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UPS Announces (and Surprises) with GRI Announcement

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Following FedEx’s 2024 General Rate Increase Announcement on August 30th, we published an article that provided some details and insight to help shippers begin planning for the increased costs that this will drive. We had also expressed surprise that FedEx had announced an average GRI that was lower than last year. At the time that this article was released, UPS had not yet publicized their plans for their 2024 rate change. 

So, a lot of us were on the edge of our seats, wondering how UPS would react. They were put in a bit of a sticky situation given the fact that they needed to figure out a way to fund the expensive new Teamster agreement that just went in place. At the same time, they need to be sure to protect their crumbling market share. UPS has faced competitive pressure from FedEx, Amazon, LaserShip/ Ontrac and the slew of other delivery options that have popped up within the last few years. 

Many experts including ICC Logistics, were predicting record level increases for the Parcel shipping community. Some even predicted double digit increases! Well, it looks like we all received another major surprise. It looks like UPS has decided that they are not in a position to announce a higher GRI than FedEx. On Friday September 8th, UPS posted the following on their website. 

The following changes will be effective December 26, 2023. Previews will be available later.

The rates for UPS® Ground, UPS Air and International services will increase an average net 5.9%.

The list of ZIP Codes to which Area Surcharges apply will change.

The list of ZIP Codes aligned to certain zones will change

Once again we need to emphasize that the announced GRI is just an average, and that the actual impact will vary greatly depending on a shipper’s volume characteristics.

Also, we are certain that both carriers will find other creative ways to help ensure they protect and grow their profit margins. Our last article detailed how Parcel Carrier accessorial charges have been a sneaky way for them to drive rate increases that are higher than the GRI that they announce. We provided some important details and insight related to how Delivery Area Surcharges have been added and changed over time. 

It looks like we hit the nail on the head in relation to Delivery Area Surcharges, as the UPS announcement spells out that the list of Zip Codes that DAS applies to will change! We are willing to bet the farm that the change will not result in less zip codes receiving DAS charges!

It’s also interesting that UPS announced that there will be a change in the alignment of zip codes and zones. We had seen this announced in the past. However, we were not able to identify any major changes in the zone charts that we studied. We will definitely be taking a closer look at this area for the 2024 rate increase impact, as this could have a major impact on shippers. 

For example, currently 5 Lbs. UPS Ground Commercial package going to Zone 4 carries a published rate of $14.60. If UPS adjusted their zone chart, and caused this same package to be classified as a Zone 5 package, the cost would jump to $15.85, an 8.6% increase! This is obviously far above the announced 5.9% GRI. We are not saying that UPS or FedEx will make these kind of changes. However, the fact that UPS has announced that there will be changes to zones has one wondering. 

In addition to the GRI announcement, UPS also provided details related to their Peak Demand, and Holiday Peak surcharges for the remainder of 2023 and into 2024. Besides big increases in Additional Handling and Large Package Surcharges (which will increase 6-7% compared to Peak Demand surcharges from 2022), they also provided specifics of rates for high volume Holiday Peak shippers (A Demand Surcharge will apply to certain UPS Air Residential, UPS Ground Residential and UPS SurePost packages, for customers who are billed for more than 20,000 packages during any week following October 2022). 

Below is the chart that high volume shippers will use to determine their peak demand surcharges. 

 

October 29, 2023 until January 13, 2024
Service Level>105% to 125% of Baseline Volume>125% to 150% of Baseline Volume>150% to 200% of Baseline Volume>200% to 300% of Baseline Volume>300% to 400% of Baseline Volume>400% of Baseline Volume
UPS SurePost$1.35 Per Package$1.85 Per Package$2.15 Per Package$2.60 Per Package$4.45 Per Package$6.40 Per Package
UPS Ground Residential$1.35 Per Package$1.85 Per Package$2.15 Per Package$2.60 Per Package$4.45 Per Package$6.40 Per Package
UPS Next Day Air Residential$2.40 Per Package$2.90 Per Package$3.20 Per Package$3.65 Per Package$5.50 Per Package$7.50 Per Package
All Other UPS Air Residential$2.40 Per Package$2.90 Per Package$3.20 Per Package$3.65 Per Package$5.50 Per Package$7.50 Per Package

We compared this chart to the one that UPS provided for the 2022 Holiday Peak Season. The increase in rates for these volume demand surcharges increased as much as 8% for some tiers! 

