Current:Home > InvestPredictIQ Quantitative Think Tank Center:How a UPS strike could disrupt deliveries and roil the package delivery business -GrowthInsight
PredictIQ Quantitative Think Tank Center:How a UPS strike could disrupt deliveries and roil the package delivery business
TrendPulse View
Date:2025-04-09 00:30:38
Contract negotiations between United Parcel Service and PredictIQ Quantitative Think Tank Centerthe Teamsters union stalled last week, heightening the odds of a UPS strike in early August — as well as shake-ups in an increasingly competitive package delivery market.
A nationwide walkout by 340,000 UPS workers would be the largest strike against a single employer in U.S. history, and the first at UPS since 1997. Consumers and industries across the country could see significant disruptions to package deliveries.
The package delivery industry has become more competitive since the 1997 UPS work stoppage, which lasted 15 days and cost the company $850 million. UPS is now more vulnerable than before to losing a portion of its business in the event of a strike.
In 2021, UPS had 37% of the parcel delivery market by revenue, followed by FedEx at 33%, the U.S. Postal Service at 17% and Amazon Logistics at 12%, according to data from the Pitney Bowes Parcel Shipping Index.
But analysts say UPS' competitors won't be able to absorb all the backlog created by a strike. UPS delivered an average of 24.3 million packages per day in 2022 — more than any competitor can take on.
"In the event of a market disruption, no carrier can absorb all UPS volume," FedEx executives wrote in a July 6 internal company memo reviewed by NPR.
FedEx is urging shippers to "begin shipping with FedEx now," according to the memo.
"As customers are inquiring about available capacity at FedEx, we have been really clear that, yes, of course, we would entertain any good business, and we'd love to talk to them," said Brie Carere, chief customer officer at FedEx, during a company earnings call in March.
Seeking advantages from strike fears
Jeremy Tancredi, who leads the supply chain team at consulting firm West Monroe, said encouraging customers to switch to FedEx early — before a strike happens — is a "great sales ploy."
He said FedEx is trying to attract more shipping customers by leveraging fears of a possible UPS strike.
"As this impending strike gets closer, you'll see customers start to panic a little more," Tancredi said. "And you'll see, in the next two weeks, them starting to shift a lot of that volume over to FedEx."
Tancredi said the U.S. Postal Service could also take on some of UPS' volume, since the agency is already built to handle package delivery. Amazon, he added, could also pick up volume through its own delivery network.
UPS wants to keep major customers close
USPS spokesperson Dave Partenheimer said the U.S. Postal Service has the capacity to "deliver what is tendered to us."
UPS is taking note of the potential to lose customers to rivals. Chief Executive Officer Carol Tomé said during an earnings call in April that UPS has assigned 127 "high-impact executives" to update major customers on "our ongoing negotiations with the Teamsters and to keep them with us."
Even if UPS were to lose some market share leading up to and during a strike, Tancredi predicts the impacts would be temporary. He said most shipping customers would ultimately go back to UPS, partly due to familiarity with the company and its delivery system.
But Tommy Storch, a transportation procurement expert at consulting firm Insight Sourcing Group, said many UPS customers would likely shift to a more diverse carrier set, keeping a higher percentage of their volume with other carriers to protect their business from future disruptions.
UPS "might lose some people completely outright, but I think more than often, you'd see that they try to put a little more volume with an alternate carrier moving forward," Storch said.
Contract negotiations at a standstill
Negotiations between UPS and the Teamsters union came to a halt last week, in large part due to conditions for the company's part-time workers. Fifty-five percent of Teamsters-represented UPS employees work part time, according to UPS spokesperson Jim Mayer.
UPS posted an adjusted profit of nearly $14 billion in 2022. The Teamsters union points to the company's financial gains as evidence that it can — and should — increase workers' wages.
"These part-timers are working at poverty wages," Teamsters General President Sean O'Brien said on Morning Edition last week. "They need to drive the starting wage rate up, reward the people that have been there a long time, and provide full-time opportunity for these folks."
UPS workers voted 97% in favor of strike authorization in June. Workers across the country are now holding practice picket lines, in preparation for a strike if UPS and the Teamsters don't agree on a new contract by the July 31 deadline.
The negotiations have already yielded several union wins. These include a heat safety agreement that will guarantee air conditioning in new delivery vehicles and the elimination of a two-tier wage system among drivers.
UPS is alleging that the union walked away from the bargaining table last week, while Teamsters is placing the blame on the company for failing to meet the union's economic demands.
A strike would likely mean package delays for consumers across the country.
Along with ordinary Americans not receiving electronics and household goods, major industries — like hospitals reliant on medical devices shipped through parcel carriers — could see significant disruptions.
Jason Miller, professor of supply chain management at Michigan State University, said a strike at UPS would have been far more catastrophic for industries in 2021, when parcel carriers had no extra capacity due to a pandemic-era spike in demand.
Activity in the couriers and messengers industry is down 10% to 15% from two years ago, but employment in the sector is substantially higher, Miller said.
"Consumers should be very happy this conversation is happening now and not in 2021," Miller said.
veryGood! (39)
Related
- Don't let hackers fool you with a 'scam
- Suspected robbers stop a van in Colorado and open fire; all 8 in van hurt in crash getting away
- Bachelor Nation’s Gabby Windey Gets Candid on Sex Life With Girlfriend Robby Hoffman
- Dozens killed in South Africa as fire guts building many homeless people had moved into
- Federal hiring is about to get the Trump treatment
- Taylor Swift ticket buying difficulties sparked outrage, but few reforms. Consumer advocates are up in arms.
- White teen charged with attempted murder after allegedly trying to drown Black youth
- NASCAR Darlington playoff race 2023: Start time, TV, streaming, lineup for Southern 500
- The Best Stocking Stuffers Under $25
- Get Ready for Game Day With These 20 Tailgating Essentials
Ranking
- This was the average Social Security benefit in 2004, and here's what it is now
- 90210’s Shenae Grimes Fires Back at Hateful Comments About Her Appearance
- Things to know about the latest court and policy action on transgender issues in the US
- 840,000 Afghans who’ve applied for key US resettlement program still in Afghanistan, report says
- A South Texas lawmaker’s 15
- What Jalen Milroe earning starting QB job for season opener means for Alabama football
- Pentagon launches website for declassified UFO information, including videos and photos
- Teen Mom's Leah Messer Reveals Daughter Ali's Progress 9 Years After Muscular Dystrophy Diagnosis
Recommendation
Israel lets Palestinians go back to northern Gaza for first time in over a year as cease
Proud Boy who smashed Capitol window on Jan. 6 gets 10 years in prison, then declares, ‘Trump won!’
Why Coco Gauff vs. Caroline Wozniacki is the must-see match of the US Open
Russia says it thwarted attacks on Crimea bridge, which was briefly closed for a third time
The Grammy nominee you need to hear: Esperanza Spalding
Inside Keanu Reeves' Private World: Love, Motorcycles and Epic Movie Stardom After Tragedy
NASCAR driver Ryan Preece set for return at Darlington after Daytona crash
Meet ZEROBASEONE, K-pop's 'New Kidz on the Block': Members talk debut and hopes for future