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How Disruptive Would a UPS Strike Be For Retail?
Talks between UPS and its U.S. workers broke down early Wednesday morning with no further negotiations scheduled, increasing the likelihood of a strike weeks before their contract expires on July 31.
The stickling point appears to be wages and pension.
“Following marathon negotiations, UPS refused to give the Teamsters a last, best, and final offer, telling the union the company had nothing more to give,” the International Brotherhood of Teamsters, which represents about 340,000 full and part-time UPS workers, said Wednesday.
UPS countered that it’s proud of its “historic offer that builds on our industry-leading pay,” urging the deal be finalized.
Organized labor has been making a comeback amid taxing work conditions across logistic networks during the pandemic. Any strike would be vastly more disruptive than UPS’ last strike that led to a 15-day stoppage in 1997 with online now accounting for between 14 percent and 15 percent of retail sales.
UPS handles 21.5 million packages a day — the most in the U.S. by far — and transports about 6 percent of U.S. GDP daily. According to the Pitney Bowes Parcel Shipping Index, UPS made up 37 percent of parcel market share in the U.S. in 2022, followed by FedEx, 33 percent; USPS, 16 percent; and Amazon Logistics, 12 percent.
Hitendra Chaturvedi, a supply chain management professor at Arizona State University, told Forbes that although not as widespread, a strike would amount to “version two” of the dislocation caused by the pandemic, driving higher transportation costs, inflationary pressure and late deliveries.
With online shopping likely seeing longer waits or higher fees, store visits as well as in-store pickup could see a pickup. Other major and regional carriers may have extra capacity amid the post-pandemic slowdown in online spend but could also be overwhelmed if a strike occurred.Amazon may revisit its plans to compete for third-party delivery that were postponed over the pandemic. Andrew Townsend, president and CEO of LSO, a regional parcel delivery carrier based primarily in the Southwest, told Freight Waves. “In a pinch, I would be willing to bet that retailers would give in to using their longtime competitor as a carrier.”
Discussion Questions
Discussion questions: Would a UPS worker strike be a major blow to retail or are enough alternative options available? Are Amazon or FedEx best positioned or would all non-UPS carriers likely benefit from a strike?
Poll
Loading …BrainTrust
Allison McCabe
Director Retail Technology, enVista
Cathy Hotka
Principal, Cathy Hotka & Associates
At the very least, it would be a significant stumbling block for retailers as moves are made to shift carriers. The online shopping deliveries are one challenge to adjust. Another is the fact that many store locations receive their inventory deliveries via UPS. This is a heavy shipment time as stores ready for BTS and new Fall deliveries so once again, supply chain elements are disrupted.
This would be massively disruptive. This type of situation will further many retailers’ interest in logistical vertical integration. The fact that UPS is the backbone of so many retail experiences will become extremely obvious, demonstrating how fragile that reliance can get.
A strike is going to be very disruptive. There are alternatives available for retailers, but pivoting to those fast enough for customers not to notice a decline in the level of service isn’t a reality. Other carriers will certainly benefit, but even for them, ramping up as fast as they need to mitigate the impact of a UPS strike is also not likely. If this strike happens, the impact on retail is going to be felt for a long time.
UPS has a very sizable market share of deliveries, so a strike would be disruptive. It would be a hassle for retailers to change couriers, and there would be significant pressure put on other firms. Returns would also be impacted. And, of course, anyone who normally collects or returns their packages from a UPS store would not be able to do so – including those that have PO boxes there.
Product stuck in transit will be a big mess, and I suspect people will stop shipping with UPS “early”. There are alternatives, that probably move enough volume at Christmas to pick up most of the UPS capacity lost in the dead of summer. In the end shippers are going to face higher costs, which will in some way shape or form fall back onto the consumer.
While alternative options are available, a UPS worker strike would be more disastrous versus “simply” disruptive. Alternatives like Amazon, USPS, and FedEx could not swallow the extra 21,000,000 packages DAILY. If this happens, it will be a major blow to the economy, not just the retail space.
We keep having disruptions to society because people at the bottom of the ladder aren’t being paid enough. (Nods to you, WGA.) This problem is entirely preventable.
Your comment deserves a “thumbs up”.
