Potential UPS Strike Creates ‘Healthy Fear’ in Last-Mile Debate

With less than three weeks until Aug. 1 and no new contract agreement in sight, a potential strike of 340,000 UPS union employees is putting the state of the supply chain in doubt.

But as competitors scramble to grab market share ahead of a potential labor stoppage, it could be argued that the closer the deadline comes without a deal, the more pressure tilts back to both UPS and the Teamsters-represented workers to finalize an agreement.

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On July 6, FedEx said it was prioritizing service for existing customers in the event of a strike, and encouraged shippers who considered shifting volume to do so immediately.

And the U.S. Postal Service (USPS) recently launched a new shipping offering, USPS Ground Advantage, which gives businesses fee- and fuel surcharge-free residential delivery of packages up to 70 pounds within two-to-five business days.

Unlike the lead up to the 15-day 1997 UPS strike, the majority of retailers are already making quicker decisions between carriers, according to Jeremy Tancredi, a partner in the operations excellence practice at consulting firm West Monroe.

“They’re not as committed to just one carrier that they were 30 years ago,” Tancredi told Sourcing Journal. “We’re already seeing diversification just in the nature of their business, and it’s easier to transition between one carrier and other than it ever has been.”

UPS was able to get an estimated 90 percent of its business back after the 1997 strike, but that was before the advent of online shopping, and FedEx hadn’t yet established its ground delivery business.

“There’s more competition than ever,” Tancredi said. “There should be a healthy fear on both sides—UPS and the Teamsters—that if at strike does happen, a larger percentage [of customers] than they saw previously, just won’t come back.”

However, even if moving carriers is easier today, a migration might not be as cut and dry as some might suspect.

“[UPS] will still get a large portion of that business back, just because FedEx and the other carriers won’t be able to handle the amount of volume,” Tancredi said. “As much as FedEx would love to be able to handle all the volume, they don’t have the network or the capacity to absorb 20 million packages a day from UPS.”

UPS accounted for 24 percent of total parcel volume shipped in the U.S. in 2022, according to data from the Pitney Bowes Parcel Shipping Index. The USPS still leads the way, accounting for 32 percent. Amazon’s delivery service handled 23 percent, while FedEx came in fourth at 19 percent. Regional carriers and others drove the final 2 percent.

Last-mile delivery diversification ramped up during Covid-19 as businesses catered to accelerated e-commerce demand.

As of April, companies had an average of 5.52 last-mile delivery carriers, up from 4.07 in April 2020, when businesses shut down across the U.S, according to insights from supply chain technology provider Project44.

Adam Bryant, chief operating officer and former CEO of AxleHire, said that many of the last-mile delivery platform’s retail partnerships began in 2021 as global supply chain disruptions stalled lead times and retailers were getting locked out of capacity.

Bryant believes companies that prepared to diversify during the congested 2021 environment are less likely to see major disruptions in the event of a strike.

“A lot of our clients have been shedding some of the larger national carriers, to a certain degree, and moving more towards regional, and having that be a piece or mosaic of their of their network,” said Bryant. “As we’re getting close to this 7/31 date, we are seeing a lot of the shippers that we’re working with already having made those moves.”

According to Bryant, “a good number” of larger clients already have moved their UPS last-mile allocation in regions covered by AxleHire.

“For us, we have not seen the panic or the sentiment of ‘Hey, I need you to take a whole bunch of packages from the client that we were already servicing,’’ Bryant said.

Like FedEx, AxleHire is aiming to protect capacity first for its existing clients, then taking on any potential new ones on a first-come, first-serve basis.

With enough uncertainty in play, Bryant believes there’s room for carriers to coexist.

“At the end of the day, there’s absolutely a world where these national carriers are needed,” said Bryant. “They’re a very valuable part of the ecosystem, because they’ve got that very extensive coverage, whether UPS and FedEx are covering the urban areas or rural areas. I don’t see a world in which the the shippers are just going to bypass them entirely.”

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