UPS standoff with unions could result in costly strike that disrupts brick-and-mortar stores and e-commerce

International Brotherhood of Truck Drivers, UPS Talks on Novel Contract disbanded on July 5, 2023.The trade union and the forwarding and logistics company are blaming each other for the fallwhat happened a few weeks later 97% of UPS truck drivers vote to strike if the Teamsters and UPS do not reach an agreement by midnight July 31.

Without a concluded contract, more than 300,000 Teamsters truck drivers will stop working August 1. This will mark the beginning of the delivery service operations first strike since 1997.

The conversation asked Jason Millersupply chain scientist at Michigan State University to explain how likely this is to happen and what to expect if it does.

What are the reasons for the upcoming strike?

Before the talks broke down, the two sides were in extensive negotiations over a up-to-date five-year agreement, would cover about 340,000 unionized UPS workers.

Courier company agrees to some Teamsters demandspromising:

1. End the two-tiered pay system in which part-time workers earn on average about US$5 per hour less than full-time workers;

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

3. Stop demanding UPS employees work overtime on days off;

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

The main remaining controversial issues concern part-time employees. Teamsters dispute UPS’s claim that part-time workers earn an average of $20 an hour. Teamsters President Sean O’Brien says they are paid “poverty wage.”

The Teamsters also want part-time workers to have earlier access to health insurance and retirement plans and a clearer path to full-time employment. The union also seeks to address safety and health concerns and “improved pay for all workers,” as well as “stronger safeguards against mobbing by management staff.”

The stalemate came after two years of record profits for UPS. The company emerged from that $12.9 billion and $11.5 billionin 2021 and 2022 respectively. The Company almost tripled its net income from 2018 and 2019 levels of $4.8 billion and $4.4 billion, respectively.

Teamsters workers say these record gains mean UPS can afford to pay higher wages.

What should consumers expect?

If UPS union workers do go on strike, many American consumers will certainly be concerned about delays in the delivery of their online purchases. I think that’s a legitimate concern, given that UPS supports about 25% all package deliveries in the US.

This The strike in 1997, which lasted 16 daystook place when e-commerce was in its infancy. The Census Bureau didn’t start tracking this part of the economy until 1999, when Online shopping accounted for about 0.6% of total retail salesConsumers currently spend about 15% of their shopping dollars on e-commerce.

If a strike were to occur, UPS’s competitors, including FexEx Ground and the United States Postal Service, would probably be able to handle about 20% UPS supplies because the industry currently has excess capacity.

It’s because of the delivery employees working fewer hours per week today compared to the peak of the COVID-19 pandemic. Demand for parcel delivery peaked in 2021when millions of Americans were still social distancing.

In the event of a long strike, UPS could lose up to 30% of your businessexperts warn because customers are switching to competitors’ services.

The risk of losing market share has many industry experts believing that if a strike were to occur, it won’t last long.

What about companies?

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 transportation operations and supply chain disruptions, I believe Americans should realize that the impact of the UPS strike will be much more severe than delays in the delivery of anything from pet food to tennis rackets purchased online.

UPS strike could disrupt availability car spare parts AND wholesale of medical suppliesto name just a few essentials. Consumers will also have difficulty getting clothes and shoes in stores, as retail outlets are usually replenished by courier companies.

According to forecasts, the supply chain for manufacturing computers and electronic products would also likely be disrupted. my data analysis from the Census Bureau and the Bureau of Transportation Statistics, which tracks how different industries transport products to their customersFarmers and construction companies trying to obtain replacement parts for bulky equipment will experience shipping delays, which could result in downtime costing tens, if not hundreds, of thousands of dollars.

As a result, the strike would force many companies to scramble to fulfill customer orders, which could force them to spend more money on more steep air freight.

Even a 10-day strike can cost the US economy an estimated $7.1 billion According to Anderson Economic Group – research firm – making it potentially the costliest 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.

What do you think will happen?

Unlike the threat of rail strikes in 2022, there is no system in place for the federal government to prevent a UPS strike. In this case, Congress had the ability to intervene, but an agreement was reached before the government had to intervene.

However, it seems likely that there is there will be calls to the White House for both sides to return to the negotiating table.

Given that both the Teamsters and UPS have an incentive not to let the company lose business to competing shipping operations, I believe they can reach an agreement quickly enough to avoid a costly and disruptive strike. Accordingly, UPS announced on July 19, 2023, that it and the Teamsters back to the negotiating table before the July 31st deadline.