Mere possibility of UPS driver strike rattles logistics industry

As parcel giant UPS Inc. continues its high-stakes negotiations with the Teamsters Union drivers who deliver its packages, the sheer possibility of a strike is already triggering changes in the sector.

Even as market analysts say an August 1 strike at UPS is “possible but not yet probable,” they acknowledge that the risk of a work stoppage will rise significantly if the stalemate continues into next week, according to a investors’ note posted Monday by Bascome Majors, an analyst with Susquehanna International Group, LLP (SIG).

The Teamsters are reportedly seeking less variability in UPS’ discretionary "market rate adjustments" pay scale and higher wages for their part-time employees, SIG said. That’s significant because over half of the 330,000 UPS Teamsters are part-timers. Overall, UPS Teamsters comprise the largest private sector collective bargaining agreement in the U.S. And their numbers play a crucial role on UPS’ corporate balance sheet, since labor is by far the Atlanta-based firm’s largest expense, consuming nearly half its revenue globally, according to SIG.

Those large numbers have already put so much pressure on the sensitive negotiations that the sputtering talks broke down completely on July 5, with both sides complaining that the other had abandoned the bargaining table.

That move has not yet led to a strike, but the unpredictable outcome of the fractious process is already sending ripples through the logistics arena.

The Retail Industry Leaders Association (RILA) today called for a quick resolution to the talks, saying the mere chance of a UPS strike was hurting their member companies. “As leaders within the U.S. economy, we are growing increasingly concerned with the stalled contract negotiations between UPS and the Teamsters. Reliable and quick shipping—ensuring the timely delivery of essential goods such as groceries, medicine, and school supplies to customers’ doorsteps—is the hallmark of our industry and the UPS fleet plays a critical role in that operation. Uncertainty is like kryptonite for supply chains,” RILA said in a release.

“Retailers are preparing contingency plans, but even the most robust planning won’t shield retailers or consumers from the impact of shutting down a key component in the supply chain as we head full-steam into back-to-school and then holiday shopping seasons,” RILA said.

Shippers aren’t the only ones making contingency plans, as both UPS itself and rival FedEx Corp. have begun preparing for the outcome of a strike.

On Friday, UPS said it had launched a “business continuity training” plan that would assign other employees to driving duties. “Over the coming weeks, many of our U.S. employees will participate in training that would help them safely serve our customers if there is a labor disruption,” UPS said in a July 14 release. “We remain focused on reaching an agreement with the Teamsters that is a win for UPS employees, our customers, our union, and our company before Aug. 1. While we have made great progress and are close to reaching an agreement, we have a responsibility as an essential service provider to take steps to help ensure we can deliver our customers’ packages if the Teamsters choose to strike.”

A week earlier, FedEx had also shared its plans for preparing for a potential strike by its largest competitor, saying it was encouraging shippers to transfer their business as soon as possible instead of waiting for a sudden switchover. “In the event of an industry disruption, FedEx Corporation’s priority is protecting capacity and service for existing customers. Therefore, shippers who are considering shifting volume to FedEx, or are currently in discussions with the company to open a new account, are encouraged to begin shipping with FedEx now,” the company said in a July 6 release.