I would be extremely impressed if 21 million packages could be readily absorbed by the other carriers much less by any single carrier. In the day of sensationalism, there’s absolutely no doubt that a UPS worker strike will be reported as a major blow to retail but the actual story may be a little different. I think there are enough alternative options to offset some of the demand but there won’t be enough time to absorb it all. I believe that Amazon is probably the best positioned though all non-UPS carriers will benefit. In the end, it will be a function of a few variables including how long the strike lasts. A lengthier strike provides all non-UPS carriers a better opportunity to prepare and to reduce their risks.
UPS holds such a large share of the ship-to-consumer market (as well as its commercial business) that a strike would be very disruptive. I wouldn’t expect retailers to jump overnight to FedEx or USPS, although they will try. This points out the wisdom of Amazon’s vertical approach to last-mile delivery.
UPS transports about 6 percent of U.S. GDP daily…??? Wow. That certainly provides a new lens to view this through. It’s no surprise then that UPS workers find themselves in a very strong negotiating position. And free delivery…which was never anything close to free…has evolved into an unsustainable model. Wages go up and delivery charges will then have to go up. Small wonder that several months ago Amazon started including fees into their process. This strike will have lasting impact on the financial model of delivery and therefore customer behavior.
I commented on this too – it’s copied directly from the UPS site – largely because it makes no sense: how could anyone transport more than ~1/365th of the GDP daily?? I’m not sure what the “real” number is – I suspect they meant annually (or maybe globally) – but it’s an excellent example of a company demonstrating its importance in one simple number…even if it was unintentional.
Contrary thought – not nearly as bad as it sounds. UPS accounts for about 5% of shopping online. Disruptive but not devastating.
My concern is the disruption to the economy. How many businesses rely on UPS for their everyday goings-on? Everything from raw materials to supplies to machine parts.
No doubt such a strike would be disruptive. The switch from online to instore shopping would ameliorate some of the pain but too many other aspects of the supply chain, including returns, would be negatively affected.
I suspect a strike by UPS would hurt Amazon and FedEx. Certainly, the volume would need to go somewhere. But online retail already struggles to make any money. Public perception of online sales would be generally damaged. In a very big picture, that might be ok. After all, Amazon has been giving away too much for years with shipping. Retailers would benefit from the public building a more realistic understanding of the costs of shipping.
In doing a little research, I found UPS’ #1 customer is…drum-roll, please…AMAZON! Who would have guessed? Amazon and others are now preparing for alternative delivery options that they will implement by the end of the month, no matter if UPS strikes.
As Jeff Sward points out, UPS moves 6% of the daily U.S. GDP. While there will be alternatives, the overall effect of other companies could the U.S. economy could be substantial.
Congratulations to UPS for being as successful as they are. They obviously are doing something right to own such a large part of the delivery business. And while a strike would be significant, it is pressures like these that often lead to industry disruptive opportunities. I can’t wait to see what comes of this over the next couple of years.
In short term, this would impact both forward and reverse logistics (returns) significantly and may also spillover to other carriers. In long term, this would be catalyzer for the “great splits,” where big retailers will part ways with major third party carriers and build their own delivery fleets (that would mostly consist of EVs).
UPS has been retail’s go-to shipper for decades, and such a strike would be significant. With September just two months away, this has a chance of mucking up fall merchandising plans. And while there are other carriers available, a shift would come with their own capacity constraints, at least in the short-term.
“transports 6% of U.S. GDP daily” (emphasis added): I realize this was copied directly from the UPS site, but it doesn’t make any sense….are we to believe they transport ~2200% of GDP a year?? That would be quite a trick!
The wordage complaint aside, clearly this would be substantially disruptive; certainly most to those who use them as a primary shipper, but really anyone who is served even indirectly by them…which is likely everyone All other shippers would “benefit” – albeit also be overwhelmed – but that really misses the point….this would be detrimental to the economy in general.
This is history repeating itself. Over the years, I’ve suggested to my clients who ship products to have relationships with at least two shipping vendors. The primary vendor can have 80-85% of the business, but you need to be able to shift to the other vendor in case of a strike, customer service issue, etc. Amazon is somewhat self-contained. FedEx has the opportunity to win new or more business from existing accounts.
A strike would impact the last mile in a big way. This is another example of why retailers need to plan in advance for disruptions / disasters in all parts of their operations, especially mission critical area where they rely on key partners or vendors.