As parcel shipping volumes continue to cool, legacy carriers are struggling to adapt to a challenging parcel industry landscape. Despite the very real threat of a strike by the 350,000 Teamsters they employ, UPS is expressing optimism about their fortunes in the new year. Meanwhile, primary competitor FedEx is turning to Layoffs throughout their operations to eke out cost savings amid falling demand. Here’s what you need to know in the industry that’s always moving.
For parcel shipping giant UPS, thefourth quarter and calendar year results for 2022 were mixed. According to reporting from Logistics Management, quarterly profits were off by 17.9% YoY, while annual profits saw an increase of 5.9%.
“I want to thank all UPSers for delivering what matters throughout the holiday season, including industry-leading service to our customers for the fifth consecutive year,” said UPS CEO Carol Tomé, as reported by Logistics Management, “For the year, we reached our targeted consolidated operating margin and return on invested capital goals one year earlier than originally anticipated. Our results in 2022 demonstrate our strategy is working.”
In a Jan. 27 earnings call, UPS CEO Carol Tomé expressed optimism aboutupcoming negotiations between UPS and the Teamsters Union, which represents 350,000 UPS employees. “Over 10 decades, we’ve negotiated many, many contracts,” said Tomé, according to reporting from Supply Chain Dive, “This is not our first rodeo.”
Despite UPS’s hopes for smooth negotiations, Teamsters leadership has been consistent in their willingness to strike should negotiations break down. Last year, Teamsters General President Sean O’Brien, in a statement posted on the Teamster’s website, said, “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. We won’t extend negotiations by a single day.”
While a strike by the 350,000 Teamsters currently employed by UPS would certainly throw the parcel carrier’s operations into chaos, it wouldn’t be the first time the company has had to handle a work stoppage, as Supply Chain Dive reports: “In 1997, 185,000 UPS Teamsters halted deliveries for more than two weeks before a new contract agreement was reached.”
In a demonstration of the Teamsters’ willingness to strike, Teamsters Local 916 workers at Archer Daniels Midland (ADM), one of the ten largest food companies in the world, have gone on strike.
According to WAND, a Decatur, Ill.-based television station, workers have a broad range of concerns: “ADM is refusing to offer these workers wages and benefits on par with what union members receive at other union facilities, which is a slap in the face,” said the President of Teamsters Local 916, “We all know the real reason the company is doing this – when these workers get a contract, non-union ADM staff will hear about it and want to join the Teamsters. ADM needs to stop the union-busting and start showing some respect to the people who are responsible for its prosperity.”
The strike signals Teamsters’ willingness to exercise their right to strike, a worrying sign for parcel carrier UPS.
Despite facing falling parcel volumes and unpredictable labor negotiations, economists remain bullish on UPS. According to Yahoo News, “Raymond James analyst Patrick Tyler reiterated a Strong Buy rating on the shares of United Parcel Service Inc (NYSE: UPS) and lowered the price target from $210 to $207.”
While a positive rating doesn’t necessarily guarantee smooth sailing for the parcel carrier, it does indicate significant investor confidence despite an array of challenges.
In an article titled “The Best of Times / The Worst of Times: What’s happening with UPS?” Intelligent Audit’s Vice President of Professional Services, Joe Wilkerson, provided his expert insight on the state of UPS to the readers of parcelindustry.com, a leading resource for the parcel shipping industry.
“These are fast-moving times for UPS and the parcel industry as a whole. I would argue that more has changed, changed back, and changed again in the past three years than in the previous 10,” Wilkerson wrote.With a dynamic parcel industry, Wilkerson recommends that shippers focus on developing strategic flexibility and data-driven feedback loops to ensure positive momentum.
In a sign of the difficult times currently faced by the parcel industry, FedEx has announced extensive layoffs to its team of officers and directors. The cuts, announced in a Feb. 1 letter to employees from CEO Raj Subramaniam, will see staff at the top levels of FedEx reduced by 10%.
“We have embarked on a transformation effort to create the world’s most flexible, efficient, and intelligent supply chain for our customers,” Subramaniam wrote in his letter to staff, according to reporting from Supply Chain Dive, “This process is critical to ensure we remain competitive in a rapidly changing environment, and it requires some difficult decisions.”
To reduce costs amid falling parcel demand, FedEx announced the suspension of SameDay City Service effective on March 31st, according to reporting from Supply Chain Dive.
The service, which operates in 1,800 cities in 30 commercial markets, will see all associated positions eliminated. According to a FedEx statement obtained by Supply Chain Dive, the service is being ended as FedEx works to “prioritize several other opportunities for growth.”
During C.H. Robinson’s Q4 earnings call on Feb. 1, Mike Zechmeister, Chief Financial Officer for the logistics powerhouse, told listeners to expect more layoffs in the new year.
Zechmeister’s statement follows the company’s November 2022 announcement of 650 layoffs, according to Supply Chain Dive.
The Vice President and CTO of the Association for Manufacturing Technology, Tim Shinbara, predicts that innovations in manufacturing technology will play a vital role in the manufacturing landscape in 2023.
“That’s important because that’s a demand domain for [U.S. manufacturing supply] manufacturing technology,” Shinbara told Manufacturing Dive, “We see that picking up speed. I thought it did OK in ’22, but I think it’s going to increase the pickups and speed and evolve.”
Despite hopes for some sense of normalcy returning to the trucking industry after several tumultuous years, fleet owners can expect to see labor woes worsen in the year, according to Truckload Carriers Association President Jim Ward. “Workforce challenges have not gone away,” Ward told Transport Dive, “They continue to be an issue for our industry and our members. ... We’re going to continue to be confronted with this challenge, just from attrition alone.”
Carriers facing an aging workforce can expect attrition rates to increase in the coming years.
Just in time for gameday chicken wings, new data indicated the price of chicken wings — a staple at Big Game celebrations across the nation — plummeted 22% YoY in January. According to Bloomberg, last January, “whole chicken wings were priced at $3.38 per pound, according to a USDA weekly retail price report. Now, they sell for $2.65 per pound as poultry farmers pushed the supply of birds to the highest level since the beginning of 2019.”
German food retailer Aldi has invested in a new distribution center in Loxley, Alabama. The 564,000-square-foot facility was built to eventually serve 100 new grocery stores in Louisiana, Alabama, Mississippi, and Northern Florida. According to Supply Chain Dive, the distribution center will “initially serve the roughly 30 Aldi locations along the Gulf Coast — 20 of which opened in the last year alone, according to the company.”
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