“We demanded the best contract in the history of UPS, and we got it.” Those are the words of Teamsters General President Sean M. O’Brien in a recent release announcing the historic UPS contract agreement.
Last month, 340,000 UPS workers said they were prepared to walk off the job if contract negotiations were not complete by July 31. Fortunately, a “game-changing” new agreement — to the tune of $30 billion for pay raises, more full-time jobs, and dozens of new workplace protections and improvements — was reached on July 25.
With UPS now handling nearly a quarter of US parcel deliveries, the threat of a strike delivered a stark wake-up call for consumers, brands, and retailers. While the retail community may have dodged the bullet this time, this groundbreaking development could signal further strikes and lasting changes to the e-commerce supply chain.
Let’s take a closer look at the events that led to this monumental agreement, and ways to increase control of your supply chain to protect your business moving forward.
UPS and the Teamsters have the largest private sector union agreement in the US. In early July, talks stalled between UPS and the Teamsters Union, which represents about 340,000 of the parcel service’s roughly 500,000 total full- and part-time workers.
The union voted — with 97% percent in favor — to authorize a strike if an agreement wasn’t reached by July 31, 2023, when the union’s current contract was set to expire. In early July, negotiations came to a halt as both UPS and the Teamsters accused one another of “walking away” from the bargaining table.
UPS and the Teamsters resumed negotiations during the last week of July, reaching an historic tentative agreement of roughly $30 billion dollars.
The landmark deal includes:
In the summer of 2022, UPS teamsters began a viral campaign to share extremely high temperature readings from inside their trucks on social media. That same August, the union announced a call to action to begin mobilizing for the new contract currently under negotiation.
While the deal was over a year in the making, the landmark agreement comes at a pivotal moment in US history.
Across the country, a wave of similar labor uprisings, including the SAG-AFTRA and Writers Guild of America strikes and the California hotel workers protest have put increasing pressure on large employers. Labor strikes across the country increased by 50% from 2021 to 2022 signaling a new era in labor agreements.
Meanwhile, a June 2023 Supreme Court ruling could make it easier for companies to sue unionized workers for damages suffered during organized labor activities, which could deter workers from unionizing or engaging in protest activity.
Though the future impact of the agreement has yet to be seen, there are clear implications for the retail supply chain.
According to consulting firm Anderson Economic Group, the UPS strike would have been the most expensive in the last century or more. The cost to the US economy could have surpassed $7 billion, with UPS customers potentially losing over $4 billion.
“This strike is a serious threat to the US economy,” AEG President Patrick Anderson told CNN Business in early July. “The degree to which the US economy has become dependent on fast delivery of small items that can be carried by UPS hasn’t really been tested.”
In 2022, UPS says it delivered an average of 24.3 million packages per day — an amount much higher than any of its competitors would have been able to absorb. That same year, FedEx — its next closest competitor by revenue — delivered only 6.21 million packages per day.
“There isn’t a single company on the planet that can handle 24 million shipments a day that UPS manages,” Mike Parra, CEO of the Americas for DHL express, told FreightWaves.
Regardless of how much volume other carriers can take on, the impact of a UPS strike would have been devastating for retailers.
Slow delivery times, higher prices on products and shipping, and a supply chain breakdown to rival 2020 are just some of the consequences the retail community would have seen if a deal had not been reached.
But this doesn’t mean retailers are out of the woods. Experts like Alex Colvin, dean of the School of Industrial and Labor Relations at Cornell, told The Atlantic that positive results for UPS Teamsters would “send a strong message to workers organizing at places like Amazon about union representation”. Teamsters president Sean O’Brien has been vocal about its intent to help Amazon workers unionize.
According to Supply Chain Dive, the companies most vulnerable to future strikes will be those who haven’t made advance arrangements for alternative carriers, as well as those without enough “volume and financial muscle to compel other carriers to make extra room in their networks at the last minute.”
Retailers need to act now to establish relationships with alternative carriers and diversify their logistics.
With the UPS agreement signaling a strong likelihood of future strikes, it's important to plan for ways to minimize the impact on your business.
Here are some ways to start preparing.
In the event of a strike, brand operators will need to increase their lead times and start planning even earlier to cope with slower delivery.
Shipping delays won’t just mean late deliveries for your customer — they could also keep raw materials from getting to your manufacturers and suppliers, and your products from getting to your warehouses. You may need to stock up on extra product to keep filling orders, while avoiding an inventory glut if you’re unable to ship goods out.
According to a 2021 McKinsey report on building a “shock-proof” supply chain, “Navigating the manifold disruptions will require retailers to maintain an end-to-end visibility… Implementing a digital control tower that connects data systems and generates insights across the end-to-end supply chain can create transparency and accelerate response times.”
Partnering with an advanced inventory optimization platform like Flieber can help bring all of your supply chain data under one roof, giving you deep insight into all sales channels and inventory locations, empowering you to plan for — and adapt to — a potential strike.
Now is the time to start reaching out to a wider range of carriers.
Here are some of the options to consider:
From getting enough seasonal inventory in stock on time to making sure loyal, high-volume channels don’t see major delivery delays, you’ll need to carefully rank and prioritize the shipments that matter most in the event of a future strike.
Here are some options to consider:
In addition to shifting some of your business to other large parcel delivery services, you could look at diversifying your delivery options to include alternative models of transportation.
Perhaps the most important thing you can do to stay on top is keep your customers in the loop.
While there is no crystal ball for predicting future strike threats, there are still practical steps you can take to strengthen your supply chain.
With real-time visibility and powerful machine-learning based forecasting on your side, Flieber can help you stay one step ahead of disruption.
Schedule a demo to learn how Flieber works today, so you can be ready no matter what happens tomorrow.