So what does this all mean? First of all, we are sticking to our guns, and reiterating that the impact of the 2024 Parcel Carrier rate increase will be higher than 5.9% for many. We are already seeing this in many areas as described above, and expect to continue to see this as the specifics of 2024 rates trickle in from both UPS and FedEx. 

The bottom line is that if you are using the announced 5.9% GRI’s as a basis to budget for 2024, you are probably making a big mistake.  The impact of the increases could be record level for some, depending on which levers the carriers decide to pull! Also, don’t think that you are protected from major increases if you have a Rate Cap in place in your agreements. Rate Caps typically only apply to base rates, so accessorial increases can have a major impact on your actual costs.

Finally, we cannot stress enough the importance of partnering with companies like ICC Logistics, that can help you determine the exact impact of these rate changes. It is crucial to fully analyze your current agreements, pricing structures, and actual data to determine true impact. Without this approach, you are leaving yourself open to surprises that can have a major negative impact on you and your companies’ profits.

FedEx Announces GRI Early

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Surprise Surprise!

Most people like a nice surprise, especially when it’s a good one! Yesterday, the parcel shipping world received a nice surprise.  FedEx provided an earlier than normal announcement of their General Rate Increase (GRI) for next year. Surprisingly some of the increases that they announced were less than those imposed last year. FedEx announced that their rates for Express and Ground Services will increase by 5.9% (on average) in 2024. While it is nice to hear that the increase for FedEx is lower than expected, this is certainly no reason for celebration! 

Last year the GRI for both FedEx and UPS came in at 6.9%. Many experts, including ICC Logistics, have been predicting record level increases for Parcel Carriers in 2024, driven by the expensive new UPS-Teamster contract. It has been reported that this new agreement will cost UPS $30B over the next five years.

Early speculators are saying that this move by FedEx is designed to put pressure on UPS and their profit margins. It is hard to say how UPS will react to this. One would expect that they did have plans to push through a rate increase designed to soften the blow of the higher costs associated with the new Teamster agreement. We had expected a GRI of at least 6.9% by UPS. But, due to this new pressure in the market, they may be forced to mirror the 5.9% increases announced by FedEx, and find some other way to improve profit margins.

If UPS decides to go this route and match the FedEx 2024 GRI amount, they will need to find creative ways to improve margins. Let’s face it, UPS and FedEx are no strangers to creative pricing. First of all, it’s important to point out again that the announced GRI’s are just average increases. The actual impact of the rate increases will vary greatly for shippers. Many factors will drive the bottom line increases that a shipper will experience including average weight and zone of packages, package dimensions, increases in accessorial rates, as well as potential changes to accessorial rules and/ or the introduction of new accessorial fees. Also, the verbiage and elements of carrier agreements can affect the bottom line impact for shippers. 

Carriers have been using accessorials as a creative way to improve profitability for a long time. Many years ago, the Delivery Area Surcharge (DAS) was introduced by UPS and FedEx for certain zip codes. Then new categories of delivery surcharges were added, accompanied with higher charges. First the Extended Delivery Area surcharge (EDAS) came into play. In more recent years (2022 to be exact) – the Remote Area surcharge was created. This sneaky little surcharge carries a price tag of $13.05 per package in 2023 for UPS, and is typically not covered by discounting that shippers may have in place for DAS or EDAS. UPS published charges for DAS and EDAS are $5.30 and $7.15 in 2023. 

On top of this, both carriers usually make adjustments to the zip codes that these Delivery surcharges apply to. Our analysis has shown that UPS has continued to move DAS Zip Codes to the EDAS category and EDAS into the Remote Area Surcharge category.  In 2023 UPS had approximately 400 more Remote Area Surcharge zips listed than they did in 2022. We are speculating that this practice will continue in 2024 and beyond. 

