Key Takeaways
- UPS drivers may go on strike if the company does not reach a new agreement with their labor union, the International Brotherhood of Teamsters, by August 1.
- UPS drivers went on a strike for 15 days in 1997 that cost the company hundreds of millions of dollars.
- A strike would have a major impact on global supply chains as UPS accounts for roughly 24% of US parcel shipments.
- Although both sides have said negotiations are making progress, risks remain if a deal is not agreed to soon.
- Procurement and supply chain management professionals should plan contingencies for supply chain disruptions that result from labor union strikes.
UPS and the International Brotherhood of Teamsters, which represents most of their full-time drivers, are currently negotiating a new National Master Agreement which would cover roughly 330,000 workers in the United States. UPS employees represented by this labor union have threatened to go on strike if a new agreement is not reached by August 1. The union recently called for a strike authorization vote; a majority ‘yes’ vote from its constituency of more than 340,000 teamsters across the United States enables the union to call for a nationwide strike if a deal is not signed by the deadline.
On June 16, the teamsters overwhelmingly voted to authorize a strike. With 97% of teamsters voting yes, Teamsters General President Sean M. O’Brien stated, "This vote shows that hundreds of thousands of Teamsters are united and determined to get the best contract in our history at UPS. If this multibillion-dollar corporation fails to deliver on the contract that our hardworking members deserve, UPS will be striking itself."
UPS issued a press release regarding the strike vote, stating, “This vote is a routine part of the bargaining process and does not mean that there will be a strike.”
The stakes are high as UPS transported roughly one out of every four packages shipped in the United States in 2022. Procurement and supply chain management professionals should prepare for disruptions as a strike by UPS employees would have a major impact on the global supply chain, resulting in shortages of inputs, higher prices, and longer lead times.
What are the points of contention?
The workers are seeking higher wages, better pensions, and more paid time off. UPS workers say they currently work six days a week with no paid sick time. Furthermore, the company has experienced significant growth in the last five years: operating profits increased 86.4% from 2018 to 2022, and workers feel that the company should share the wealth as part of their new collective bargaining agreement.
General safety has also been a concern the teamsters are seeking to address. UPS does not air condition a majority of its fleet of delivery vehicles, which has resulted in more than 100 UPS workers being hospitalized for heat illnesses since 2015. UPS and the International Brotherhood of Teamsters agreed on new preventative safety measures in their negotiations this June, including vehicle enhancements to increase airflow and cooling.
What happened during the 1997 UPS strike?
While history can only inform so much of the present, you may want to look at how labor disputes in the transportation industry have been resolved in the past for additional context.
This isn’t the first time that teamsters working for UPS have gone on strike: a large-scale strike took place in 1997, with 185,000 Teamsters going on strike in what became one of the largest labor walkouts in the United States since World War II. The strike occurred due to concerns about job security, wages, and the use of part-time workers who received fewer benefits than their full-time counterparts.
The strike lasted 15 days and cost UPS $600 million. UPS lost market share to its competitors, including FedEx and the US Postal Service. The agreement that ended the strike raised starting pay from $8 per hour to $8.50 per hour for part-time workers and raised driver wages by $3.10 per hour. Other part-time workers received a $4.10 increase in their hourly wages. Additionally, UPS agreed to reduce its use of subcontractors and to create more full-time jobs.
Which industries would be most affected by a UPS strike?
Although a strike by UPS workers would affect most of the economy, some industries face a higher risk than others. Many retailers depend heavily on carriers like UPS for shipping. A UPS strike would mean empty shelves, longer wait times, and higher shipping costs. However, larger retailers that manage their own shipping are in a better position to weather a potential UPS teamsters strike than others. One source estimated that Amazon shipped 72% of its own packages in 2021.
Manufacturers would also be affected as manufacturing requires a constant stream of inputs from suppliers who are often scattered across long distances. Exposure would be higher for manufacturers with longer and more complex supply networks such as vehicle manufacturers. Manufacturers would also struggle to ship their finished goods to buyers as some of them may contract with UPS.
Shortages of inputs would also affect maintenance and repair because equipment cannot be fixed if replacement parts and other supplies cannot be shipped. Equipment and machinery would have to be taken offline, affecting industries across the economy.
What can procurement and supply chain management departments do?
Procurement departments can start by assessing their exposure to a potential strike. You should ask your suppliers for information on which shipping companies they are using to ship goods to their facilities. You can categorize this data by supplier, by product, by importance, and by the frequency of shipments. If you don’t have a clear understanding of which shipping methods your suppliers utilize, now is the time to begin asking those questions.
You can then assess your exposure to UPS and any disruptions that may result should a strike occur. The biggest risk will come from products that are both important and frequently shipped. Risk will be lower for products that are important but only shipped once a year or once a month. Risk will also be low for non-essential products that your organization can live without.
If most of your shipments of an essential item are coming from UPS, that could present a significant risk and you may want to develop contingency plans or diversify your shipping. You may also want to stock up on essential items or identify alternate suppliers so that you will be in a better position if a strike does occur.
Your organization could be affected even if you do not use UPS because a UPS strike would lead to a sharp decline in freight transportation, driving up spot rates.
You should also examine your contracts with both upstream suppliers and downstream buyers. Will you be held liable if you are unable to fulfill your contractual obligations due to a shortage of input goods? Will you be eligible for compensation from suppliers if they are unable to uphold their contractual obligations? Or does the strike count as a force majeure event?
You should also inform your downstream buyers of the situation and let them know about the steps you will be taking. Manage their expectations and be transparent about the risks that you face. Otherwise, your downstream buyers may be alienated, which could lead them to take their business elsewhere.
Even after taking all these steps, your organization may still be affected. Will you be eligible for insurance if that does occur?
Finally, you should monitor the situation and remain in contact with your suppliers and shipping companies.
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