Striking a Balance: The Potential Impact of the Teamsters Agreement on the Parcel Logistics Industry

If your shipping business relies on UPS to deliver packages (inbound or outbound) to operate, scale up, or even survive, you need to be prepared.

The Teamster’s current agreement expires on July 31, 2023. And while UPS CEO Carol Tomé says she believes that the company and the union are aligned in their negotiations for a new five-year contract, union members disagree.

They’re making preparations in the event of a strike.

Will UPS and Teamsters Reach an Agreement?

This is UPS’s greatest challenge of the last 25 years. And we’re talking about a company that was successful; during the pandemic. Nonetheless, if a 21st-century strike looks anything like the parcel chaos of 1997, shippers could be looking at an operational meltdown with a disruption of millions of deliveries.

Shippers and operators that remember what that 1997 strike was like called it “absolute hell.” And given the ramifications it could have on the current fragile economy, a question raised by many is, “how/will the current administration step in to avoid a full work stoppage?”

Some industry experts remind us that this administration has been very pro-union, and with mid-term elections behind us, there may be less incentive for them to step in this year. But experts also agree that doing so would be in their best interest.

Why? Because there’s too much at stake for Teamsters and UPS to continue down a path that could lead to a strike. Roughly 20% of the Teamsters union are UPS employees, and with the future and fortune of both interlinked, UPS would be better off playing ball. Shippers have more choices than they did in 1997 during the last strike. Moreover, both parties comprehend that a strike devastates each of their interests, and they’ll both do whatever it takes to ensure one doesn’t happen.

But what exactly is so different about the UPS 1997 strike and the current impending 2023 strike threats?

1. In 1997, UPS was not a publicly traded company, which meant its stock price was not a concern for shareholders.
2. The competitive landscape was also very different back then, no Amazon or extensive regional carrier market existed to contend with.
3. This meant that shippers had few alternatives to UPS and would inevitably return to using their services once the strike ended.
4. Today’s market is vastly different, and a strike could lead to a significant drop in UPS’s share price.
5. Shippers now have more means to diversify their volume, and a strike could push them towards alternative carriers.
6. Furthermore, non-union carriers are unlikely to be organized any time soon, which means the Teamsters are unlikely to find an alternative to UPS in the long term.

What Can Shippers Do if UPS Strikes?

Experts suggest relying on facts rather than hoping for a deal from UPS administration. As formal negotiations are set to begin in April, many shippers are already looking for alternative options with national and regional carriers.

• FedEx’s ground services are equipped to manage mass volume influx, and more shippers are starting to dual-source their parcel carriers, so there’s less disruption involved in shifting freight. FedEx will almost certainly limit the additional volume if a UPS meltdown occurs and might establish additional operational/contractual demands, but they can ease some of the strain shippers will be feeling.
• USPS will likely be overwhelmed with the number of packages shifted over from UPS, but with an upgrade in their parcel capabilities, they’re better prepared than during the last UPS strike. Still, snail mail should be expected.

Regional carriers have also grown their footprint since 1997. You need these local carriers in your carrier mix if they aren’t already, to make up for gaps in the supply chain by national carriers. And for eCommerce shippers using Amazon (FBA, FBM, or Buy With Prime) as a sales channel, you might want to consider a greater volume push through your Amazon program.

This comes with its own set of challenges, though, as many of these carriers insist on long-term agreements to ensure volumes don’t swing back to UPS after a new labor agreement is inked.

The bottom line is while a strike may seem unlikely, both parties continue to engage in rhetoric that causes anxiety for millions of shipping businesses and consumers. As a precaution, shippers should have a positive outlook but also a contingency plan. It’s critical to diversify distribution without jeopardizing existing discounts, update your network to manage multiple carriers, and explore options to ensure a smooth transition. And the sooner you prepare, the better equipped you’ll be to handle the worst-case scenario.