased interest in alternative delivery services. Dykes acknowledged that the delivery insourcing and rate increases could lead to customer churn.
"There are some customers that this might not work for, and we've taken that into account in our forecast," Dykes said.
Despite the risk of losing business, UPS executives said the move will ensure SurePost packages are delivered with strong service without impacting the company's financial performance.
The carrier already increased the amount of SurePost volume it redirected back into its own network by 660 basis points from Q3 to Q4, according to Dykes. That resulted in half of all SurePost packages being delivered by UPS drivers.
"The investments that we have made in the network and the technology allowed us to insource almost 1.5 million stops within a matter of weeks," Dykes said.
Delivery stops have increased, but the company also saw a reduction in spending on purchased transportation in Q4 as a result of insourcing more SurePost activity, according to an earnings presentation.