Both Carriers have made changes to rules that govern Dimensional Weight as well as Additional Handling Charges over time. In 2015 both carries lowered their Dimensional Weight Factors from 166 to 139, which increased costs for most shippers. Both have also introduced new rules that apply to Additional Handling surcharges. For example, in 2016 both carriers lowered the length of packages (longest side) from 60 inches to 48 inches before the surcharge applied. New categories of Additional Handling have been added over time, and now include extra charges for specific weight, combined length and girth, length, width, as well as packaging. Published charges for Additional Handling vary from $16.50 to $34.50 for UPS and $16.50 to $36.00 for FedEx (per package). 

There are also many interesting rules that govern situations where carriers reserve the right to charge Additional Handling Fees. UPS has one listed in their Service Guide under rules for the application of Additional Handling for Packaging. It states that they can charge an Additional Handling Charge for Packaging for “Any article that is encased in a soft-sided pack (e.g., poly bags and bubble mailers) that exceeds 18 inches along its longest side or 14 inches along its second-longest side or 6 inches in height.” We know that many shippers use these larger size poly bags to ship their product (especially those that ship clothing/ garments). However, up until this point, we have not seen any wide scale enforcement of this rule. Not sure why, but this could be a creative way to help bolster profits.

So, our point with all of this is that it really doesn’t matter if UPS matches the FedEx GRI or not. The bottom line is that 5.9% is still a hefty increase!  On top of this, it is only an average, and the impact could be much greater for shippers, especially when the carriers start playing the “Smoke and Mirrors” games that they play. It is obvious that carriers have many levers that they can pull to help improve their profits. Many of these are not so obvious to the average shipper. 

The big questions are “What is the specific impact to you, the Shipper?” and “Do you have contracts that can help shield you from potential rate increases that can damage your bottom line?” We would expect that you don’t want to be unpleasantly surprised by unplanned/ unexpected increases in costs in 2024. ICC Logistics has a long history of delighting customers by driving significant cost savings that they didn’t know existed. Please reach out to us today to ensure that the surprise that you experience with your 2024 carrier rate increase impact is a good one! 

And, as an added bonus, ICC, (which we have done for decades now), will be publishing FedEx and UPS Rate Comparison Charts comparing 2023 rates, with the new 2024 rates just as soon as the revised rates are officially published by FedEx and UPS. Be on the lookout for this incredibly valuable information.  

UPS Teamster Update: It Still Ain’t Over

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 A Good News, Bad News, Good News Story

Well the results are in-  UPS Teamster members have voted to accept the UPS contract offer that their leadership team had tentatively accepted back on July 25, 2023.  The contract was overwhelmingly accepted with 86.3 % of UPS Teamsters voting yes to the deal. Shippers no longer need to worry about the possibility of a strike.  Obviously this is the Good News Story. But what impact will this new agreement have on the market place and your business?  Our intent is to provide you with some insight regarding what to expect moving forward, and to help you build a strategy to minimize the impact of market changes. 

Now that we know the good news, let’s talk about the bad news.  There is probably no need for us to get too deep into the increases that UPS workers will receive through this new deal. There have been many stories in the media that describe how UPS Driver pay will go to $170K per year. Part time workers will see increases in pay by as much as 48% over the life of the agreement. Additionally, UPS made many other concessions that will prove costly for them in the coming years.

UPS Leadership acknowledged that the new Teamster agreement will have a big impact on their costs. In their latest earnings release earlier this month, UPS cut its full-year revenue and profitability targets, citing higher-than-expected labor costs and business lost during the contract talks with the Teamsters.

So, shippers that use UPS should brace themselves for the record level rate increases that ICC and other experts have been predicting for some time now. For those shippers that use FedEx and other parcel carriers, don’t think that you are off the hook. As we all know, history repeats itself. So, why wouldn’t FedEx just match the increases that UPS will announce later this year to help them improve their profit margins as they have in the past? This is really a no brainer. 

