UPS strike may disrupt package delivery. How to: NPR

UPS strike may disrupt package delivery.  How to: NPR

Negotiations between UPS and the union representing the company’s workers broke down last week, with each side accusing the other of walking away from talks.

Brittany Newman/AP

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Brittany Newman/AP

Negotiations between UPS and the union representing the company’s workers broke down last week, with each side accusing the other of walking away from talks.

Brittany Newman/AP

Contract negotiations between the United Parcel Service and the Teamsters union stalled last week, raising the prospect of a UPS strike in early August — as well as jitters in an increasingly competitive package delivery market.

A nationwide walkout of 340,000 UPS workers would be the largest strike against a single employer in U.S. history, and the first at UPS since 1997. Consumers and industries across the country could see significant disruptions to package deliveries.

The package delivery industry has become more competitive since the 1997 UPS work stoppage, which lasted 15 days and cost the company $850 million. UPS is now more vulnerable than before to losing part of its business in the event of a strike.

In 2021, UPS held 37% of the package delivery market by revenue, followed by FedEx at 33%, the US Postal Service at 17% and Amazon Logistics at 12%, according to data from the Pitney Bowes Parcel Shipping Index.

But analysts say UPS’s competitors won’t be able to absorb all the backlog created by a strike. UPS delivered an average of 24.3 million packages per day in 2022 – more than any competitor can handle.

“In the event of a market disruption, no carrier can absorb all of the UPS volume,” FedEx executives wrote in an internal company memo on July 6 reviewed by NPR.

FedEx encourages shippers to “start shipping with FedEx now,” according to the memo.

“When customers ask about available capacity at FedEx, we’ve been very clear that, yes, of course, we would entertain any good business and we’d love to talk to them,” said Brie Carere, chief customer officer at FedEx. , during a corporate earnings call in March.

Seeking benefits from strike fear

Jeremy Tancredi, who leads the supply chain team at consulting firm West Monroe, said encouraging customers to switch to FedEx early — before a strike occurs — is a “great sales ploy.”

He said FedEx is trying to attract more shipping customers by capitalizing on fears of a possible UPS strike.

“As this impending strike approaches, you’ll see customers start to panic a little more,” Tancredi said. “And you’ll see in the next two weeks they start moving a lot of that volume over to FedEx.”

Tancredi said the US Postal Service could also take on some of UPS’s volume, since the agency is already built to handle package delivery. Amazon, he added, can also source volume through its own delivery network.

UPS wants to keep big customers close

USPS spokesman Dave Partenheimer said the US Postal Service has the capacity to “deliver what is offered to us.”

UPS notes the potential to lose customers to rivals. CEO Carol Tomé said during an earnings call in April that UPS has assigned 127 “high-impact executives” to update major customers on “our ongoing negotiations with the Teamsters and to keep them with us.”

Even if UPS were to lose some market share before and during a strike, Tancredi predicts the consequences will be temporary. He said most shipping customers would eventually return to UPS, in part because of familiarity with the company and its delivery system.

But Tommy Storch, a transportation procurement expert at consulting firm Insight Sourcing Group, said many UPS customers are likely to shift to a more diverse set of carriers, keeping a higher percentage of volume with other carriers to protect their business from future disruptions.

UPS “may lose some people completely, but I think more than often you’ll see them try to put a little more volume with an alternate carrier moving forward,” Storch said.

Contract negotiations are at a standstill

Negotiations between UPS and the Teamsters union stalled last week, largely due to the conditions of the company’s part-time employees. Fifty-five percent of Teamsters-represented UPS employees work part-time, according to UPS spokesman Jim Mayer.

UPS posted an adjusted profit of nearly $14 billion in 2022. The Teamsters union points to the company’s financial gains as evidence that it can — and should — raise workers’ wages.

“These part-timers are working poverty wages,” Teamsters General President Sean O’Brien said. Morning edition last week. “They need to raise the starting pay rate, reward the people who have been there a long time, and provide full-time opportunities for those people.”

UPS workers voted 97% in favor of strike authorization in June. Workers across the country are now holding a practice strike, in preparation for a strike if UPS and the Teamsters do not agree on a new contract by the July 31st deadline.

The negotiations have already yielded several trade union gains. These include a heat safety agreement that will guarantee air conditioning in new delivery vans and the elimination of a two-tier pay system among drivers.

UPS claims the union walked away from the bargaining table last week, while the Teamsters blame the company for not meeting the union’s financial demands.

A strike is likely to mean package delays for consumers across the country.

Along with ordinary Americans not receiving electronics and household goods, major industries — such as hospitals that rely on medical supplies sent through parcel carriers — could experience significant disruptions.

Jason Miller, a professor of supply chain management at Michigan State University, said a strike at UPS would have been far more catastrophic for the industry in 2021, when package carriers did not have extra capacity due to a surge in demand from the pandemic.

Activity in the delivery and courier industry is down 10% to 15% from two years ago, but employment in the sector is significantly higher, Miller said.

“Consumers should be very happy that this conversation is happening now and not in 2021,” Miller said.

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