Alexis Asks: Creating Carrier Diversity for Disruption Preparedness

The possibility for a union strike is always there, looming in so many industries where unions have been a haven for employees to advocate collectively. In the supply chain, recent turmoil has bubbled to the surface for delivery drivers and after months of negotiations between carrier UPS and the UPS Teamsters, the union representing roughly 340,000 company workers, the union has approved a strike and walked away from the negation table. 

What's the motive?

Michael Foy, director of business development at Inmar Intelligence, explains the point of view from many UPS drivers he's spoken with. "Most of the drivers feel like UPS continues to “crack the whip” and financial gains have not been properly shared.  At the end of the day, most drivers feel the core of the vote is for long-term improvement on their financials and the overall way they are treated," says Foy. "To quote a driver, “This time around it has really built to a point of many years of frustration and now is the time to make a statement so we can stand together to make our UPS environment a better place.”

Creating a better work environment is a noble cause. Last year saw the introduction of a contract campaign and in April, national negotiations began between the Teamsters and UPS. Since then the Teamsters won on the bargaining point to equip delivery vehicles with air conditioning and take other precautions for heat safety, but other demand sparked the union to vote for a strike, which ultimately went through.

"The UPS Teamsters National Master Agreement is the largest private-sector contract in North America. Full- and part-time UPS Teamsters are working in lockstep for a new five-year agreement that guarantees higher wages for all workers, more full-time jobs, an end to forced overtime and harassment from management, elimination of a two-tier wage system and protection from heat and other workplace hazards," says Teamsters. 

Should UPS fail to come to terms by July 31, a strike will happen.

What's the impact?

Foy shares the difference in impact from the 1997 UPS strike. "The traditional response is that the longer the strike goes on, the more prices rise on products and create a diminished product supply, but there are some more granular impacts." He explains that today, Amazon is 90% reliant on their internal delivery network and only 10% on UPS, subsequently there could be an uptick on Amazon ordering and they'll need to adjust for the surge. As consumers become aware, they could move towards ordering from other online sellers and studying their delivery options accordingly. 

"FedEx will be impacted with newfound volume from shippers, but they have learned from 1997 and recent holiday peak seasons how to control volumes. Much like UPS companies that will be impacted, FedEx has formal plans to protect current customers and existing volume with the goal of no service deterioration. However, it will remain a mystery until an actual event about how they execute with their plan," says Foy.

A recent Forrester report, “The State of The US Consumer and Returns, 2023”, stated that 62% of shoppers are returning items to stores whether bought in-store or online, 12% used the USPS and 9% used a locker, with 24% of consumers using carriers for returns. Considering this against the backdrop of a strike, many sellers will need to diversify — and it may be too late to expand their drop-off options. Additionally, remote areas will be largely impacted as UPS is second behind USPS in remote delivery coverage.

"If the strike lasts a couple days the impact will be tolerable. If it gets over 3 days there will start to become significant revenue and customer dissatisfaction from products on shelves, deliveries, etc. If we get to over 7 days, it will be quite impactful to all the companies that were mostly UPS and loss of revenue will be damaging for those companies," says Foy. "Over 10 days, the volumes will really start to cause disruption to even companies not with UPS due to volume handling and most likely require political intervention here or even at 7 days."

What should retailers do?

Unfortunately, there might not be much they can do. If time allows for retailers to engage with other non-UPS carriers — do it NOW. Moving forward, diversification in delivery options is key to minimizing similar risks. The more carrier options, the more volume spread. Foy explains that for years leading up to the last strike, the common philosophy was to load up all your parcels into one contract for simplicity, bigger discounts and ease of analyzing the data. The 1997 strike reminded people that this strategy was not the way to go.

We can use history to teach better carrier strategy by breaking down modes, parcel thresholds, channels and geography, Foy says, to prevent the ripples of such events to damage your company, and reputation. A diverse portfolio means that there is no monopoly in your retail delivery service, and even if the UPS strike doesn't happen, it's a needed strategy to combat the disruptions of the future.