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With the possibility of a UPS strike looming, the national supply chain is bracing for impact.
The Teamster Union, which represents about 340,000 United Parcel Service package delivery and warehouse workers, last month voted to authorize a strike if contract negotiations fail to produce a deal by July 31.
The last time workers walked out at UPS was in 1997, well before e-commerce became an integral part of our lives. If another strike happens, the impact on the US supply chain, package delivery, and the overall economy could be massive.
Given the huge part UPS plays in the shipment of goods in the US, all eyes are on the labor negotiations. UPS said it transports about 6% of the country’s gross domestic product daily.
UPS stats illustrate company’s vital role
According to Pitney Bowes, UPS had the second-highest parcel shipping volume in the US after the US Postal Service in 2021 with 24% compared to USPS’ 32%. Amazon Logistics followed with 22% and FedEx with 19%.
More numbers show the company’s powerful role in the economy:
- UPS delivers packages for 1.6 million shipping customers to 11.1 million delivery customers
- Last year, UPS delivered 24.3 million packages per day
- Total 2022 revenue was $100.3 billion
- About $8.6 billion in dividends and stock buybacks returned to shareholders
- More than 500,000 workers around the world, including 340,000 represented by the Teamsters
Profits have soared since the pandemic, when consumers became dependent on fast delivery of essentials and other goods. The union says workers should get their fair share.
“Our members are fighting for a post-pandemic agreement that honors the sacrifices they made to keep this country moving during the last several years,” Teamsters General Secretary-Treasurer Fred Zuckerman said last month.
Shippers scramble for alternatives ahead of potential strike
A UPS Teamsters strike could set the supply chain back from its slow post-pandemic recovery, disrupting package delivery across the country for consumers and businesses alike.
A 10-day UPS work stoppage could cost $7 billion, according to a Reuters report that cited analysis from consulting firm Anderson Economic Group. The estimate includes $4 billion in losses to UPS customers.Experts say shippers need to prepare for alternative carriers as soon as possible in order to keep packages flowing to their customers.
Patrick Kelley, executive vice president at OSM Worldwide, the fifth-largest nationwide e-commerce package shipper, said in an email that industry cooperation will be key.
“If a strike does happen, no one carrier can handle nearly a quarter of the overall domestic parcel volume alone, and the entire industry is going to have to collaborate together.”
“We’re already seeing reports from competing big-three carriers relative to volume planning, and there’s no guaranteed acceptance into their networks – there will be limitations on what new volumes are taken on in order to continue providing a high level of service for existing customers,” he added.
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Delivery services under pressure, new strategies eyed
Indeed, shippers without existing contracts with alternative carriers face the biggest challenge in the event of a UPS strike. FedEx announced earlier this month that it’s prioritizing capacity and service for its existing customers.
“Shippers who are considering shifting volume to FedEx, or are currently in discussions with the company to open a new account, are encouraged to begin shipping with FedEx now,” the company said.
USPS recently launched a new shipping service that it says will make it more competitive in the package industry. A USPS executive told Government Executive that changes at the agency will enable it to handle increased volume in the event of a UPS strike.
Kelley said UPS may be able to move some existing volume to their USPS last-mile delivery option, which could help ease some of the pressure.
“In the long run, the uncertainty may cause some shippers to lose some faith – when is the next time an outage might affect our shipments again? The whole situation is driving a more serious look at multi-carrier strategy among shippers of all sizes.”
Shippers have made progress in diversifying their carrier mix, according to SuppyChainDive, which cited a report that showed the average number of last-mile carries per company was 5.52 in April, up from 4.98 from the previous year.
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Faced with ongoing uncertainty, retailers are strengthening their supply chain to keep shelves stocked, inventories healthy, and customers satisfied.
UPS strike would impact industry supply chains
If Teamsters UPS workers strike, we could wind up seeing a repeat of the kind of disruptions that plagued the supply chain during the pandemic.
In addition to delivery delays for consumers, businesses of all sizes rely on UPS for delivery. Supply chains for medical supplies and car parts could be hard hit because they depend on wholesale shipments to operate, a logistics expert told Forbes.
Magnus Meier, Global VP, Wholesale Distribution Business Unit, SAP, said wholesale distributors often have alternative third-party logistics partners. But they might need to book capacities well in advance, which could cause some disruptions for their customers.
“A distributor that banks on UPS alone will have a hard time mitigating this situation and will need to rethink their approach. Similar to what we have seen after the COVID-19 pandemic, instead of relying on a pure ‘just in time’ approach, they should plan for potential disruptions by adopting a ‘just in case’ approach for critical items, supply chain partners, and customers,” Meier said.
Meanwhile, the retail industry is gearing up for back-to-school sales and the holiday season.
“The ability to move goods from U.S. ports to stores could be impacted if UPS and the Teamsters don’t resolve their differences before their contract expires at the end of the month,” Jonathan Gold, VP for supply chain and customer policy at the National Retail Federation, said in a prepared statement earlier this month.
“Seamless supply chains are critical for retailers as we head into the peak shipping season for the winter holidays,” he added.