If you think that Amazon’s expansion into the Parcel delivery market will help keep costs down, guess again. The Teamsters have been very vocal about their desire to drive higher salaries for Amazon workers. Teamster General President, Sean M. O’Brien has been quoted as saying, “Teamsters have set a new standard and raised the bar for pay, benefits, and working conditions in the package delivery industry. This is the template for how workers should be paid and protected nationwide, and nonunion companies like Amazon better pay attention.”

Adding to the bad news is the recent Yellow Freight bankruptcy. Thankfully, in the short term, excess capacity in the LTL market seems to have staved off any major impacts on cost. But, what will happen as capacity starts to tighten during the upcoming holiday peak season? Estes and Old Dominion have made offers for Yellow Freight assets, which could help these carriers grow their respective market share. So, what impact could this have on LTL prices? Obviously still a lot of unanswered questions here. But, many things point to higher costs for the LTL market as well 

So now for some more good news. The bottom line is that smart shippers can plan ahead to help protect themselves from substantial increases in costs and further erosion of profit margin. Here are some of our recommendations for you to consider as you build your cost avoidance strategy; 

1.Time to Assess your Parcel and Freight Carrier Agreements. Many things need to be considered here. Many shippers have the ability and resources to take a high level view of where they stand with their Parcel Agreements.  There are some easy things to look at. For example, When does my agreement expire? Do I have any language in my agreement that would prevent me from renegotiating my agreement now? When was the last time I renegotiated my agreements? Is my company in a position to consider a move to another parcel carrier? How much has my business changed since I last negotiated my current parcel agreement? 

2.Time to take a holistic view of your current Transportation & Logistics Programs –  Many shippers are utilizing outdated Transportation and Logistics Systems . In many cases, these legacy programs were built at the start-up of the business, and never changed. They are often built around older internal systems, which limited the ability for changes in order fulfillment. Companies that started out regionally may now be selling nationally and globally. All of this results in added cost for shippers. 

Here are some questions to consider with this; What are your options? Are you in a position to consider the use of Regional Carriers, or other Final Mile, or Middle Mile Carrier options that have sprung up in the last few years? Can your current systems support the addition of new carriers? Are you using the right LTL carriers for your product/ customers/ market?  Is your current Distribution Center, or 3PL in the right place to ensure lowest cost/ fastest delivery to your customers? Should you upgrade your current TMS/ WMS systems? 

3. Time to talk to the experts – Many companies are hesitant or reluctant to bring in outside help or consultants. Transportation and Logistics leaders often feel that they know enough to negotiate their own deals and make their own decisions. CFO’s and other company leaders think they don’t need to bring in experts because they have the right people on their staff that have the expertise to ensure that they are getting the most from carriers. 

The bottom line is this- even if you have the best Logistics and Transportation people on your staff, there is no way for them to possess the vast data and insight that the experts can provide. Here is a great way to look at this. The best and most experienced Transportation and Logistics leaders probably have been involved in dozens of Parcel and Freight negotiations during their careers.  They also could have worked at many different companies. So maybe they have some good insight. However, Logistics consultants have been involved in hundreds or even thousands of Parcel and Freight negotiations, for hundreds/ thousands of different companies. Also, in many cases (like at ICC), they have sat at the carrier side of the negotiating table. 

The experts are much more in tune with current pricing and market trends. Parcel and Freight agreements usually have 1-3 year terms. A lot can change in the market during these time periods. Good consultants have a vast amount of recent carrier invoice data that can be used to benchmark against the current market. The experts are involved with this on a daily basis, so they know what to ask for and when and how to ask for it. 

Company leaders need to realize that Logistics consulting experts are not looking to replace, or make their Logistics and Transportation teams look bad. The main goal is to make these teams smarter/ stronger and to provide them with the tools that they do not have to help them drive the greatest savings possible, without compromising service to customers. 

