UPS, Teamsters agree on fresh contract, averting costly strike that could delay deliveries to consumers and retailers

The International Brotherhood of Teamsters truck drivers union and UPS have a new five-year contract was agreed which increases wages and guarantees more air conditioning in drivers’ trucks. The agreement concluded on July 25, 2023 entered into force a week before the August 1st deadline that the Teamsters are preparing for a strike that threatens would be the first time since 1997 that UPS employeesThe union announced on August 22 that 86.3% of members voted to approve Agreement, ratifying it.

The conversation asked Jason Millersupply chain scientist at Michigan State University to explain what happened and summarize the significance of the deal, which keeps 300,000 workers on the job.

What does this contract include?

UPS has agreed to:

1. Augment starting hourly rate for part-time employees is $21up from $16.20.

2. Augment the hourly rate of current part-time and full-time employees by $2.75 in 2023 and $7.50 more over the next five years.

3. To do Martin Luther King Jr. Daythird Monday in January, paid holiday.

4. Stop demanding UPS employees work overtime on days off.

5. Add fans and install air conditioning in many trucks to improve cooling.

6. Create another one 7,500 full-time Teamster jobs AND fill 22,500 vacancies.

Teamsters CEO Sean O’Brien hailed the deal as a victory“This agreement sets a fresh standard in the labor movement and raises the bar for all workers,” he said.

What does this deal say about the supply chain and workforce?

This agreement further strengthens the forceful negotiating position of unions representing logistics workers – not only in the U.S. but also in other countries. Canada, Europe and anywhere.

Shipping to the US may still be disrupted due to one of the following: the tightest job market in decadesbecause the rival UPS FedEx recently had 5,200 pilots reject new labor contract.

As previously mentioned, TForce Freight – formerly UPS Freight – has entered into its own fresh five-year contract with the Teamsters earlier in Julyjust like a competitor ABF Freight. Union pilots in Delta Airlines AND American Airlines Fresh contracts with gigantic increases were recently signed – in Delta’s case, the boost was 34%.

In my opinion, UPS was more willing to accept the Teamsters’ demands because the current economic conditions were favorable for work. Moreover, the company realized that a strike could cost it a significant share of the market, even up to 30% of volume according to one estimate. In conjunction with the company recent high profitsIt was not in the interest of UPS management to allow a strike.

What would happen if a strike broke out?

About 57.3% of packages delivered by UPS are sent directly to consumersThe rest goes to retailers and other businesses.

Based on my years of research and supply chain disruptions, the impact of a UPS strike would have a far broader reach than delays in deliveries of everything from pet food to tennis rackets that American consumers buy online.

The UPS strike may have disrupted availability car spare parts AND wholesale of medical suppliesto name a few essentials. Consumers would also have difficulty getting clothes and shoes in stores because retail outlets are usually replenished by courier companies.

Even a 10-day strike could cost the US economy an estimated $7.1 billionaccording to the research company Anderson Economic Group. That would potentially make it the most exorbitant strike in U.S. history. Those costs come from 340,000 striking workers losing an estimated $1.1 billion in wages and UPS losing $816 million in earnings. The rest of that estimate would come from disruptions caused by UPS customers.

This article was updated on August 22, 2023. Parts of it originally appeared in a previous article published on July 20, 2023.