EAF Logistics

On Friday, June 16, 2023, UPS Teamster employees voted to authorize a strike. Let’s break this down.

Background

United Parcel Service (UPS) employees, particularly those engaged in package delivery and logistics operations, can join the International Brotherhood of Teamsters (IBT). This labor union represents various workers across multiple industries, including transportation. IBT, on behalf of the UPS Teamsters, participates in labor contract negotiations with UPS to reach collective bargaining agreements (CBA) to regulate the workers’ employment terms and conditions. These negotiations directly impact an estimated 64% (330,000) of UPS employees, who are either teamster members or work jobs alongside members. 

Current Events

The UPS-Teamster CBA expires on July 31, 2023. UPS and IBT have yet to reach terms for a new CBA. In an attempt to apply pressure to the contract negotiations, UPS Teamsters voted, with 97% in favor, to strike beginning August 1, 2023, if a new CBA is not reached. The last time this happened was the UPS Teamster Strike of 1997; the strike lasted 15 days, involved an estimated 185,000 teamsters, with an estimated 7 million parcels backlogged, and resulted in an estimated financial loss to UPS of $780 million. UPS brought in temporary employees to keep operations running but failed to stop the hemorrhage.

Industry Impact

If a new UPS-Teamster CBA is unreachable, customers and businesses will see the effect immediately. UPS deliveries will come to a halt, some will trickle through with the aid of temporary employees, but most will remain frozen in transit. UPS competitors like FedEx, DHL, and USPS will surge in activity as customers seek new shipping providers. This surge in activity may have a short-term delay in the competitors’ normal operations as they adjust to the increased demand. Competitors will likely monitor the CBA negotiations closely to prepare their operations to accommodate the demand. 

What to Expect

A UPS Teamster strike will impact your business’s supply chain operations, from inventory management to logistics management; your customer experience will be affected. Here are areas of your business to monitor to minimize the strain on your customer and retain your brand reputation: 

1. Delayed Deliveries and Fulfillment Challenges: A shipping provider labor strike can lead to delivery delays and pose significant challenges for businesses trying to fulfill customer orders on time. Businesses may struggle to meet customer expectations, resulting in dissatisfied customers, potential loss of sales, and damage to the brand’s reputation.
2. Inventory Management and Storage Concerns: Extended labor strikes can also impact inventory management and storage. With shipments delayed or halted, businesses may have excess inventory or insufficient stock to meet customer demand. This can lead to imbalances in inventory levels, increased warehousing costs, and the need for alternative storage arrangements. Effective inventory management strategies become crucial to optimize stock levels, minimize holding costs, and prevent stockouts or overstocks.
3. Communication and Customer Service: Maintaining open and transparent customer communication becomes paramount during a shipping provider labor strike. Businesses should proactively update customers on delays or disruptions, manage expectations, and provide alternative solutions when possible. Prompt and efficient customer service can help mitigate customer frustrations and build trust during challenging times. Exploring options for partial refunds, expedited shipping upgrades, or offering incentives for future purchases can help retain customer loyalty and satisfaction.
4. Diversification and Contingency Planning: To minimize the impact of a shipping provider labor strike, businesses should consider diversifying their logistics and transportation options. This involves establishing relationships with multiple shipping providers to mitigate risks associated with a single-source dependency. Developing contingency plans and alternative routes for transportation can provide flexibility and enable businesses to adapt quickly to unforeseen disruptions. Reviewing and updating these plans ensures preparedness for potential labor strikes or other logistic disruptions. Keep in mind that businesses may face additional costs and challenges associated with alternative shipping arrangements during a shipping provider labor strike. Negotiating contracts with new shipping providers or reevaluating existing agreements can be complex and time-consuming, requiring careful consideration of service quality, pricing, and long-term partnerships.

While a shipping provider labor strike can introduce logistical challenges and disruptions, businesses can mitigate the impact through proactive planning, effective communication, and diversifying shipping carrier options. By implementing robust inventory management strategies, maintaining transparent communication with customers, and developing contingency plans, businesses can navigate labor strikes and ensure continuity in their operations. Adapting to such disruptions helps manage short-term challenges and strengthens the resilience and flexibility of the overall supply chain.