Naturally, company leaders are often concerned about the cost of engaging with Transportation/Logistics consultants. The good news here is that most of these consultants are willing to work on a gain share basis, meaning that they will not pay anything unless the consultants can drive savings for them. It is not unusual for shippers that partner with a Logistics consulting firm to experience an ROI of 5X-10X or more. 

The ICC Logistics team has had tremendous success with helping customers build their own good news/ success stories. We are looking to continue to spread the good news. So, please reach out to us today to find out how we can help you prepare for the expected changes in the Transportation and Logistics marketplace. We are certain that we can deliver solutions that will protect your margins and enhance service to your customers. 

 

8 Steps to Better Collaboration: Procurement and Logistics

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Unlock the True Potential of Synergy and Collaboration 

I have always been intrigued by the relationship between corporate procurement departments and corporate logistics departments.  The question that always comes to mind is, which department is best suited to negotiate the “best” deal for the company?  There is a reason why this intrigues me.

Several years ago, we were asked by the corporate logistics department of a major apparel retailer to analyze their parcel carrier contracts to advise them what potential savings they could achieve as a result of our comprehensive benchmark analysis services.   Unbeknownst to us at the time, the corporate procurement department of the retailer had been given the ultimate authority to finalize the negotiations with the parcel carriers.  

Negotiations had been going on between the retailer and the parcel carriers for months, which is certainly typical with large parcel spend contract negotiations. In the end, the procurement department made the decision to end the back and forth negotiations and sign the “latest and greatest” offer from the Parcel carriers. This decision was apparently made because of the considerable amount of time the negotiations had been ongoing.  However, one key element the procurement department failed to consider, was the fact that the data and analytics we had provided to the logistics department projected that if they did sign the “latest and greatest final” parcel carrier contracts the carriers had presented, they would be leaving over $12 Million in potential savings on the table.   

So of course after hearing this decision by the corporate procurement department, my immediate response was, “how will you explain to your CEO and CFO that you left $12 Million on the table?”  Secondly, “how many garments would you have to sell to generate $12 Million in net profits for the company?” 

We assume those discussions with top management did not go well.  

It is clear that the relationship between corporate procurement departments and corporate logistics departments is critical for the overall successful functioning of any organization. While they are separate and distinct functions within a company, their activities are closely intertwined and complementary.

Collaboration is King

Procurement and logistics departments should collaborate closely to ensure the smooth flow of goods and services within the organization. While procurement is responsible for sourcing and acquiring the necessary materials, products, services, and comprehensive contract provisions, logistics provides insight into the company’s actual needs for transportation services, storage, and distribution of these items. Effective collaboration and data sharing, between these two departments is essential to meet the company’s overall operational needs and even more importantly, customer requirements.

Procurement departments must rely on logistics teams to provide insights and data related to demand forecasting and inventory management. Logistics departments offer valuable information about transportation capacity, lead times, storage capabilities, freight rate structures, contract pricing requirements and anomalies, as well as overall supply chain constraints. This information helps procurement departments make informed decisions about when and how much to procure.

Both procurement and logistics departments should interact with suppliers and service providers. Procurement typically negotiates contracts, establishes relationships, and manages supplier performance. They should always work collaboratively to optimize the supply chain, ensure efficient operations, and maximize cost reductions and customer satisfaction.

Working together

Procurement and logistics departments that collaborate effectively tend to understand each other’s needs and objectives, thereby creating the best solution for all parties involved.

Shared Goals and Objectives: Procurement and logistics should align their goals and objectives to ensure a unified approach. This includes understanding the company’s overall logistics requirements, cost targets, service level expectations, and strategic priorities. By jointly defining the desired outcomes, they can work together to achieve the best value for logistics services.

Early Involvement: Procurement should involve logistics early in the procurement process. By engaging logistics experts from the beginning, procurement can gain insights into specific logistics requirements, challenges, and opportunities. This enables them to consider logistics-related factors when evaluating potential suppliers, negotiating contracts, and making sourcing decisions.

