UPS Strike Risk: How Threats of Strikes Can Impact Supply Chains

Recently, supply chains have faced disruptions due to an increased incidence of strikes. For example, recent disputes between West Coast ports in the US and Canada and the ILWU led to extended dwell times. As a result, shippers are proactively managing their strike-related risks.

Consider, for example, the recent situation with UPS. The UPS Teamsters union cast a vote to initiate a strike on August 1st unless a fresh labor agreement was reached with the company. UPS, a major player in the last-mile delivery market, could not afford a strike involving over 300,000 workers, particularly given the surge in eCommerce over the last five years. The ramifications for most supply chains, especially in the retail sector, would have been significant.

Though UPS managed to avert an actual strike by reaching an agreement, the mere threat has not been without consequences. Leading up to the potential strike, customers began diverting more than a million parcels daily to alternative last-mile carriers. According to carrier diversification data provided by project44, not only were parcels rerouted, but shippers also started incorporating new carriers into their networks. This strategic shift in partnerships might imply that UPS won’t fully regain all the volume that was diverted. This is especially pertinent considering the impending peak holiday season, during which shippers are likely to retain the newly onboarded carriers to handle the typical volume surge experienced from November to January.

Carrier Diversification

Despite the potential strike, project44 last-mile performance data shows that UPS maintained its on-time performance, proving the professionalism of their drivers. Consequently, the threat of the strike did not significantly impact the last-mile market, but it did lead to a noticeable adjustment in shipping behaviors.

Last Mile On-Time Performance

This phenomenon is partially attributed to the urgency for prompt deliveries, spurred by initiatives like Amazon’s same-day delivery, pushing retailers to provide competitive shipping times.

Failure to meet shipping expectations runs the risk of customers seeking alternatives, even if it means paying extra, to receive items sooner. A glance at the accompanying chart reveals that retailer-estimated shipping times are at an unprecedented low, with actual delivery times surpassing these estimates on average. Given the current eCommerce landscape, retailers cannot afford substantial delays and disturbances.

Retail Lead Times

Thankfully, a new five-year contract between UPS and the Teamsters prevented the strike. However, the recent trend of volume diversions underscores that even the potential of a strike can cast ripples across businesses. In a climate where employee satisfaction with working conditions and compensation is crucial, especially for unionized employees with a stronger capacity for organizing votes and strikes, any discontent can trigger major disruptions.

Shippers are becoming more agile in diverting volumes elsewhere at the slightest hint of strike-related uncertainties. As supply chains continue to evolve in response to these challenges, it’s evident that the delicate balance between meeting consumer demands and managing workforce concerns will play a pivotal role in shaping the future of resilient and adaptive supply chain systems.