With a Teamsters strike set to begin on Aug. 1, UPS could stand to lose up to 4 million packages in diverted volume, and its competitors want their share. For example, FedEx is preparing to take on additional volume. And with its new Ground Advantage initiative now approved by the Postal Regulatory Commission, the United States Postal Service is also ready to compete for package volumes. But it’s not all sinking ships and circling sharks: Prime Day 2023 brought in big bucks for Amazon, and shippers are looking for alternatives to Yellow Corp. as the carrier struggles. Here are the past week’s headlines making news in an industry that's always moving.
With the likelihood of a strike among UPS’s 350,000 Teamsters growing daily, industry experts are turning to data to understand what a major strike would mean for UPS. One parcel industry expert predicts that UPS will likely lose 30% of diverted volumes in a Teamsters strike, which equates to roughly 4 million packages.
While losses this significant would surely shake shareholders, they could also lead to significant staffing layoffs. “Because there are about 80,000 package car drivers and each driver delivers about 230 parcels per day, the diverted volume, if it never returns to UPS, could result in 4,300 lost driver jobs and those of a few thousand package handlers for every 1 million packages diverted,” the industry expert told FreightWaves.
The USPS’s new Ground Advantage service received a favorable review from the Postal Regulatory Commission, an independent Federal regulatory agency that oversees the Postal Service. With the approval, the USPS now has permission to implement Ground Advantage throughout its operational base beginning in early July. According to a June 26 press release, Ground Advantage offers USPS shippers key benefits:
With Ground Advantage, USPS hopes to better compete against its primary competitors, including UPS and FedEx.
According to an internal company message, FedEx plans to accept additional parcel volume for a short time to capitalize on shippers’ fears of an Aug. 1 strike among UPS’s Teamsters. However, despite FedEx’s bid for diverted volume, industry experts contend no single carrier can take on all of UPS’s volume.
Writing for Supply Chain Dive, author Max Garland opined, “While there’s a healthy amount of delivery capacity in the market as demand remains soft, it’s not enough to absorb UPS’s millions of packages daily. Only 10% to 20% of the company’s shipments could be picked up by other carriers in the event of a strike.”
Slumping volumes in the parcel transportation sector are forcing major carriers into difficult decisions. In a June 20 earnings call, FedEx executives stated the company cut 29,000 U.S. jobs during the fiscal year 2023. They also predicted that its 2024 profit outlook calls for adjusted earnings to fall between $16.50 and $18.50 per share — well below shareholder expectations.
Despite this bleak outlook, FedEx leaders say the increasing likelihood of a Teamsters strike at competitor UPS could lead to an uptick in FedEx volumes. “We're having a lot of great conversations with legacy UPS customers and … we feel really good about the sales pipeline because of the strong value proposition we have versus our primary competitor,” FedEx Chief Customer Officer Brie Carere said.
The low volumes and ongoing labor strife plaguing the transportation industry have brought LTL carrier Yellow Corp. to the brink of collapse. However, according to a July 10 article in FreightWaves, the company has worked with a consortium of lenders to buy some time. Though the arrangement may have provided relief for the time being, the deal comes with some caveats, including:
Meanwhile, as Yellow Corp. struggles to maintain operations, shippers are beginning to shift volume to other carriers. According to an analysis from TD Cowen, “Analysts are starting to see freight diversions to other carriers, with [ArcBest-owned ABF Freight] and [TFI International-owned TForce Freight] as potentially the biggest winners of diverted freight from Yellow.”
The shift builds on bad news for Yellow. “The company has nearly $1.6 billion in debt payments and obligations due in the next three years,” reports Supply Chain Dive, “It has warned employees it is running out of money and its survival depends on lenders agreeing to provide financing, which will require a deal with the Teamsters on One Yellow.”
In a grim sign for the economy at large, manufacturing slowed in June to its lowest point this year. The ISM’s Purchasing Managers’ Index showed a 12-month low in June, registering 46%. Any index reading below 50% demonstrates that the economy is contracting rather than expanding.
According to Tim Fiore, chair of the Institute for Supply Management’s Manufacturing Business Survey Committee, the decline in manufacturing results from the softening demand plaguing businesses involved in producing, selling, or distributing consumer goods. “Demand remains weak, production is slowing due to lack of work, and suppliers have the capacity,” Fiore told Supply Chain Dive. “There are signs of more employment reduction actions in the near term.”
Port workers along Canada’s West Coast have returned to work following a 13 day strike. The strike, which began on July 1, was instituted by the International Longshore and Warehouse Union Canada following a breakdown in contract negotiations with the British Columbia Maritime Employers Association, or BCMEA, over contracting, wages, and automation.
In a statement released on Twitter, Canadian Labor Secretary Seamus O’Regan Jr. said “The scale of this disruption has been significant. The extent of it has shown just how important the relationship between industry and labour is to our national interest. Our supply chains and our economy depend on it. We do not want to be back here again. Deals like this, made at the collective bargaining table, are the best way to prevent that.”
Prime Day 2023, along with competing sales from other retailers, helped push a significant spike in U.S. e-commerce numbers. Per Adobe Analytics, as reported by Retail Dive, July 11 saw a 6% increase in e-commerce sales YoY, and July 12 saw a 6.4% increase YoY.
For e-commerce giant Amazon, Prime Day 2023 brought in record customer spending. The first day of Prime Day 2023, July 11, was the company’s single largest sales day. Customers spent over $2.5 billion throughout the two-day event, according to a July 13 press release.
“The first day of Prime Day was the largest sales day in Amazon’s history, and Prime members saved more this year than any other Prime Day event,” said Doug Herrington, CEO of Amazon Stores. ”Thank you to our Prime members for continuing to shop in our store and to our employees and independent sellers around the world who delivered for customers this Prime Day.”
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