Collaborative Supplier Selection: Procurement and logistics should collaborate in selecting logistics service providers. Logistics should provide input on supplier capabilities, service levels, geographic coverage, and any specific requirements related to transportation modes, warehousing, or distribution. Procurement can then leverage this information to evaluate potential suppliers, negotiate contracts, and select the most suitable logistics partners.

Performance Metrics and KPIs: Procurement and logistics should define key performance indicators (KPIs) and service level agreements (SLAs) together. Logistics should contribute their expertise in identifying relevant metrics, such as on-time delivery, transit times, order accuracy, and responsiveness. Procurement can then incorporate these metrics into contracts, ensuring that they reflect the company’s expectations for value and service quality.

Continuous Performance Evaluation: By regularly reviewing supplier performance against established KPIs, they can identify areas for improvement, address any concerns, and drive accountability. This evaluation process should be collaborative, with logistics providing input on operational aspects, and procurement focusing on contractual compliance and cost effectiveness.

Data Sharing and Visibility: Procurement and logistics should establish effective data sharing and visibility mechanisms. They should leverage technology solutions that enable real-time information exchange, such as transportation management systems (TMS) or supply chain visibility platforms. This shared visibility allows both departments to monitor logistics operations, track shipments, identify bottlenecks, and proactively address any issues that may impact value or performance.

Continuous Improvement Initiatives: Procurement and logistics should jointly drive continuous improvement initiatives. By sharing insights, best practices, and lessons learned, they can identify opportunities for process optimization, cost reduction, and service enhancement. Regular communication and collaboration foster a culture of continuous improvement throughout the procurement and logistics functions.

Supplier Relationship Management: Procurement and logistics should work together to manage relationships with logistics service providers. They should collaborate in supplier performance reviews, contract renewals, and contract negotiations. By maintaining strong relationships with logistics partners, they can leverage these partnerships to drive value, innovation, and continuous improvement.

parcel and freight contract audit service

So while we’re sure most companies would think twice about leaving $12 Million in potential savings on the table, (especially when the savings projections were clearly documented as they were in this case), when dealing with logistics and supply chain operations the three most important elements are Communication, More Communication and Even More Communication!   

 

Tim Binkus brings us the latest on UPS/Teamsters

UPS/Teamster Silence is Loud!

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Crickets!

It has been eerily quiet since our last post related to the UPS/Teamster Contract negotiations on July 7th.  We had been hoping to be able to report on some progress or at least a return to the negotiating table. Unfortunately, that is not the case. The Teamster Contract Expiration Countdown clock is now down to 18 days, which means that if the Teamsters are true to their word, UPS service could come to a screeching halt in under 3 weeks. 

The only activity that we have seen on the Teamster’s side of things are a lot of reports that they are performing, “Practice Picketing” around the country. We are not sure why there would be a need to practice holding signs, and walking around in circles, shouting about the need for higher wages. So, it is probably safe to speculate that these “Practice” picket lines are designed to put more pressure on UPS, and draw attention to the Teamsters intentions to take on all non-union carriers, (especially Amazon!).

Besides these “Practice” picket scenarios, there has been a lot of press around the breakdown in negotiations that occurred on July 5th, along with a lot of finger pointing regarding who actually walked away from the negotiating table. 

On July 7th, UPS issued a statement on their website that said “The Teamsters stopped negotiating this week despite strong proposals from the company that build on our industry-leading pay and benefits for our full-time and part-time employees. We have encouraged the Teamsters to return to the table to continue building on the significant progress we have made, including the recent completion of all local supplements.” 

It went on to say “Just over three weeks remain until the current contract expires on August 1. Refusing to negotiate, especially when the finish line is in sight, creates significant unease among employees and customers and threatens to disrupt the U.S. economy. We are proud of the proposals we have put forward that deliver wins for our people.”

On the Teamsters side, in an interview with CBS News on July 11th, Teamster’s General President Sean M. O’Brien stated that the talks broke down on July 5th after the union was told by UPS that they had “no more money to give, especially for the Part Timers.” The CBS newscaster then read a statement from UPS that stated “The Teamsters have stopped negotiating despite historic proposals that build on our industry-leading pay.”  

