Here is an interesting article from the Wall Street Journal about the struggles of scaling Automation at UPS. (An interesting tidbit: UPS says about half its packages are processed through automated facilities today. At FedEx, 96% of ground packages move through automated sites. )
The article seems to blame the problems of UPS on the lack of automation and having unionized employees. I think the main problem may be that the automation at UPS has grown organically in a slapdash fashion.
In fact, the relevant quote is:
As online-shopping volume grew, UPS relied on what a former UPS executive calls “a Band-Aid” approach to upgrading its network, patching it up by adding extra shifts or extending hours, or retrofitting parts of older buildings with new equipment. UPS says the union hasn’t impeded spending on automation. The cost and size of the machines needed to automate an older facility are now low enough to allow UPS to retrofit older facilities and build new ones, […]
The explosive growth of e-commerce has shifted the attention from bulk orders made by small businesses to multiple small orders made by individual households. The nature of granular shipments has definitely affected the operations of shipping firms.
Automation claims apart, it is not at all clear to me that FedEx has handled the challenge of granular shipments (and the rising competition from Amazon) any better.