What could a potential UPS strike mean for your packages?

A UPS strike by 185,000 workers 25 years ago brought the logistics giant’s operations to a standstill. The 15-day strike cut package deliveries, overwhelmed the US Postal Service and FedEx, and damaged businesses across the United States.

Now, more than 340,000 UPS workers represented by the Teamsters union are threatening to strike over wages, hours and working conditions if there is no agreement in contract talks between the company and the union. If a strike takes place, it would be the largest single employer strike in US history.

The work stoppage would also kick in as shoppers enter the back-to-school season, and retailers are gearing up for the holiday season later in the year.

How bad can it get? Logistics experts predict that a brief UPS strike would not be as devastating as it was in 1997 because things have changed in the intervening quarter century: There are more shipping options, for example. But if the strike lasts longer than a week, there will be some empty shelves, higher prices and slower package deliveries for customers, they say.

In the worst-case scenario, a long-term UPS strike could cause major disruptions to the US supply chain network.

More options now

Shippers have more options than they did in 1997: FedEx and regional carriers have grown since then, and Amazon’s logistics business didn’t even exist then.

Walmart, Target and other retailers have also built their own last-mile delivery operations, offering customers the option to buy online and pick up their orders in stores. Gig companies like Uber have since entered the market to deliver as well.

“The big lesson from the strike was to diversify,” said Cathy Roberson, head of Logistics Trends & Insights, a supply chain research firm.

The economy has slowed and many consumers have pulled back on discretionary goods such as electronics and clothing. That means demand isn’t as high as it was earlier in the pandemic, and retailers don’t need to bring in as much inventory for back-to-school and holiday shopping. In fact, many companies are stuck with too much merchandise right now.

UPS’s revenue fell 6% in the first quarter compared with a year earlier, and it said in April that it expects “volume to remain under pressure.”

“If you look at the overall market, nobody sees a pickup anymore,” Roberson said. “From an economic perspective, we’re going to have a very subdued peak season.”

Companies have also had time to prepare for the possibility of a strike.

FedEx and other carriers have been urging shippers for months to switch away from UPS to avoid delays from a strike.

Strike odds

UPS delivers about a quarter of all U.S. packages to their final destination, according to Pitney Bowes, a global shipping and logistics firm, and there is not enough capacity in the market to replace UPS. And the share of shipments is even larger than that number indicates since many of the packages delivered by the US Postal Service are moved by UPS.

Overall, UPS handled 18.7 million domestic packages a day on average in the first three months of this year.

Small and medium-sized businesses that are lower in the pecking order than big-box chains will experience the most delays from a prolonged strike, logistics experts say.

“Major retailers have contingency plans in place,” said John Haber, chief strategy officer at third-party logistics provider Transportation Insight Holding Company, who worked for more than a decade in UPS’s corporate finance office.

Businesses and customers in the rural areas will also be most affected by a longer strike.

“If you get beyond three days, you start going into the danger zone” in remote areas, he said. “That’s when things really start to become bottlenecks. And then you fall behind.”

Agreement may be likely

Logistics experts generally believe that a protracted strike with damaging implications for businesses and the economy will be averted. Both sides have too much to lose in a protracted conflict.

UPS CEO Carol Tome has predicted that an agreement will be reached without a strike.

“We are aligned on several key issues,” she said in April. “While we expect to hear a lot of noise during negotiations, I am confident that a win-win-win contract is very achievable and that UPS and the Teamsters will reach an agreement by the end of July.”

Teamsters General President Sean O’Brien, while acknowledging the progress that has been made, refuses to say whether or not he thinks a strike is likely.

“When you get into the meat and potatoes of wages and benefits, things can get very difficult, very controversial,” O’Brien told CNN last week. “Our goal is to get the best deal to avoid a strike.”

A promising indicator of a deal came this week when negotiators for UPS and the Teamsters reached a tentative agreement on a crucial issue in contract negotiations: the installation of air conditioning — gradually — throughout its fleet of 95,000 vans.

“The odds of a strike are as high as they’ve been since 1997, but they’re still less than 50%,” said Alan Amling, a fellow at the University of Tennessee’s Supply Chain Institute and a former UPS executive.

“Both UPS and the Teamsters know that the volume that leaves them during a strike would be gone for good because there are alternatives. It’s mutual destruction if that happens,” he said.