Mr. O’Brien’s response again suggested that it was not the Teamsters that walked away, and stated that “all that they need to do is pick up the phone and say that they have a better offer, they know what they need to get this deal done.”

So, the bottom line is that it appears that the Teamsters are continuing to take the same approach that they have throughout these negotiations. They have claimed that they have not made any concessions while gaining agreement on all of the 55 issues (mostly non-economic) that have been tentatively agreed to.  

The statements that O’Brien has made, paints the picture that the Teamsters are not looking to negotiate or compromise with UPS. So far the approach has been – give us the money, or we are going on strike- period! Based on our experience, it is pretty difficult to negotiate and work things out when the other party is unwilling to give or trade anything. 

So where is this going to go? Here are some potential scenarios.

The Show- 

Maybe this is just part of the show that UPS and the Teamsters need to put on, so that both sides can appear to win. Teamster leadership needs to show some strength, given the platform that they used to rise to power. They definitely cannot come out of this being viewed the same way that James Hoffa was following negotiations in 2018, when Hoffa and his team ratified the UPS Agreement despite a majority of UPS Teamsters voting no (we had provided details of this in one of our earlier blogs). So, they cannot make it look like it was easy to get the raises and benefit improvements that they are seeking. This needs to be viewed as a fight to the end!

On the UPS side of things, the company could potentially win by ultimately agreeing to provide improved wages for the struggling “poverty wage Part Time workers”, that the Teamsters have been publicizing for the past few weeks.  This would certainly create some positive press for UPS, and show that they indeed are serious about rewarding their employees. UPS CEO Carol Tome’ has consistently stated her intent to take care of UPS people. So this could help her deliver on this message, and show that UPS is taking care of US workers. 

More importantly, if the Teamsters can deliver a solid wage and benefit package for their members, it could help them in their efforts to gain traction with other non-union carriers, especially Amazon. They have been very vocal about their intent to help the employees of non-union carriers improve their wages, benefits and working conditions. We’re pretty sure that UPS would love to see the Teamsters have success in their efforts to unionize FedEx and Amazon, as this could help level the playing field in the Small Parcel market. 

So, if this is indeed just a big show, then we should expect an announcement in the near future that says that UPS and the Teamsters have returned to the negotiating table, and a subsequent announcement that they have agreed to an historic wage and benefit package. Of course with this, there would not be any strike. 

Government Intervention-

There has been ongoing speculation that the government could intervene and block a strike due to the potential impact that this could have on the US economy. UPS currently handles volume that represents 6% of the US GDP. Also, other carriers, including the USPS could be crippled by extreme volumes being shifted to them. So, this could have a ripple effect across the entire US Supply Chain. Given the fragile economy that exists today, it doesn’t seem likely that the government could ignore this situation. 

However, we would expect that if the government does step in, it will not eliminate challenges that current UPS shippers would face. Shippers would now be relying on disgruntled UPS workers, and a union that is not happy with this unwelcomed intervention. We believe that this would result in serious slowdowns and service issues with UPS volume until a tentative agreement is reached. 

1997 All Over Again-

If it turns out that this is not a show, and the government decides to stay out of this battle, it is then very likely that there will be a UPS strike like the one that occurred in 1997 (lasted for two weeks). Obviously this would have a major impact on UPS, the Teamsters, Shippers, as well as the US Economy. It’s hard to say how long a strike could last. But, experts that we have spoken with feel that it would not last long. After all, the longer that it goes on, the more volume and money that would be lost by UPS. It would cost the Teamsters money as well as they would need to tap into their Strike fund. There could also be a permanent loss of Teamster jobs as some of this volume would never go back to UPS. 

What about me-

Unfortunately, we don’t see how any of these scenarios will be completely positive for Shippers. Sure it will be beneficial if a strike is avoided. However, with or without a strike, there will be added cost for all. UPS is ultimately going to agree to a contract that will create added cost for them. This will be passed along to shippers, and will drive up Small Parcel shipping costs for all carriers.  So we’re sure at this point you are asking “What should I do???” Give us a call today so we can help you answer that question!

