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For the past few months, transportation industry headlines have repeatedly focused on a single story: the ongoing negotiations between UPS and the Teamsters, which represent more than 350,000 of the parcel giant's workforce. If the two parties fail to reach an agreement by July 31, UPS operations could grind to a halt, or at least a slow crawl. A work stoppage at UPS, which shipped 24% of U.S. parcel volume in 2021, could see historic disruptions to the parcel supply chain, with the parcel giant potentially having to shutter operations or at least slow to a crawl for the duration of the strike. Most likely, they’ll rely on administrative staff in the terminals and hubs, and contact drivers on the roads.
The high-stakes negotiations between UPS and the Teamsters have both sides offering different stories. This article cuts through the bluster and buzz for nervous parcel shippers and examines the critical question: How would a strike at UPS affect parcel shipping?
Before we can get into what a strike at UPS would mean for parcel shippers, we must understand how we arrived at this tense moment. Let’s delve into both sides of the story to help shippers understand the issues.
Following the institution of a controversial revenue management strategy in 2020, UPS saw significant gains in revenue, as CEO Carol Tomé touted in the company's 2020 annual report to shareowners: “In the U.S., revenue grew 15.1% to $53.5 billion with volume growth across all products,” Tomé said. The Teamsters, however, feel that this revenue growth, built on high-performance expectations in volatile times, has come without an accompanying increase in wages and benefits for UPS workers.
Teamsters Union President Sean O’Brien, who took the helm from his predecessor, James P. Hoffa, in 2022, says this discrepancy between profits and wages is a crucial point of frustration for the Teamsters. “Our union is resolved to win the best contract for UPS members and to reset the standards for wages and benefits in this industry by August 1, 2023,” said O’Brien, according to reporting from Supply Chain Dive, “We won’t extend negotiations by a single day.”
Going into negotiations, the Teamsters have a few key priorities. By understanding these priorities, shippers can better understand the factors leading to a potential strike at UPS.
In addition to a crew of full-time drivers, UPS maintains a pool of drivers listed under the 22.4 designation. The designation, named after a clause in the current contract between UPS and the Teamsters, refers to drivers that make deliveries between Tuesday and Saturday, according to reporting from Supply Chain Dive. Drivers under the 22.4 designation are paid less than their full-time counterparts, leading to significant pushback from Teamsters' leadership.
As brutal summer heatwaves increase in regularity, a rise in heat-related injuries and deaths among drivers is leading to concerns for worker safety amongst Teamsters leadership. The New York Times, citing government records, reported at least 270 UPS and USPS workers were sickened and, at times, hospitalized due to heat-related injuries between 2015 and August 2022.
Following a pandemic-era parcel shipping boom, the Teamsters are concerned about many of their members being forced to work consistent overtime, leading to exhaustion and poor work-life balance. In an interview with CNBC, Kara Deniz, a Teamsters representative, said, “There are some drivers who leave while their kids are sleeping, and when they come back at night, the child is back in bed. [Those drivers] lose the entire day working.”
Despite tough talk from Teamsters leadership, Tomé has been consistent in her optimism about the upcoming negotiations, which begin on April 17. "I would submit that a win-win-win is very achievable because we are not far apart on the issues," Tomé, according to Business Insider.
Recently, Tomé has touted progress on worker safety, benefits, and wages. An industry veteran, Tomé has overseen several rounds of negotiations at UPS; she has reassured UPS personnel, the media, and shareholders alike that a strike remains unlikely.
Despite that optimism, the potential strike arrives at a difficult time for UPS. A steep decline in demand for parcel volume has led the carrier to make difficult decisions in recent months, including a recent layoff of an undetermined number of drivers under its 22.4 designation, according to a FreightWaves article. As Amazon continues to build independence from UPS, the forecast is grim for UPS. Per Supply Chain Dive: “Adding further pressure to 2023 results, UPS expects average daily volume in its U.S. domestic segment to fall YoY, driven by its top customer Amazon taking on more of its own deliveries. Revenue from the e-commerce giant represented 11.3% of UPS’ business in 2022, down from 11.7% the year prior [...].”
As tensions rise between UPS and Teamsters leadership, parcel shippers are getting nervous. Despite the potential for a strike if no agreement is reached by the July 31 deadline, parcel industry experts have recently said that, despite some cause for concern, there’s no need for the doom and gloom. Some within the industry predict an agreement could happen much sooner.
Despite those rosy predictions from Tomé and others, parcel shippers should nonetheless prepare for a stormy forecast for UPS and the Teamsters. A strike by UPS’ 350,000 Teamster members could have catastrophic effects on the supply chain. Still, by learning how a strike might affect operations, parcel shippers can build much-needed resilience in parcel operations.
For parcel shippers, a strike at UPS could lead to massive disruptions. In 2021, UPS saw 24% of the total U.S. parcel volume. While volumes have fallen since the boom times of the pandemic, UPS remains responsible for a significant portion of U.S. parcel capacity. If a shutdown were to happen, parcel shippers would see a substantial drop in parcel capacity, leaving businesses with an impossible choice: sacrifice service and accept that shipments will be late, or scramble to find capacity through another carrier. For parcel shippers, neither of these options is good. With the potential of a strike lurking in the background, parcel shippers are searching for innovative strategies to build resilience in a high-stakes parcel transportation industry.
As shippers work to prepare for a potential strike of UPS’ 350,000 Teamsters, many are searching for innovative ways to build resilience in a volatile labor landscape.
With recent parcel shipping innovations, parcel shippers can gain access to a vital range of assets to help them navigate the murky waters of parcel transportation in 2023.
With a potential UPS strike in the summer of 2023, parcel shippers want to build independence from UPS. Logistics network optimization takes advantage of data aggregation technology to help parcel shippers compare carriers to determine the optimal combination of carriers for maximum cost-effectiveness and service delivery. With a logistics network optimized through streamlined data aggregation and analytics, parcel shippers can build a diversified portfolio of reliable transportation partners. This reliable network, paired with zone skipping, hub injects, and footprint redistribution strategies, means that parcel shippers can weather the worst effects of a strike at UPS without sacrificing service.
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