Update: UPS/Teamsters Talks Stall

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The UPS Teamsters negotiations took a turn for the worse this week.

We had been encouraged by the progress being made.

Both UPS and the Teamsters had indicated that they had reached tentative agreement on three economic issues. However, talks came to a screeching halt early on July 5th, following a marathon negotiating session. The Teamsters had indicated that they needed to have a last, best final offer by July 5th, to have time to put the proposed contract forward for its members to ratify before the agreement expiration (July 31st). 

So, the big question is what happened?

Both parties have acknowledged that they have come to terms on 55 key issues. However, as we had predicted in the past, the two sides are far apart on wages. Based on comments being made by Teamster Leadership, it seems that Part Time wages is the big sticking point. A majority of UPS Employees are part time. 

It appears that the Teamsters union is looking to use the UPS negotiations as a rallying cry for the struggle of all Part-Time workers in the US. In an internal communication to UPS Teamster members they used the tag line “At UPS, and in the U.S., Part-Time Poverty Doesn’t work”. A statement in the communication by Teamsters General President Sean M. O’Brien stated “It’s a déjà vu maneuver for UPS who should know since 1997 that part-time poverty isn’t working for America.” 

On Thursday AM, O’Brien provided told CNN that There’s no doubt that UPS full-timers make good wages, good benefits,” O’Brien said. “Those trucks don’t go out unless they are loaded and our part-timers are the unsung heroes. They are working for poverty wages and we need to drive up those starting rates of pay.”

On-line reports that we have reviewed indicated that a UPS spokesperson disclosed that part-timers at UPS make an average wage of $20 per hour after 30 days of employment and receive healthcare benefits and pensions. We are certain that there are many individuals in the Part-Time workforce that might feel that UPS Part-Time workers also make good wages and benefits. 

During the interview with CNN, O’Brien was asked if the anxiety around a UPS strike, or actual strike, could hurt Teamster members. He responded by saying that volume lost due to a strike would ultimately come back to UPS. This is a pretty bold statement to make, given the multitude of new Small Parcel carrier options that have developed over the past couple of years. So, Sean may be missing something in his approach. 

However, Sean O’Brien and the Teamsters have continually stated the fact that they intend to take on corporate America in their fight for better pay and wages, especially Amazon.  In the press conference that he held this past Saturday, Mr. O’Brien said “This is the largest collective bargaining agreement in any private sector union,”. He went on to say that this contract could “set the tone and set the standard high for labor — not just the Teamsters but the entire labor movement.”

So the question becomes, are the Teamsters serious in their attempts to make an example of UPS, sacrificing their own members job for the better good of all workers in the US? Or is this just part of the ongoing attempt to squeeze every dime that they can out of UPS. 

Last week, we had predicted that UPS would cave into the Teamsters demands, and then just pass the cost along to customers, to avoid further Shipper anxiety or a strike.  Our prediction was based on the fact that there was a lot of progress being made. However, the recent turn of events is causing us to rethink our position. Based on this recent news, it appears that there is a greater possibility for a strike. 

However, we are sticking to our guns with one part of our prediction. Regardless of the fact that there is a strike or not, the end result will be increased costs for all shippers. UPS has already agreed to many items that will drive up their costs (Improved cooling in vehicles, elimination of Two Tiered Driver system, increased Holidays, etc.). Ultimately UPS will need to agree to an increased wage package for all employees as well. 

Also, if there is indeed a strike, UPS will need to recoup some major lost revenues. So, it appears to be inevitable that we can expect continued record level rate increases from UPS, which will drive the same from the rest of the industry. So, as they say “In Life the only thing that is certain is Death and Taxes. Well we would like to add something else to that phase “AND SMALL PARCEL RATE INCREASES.” 

We might not be able to help you avoid Death and Taxes. However, we are certain that we can help you combat the ongoing onslaught of Small Carrier Rate increases. Reach out to us today to find out how.