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West Coast Labor Negotiations Still Ongoing

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As reported by Logistics Management News, no labor agreement between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) has yet been reached.  However the good news is, both sides are still talking.

The ILWU represents port workers in California, Oregon, and Washington, with more than 30% of U.S. incoming container traffic moving through West Coast ports at the Ports of Los Angeles and Long Beach.  The PMA represents shipping lines and terminal operators at 29 West Coast ports, and the contract, which expired on July 1, represents more than 22,000 dockworkers at all 30 U.S. West Coast ports.

It wasn’t long ago that shippers were really concerned that a West Coast Dock Strike would cripple supply chains right before Peak Season, so that fact that both sides are still talking is being taken as good news, at least for now.

In a joint statement, both sides stated that “Talks are continuing on an ongoing basis until an agreement is reached,” and they “remain hopeful of reaching a deal soon.”

Going back to the middle of 2022, West Coast ports lost market share, due to the uncertainty of the timing of a new deal being reached, to East Coast and Gulf Coast ports, with shippers not wanting to have labor issues impact cargo flows.  These East Coast and Gulf Coast ports we believe will continue to receive higher volumes as shippers are wary of putting all, their eggs in one basket.

Port of Los Angeles Executive Director, Seroka said on a recent media conference call that the PMA and ILWU have made it clear they remain committed to getting a deal done and will not go on strike. And he commended President Biden for being the first president to visit with both sides and their top negotiators last June on the USS Iowa, encouraging the parties to stay at the bargaining table and work through their issues. He also credited the U.S. Department of Labor for its efforts to develop strong business relationships with both parties.  How long this love affair with the Federal Government continues remains questionable; just ask the folks living in East Palestine, OH.

Executive Director Seroka went on to state, “We have not seen any change in productivity.  “The rank and file that go out there every day…are on the job, moving all of the cargo they can through the port. That message needs to continue to get out as the ground truth to importers and exporters across the country. Yet, there still is trepidation. There are many transportation managers that could not go back to their boss for a third straight year and say ‘I got our cargo stuck in the jaws of congestion out in California.’ Maybe history will say there was some overcorrection here. The combination of that and the handwringing about the economy has got us turned a little bit sideways when it comes to the supply chain. We have got to get this collective bargaining agreement done…and focus on what we can do to deliver value.”

Seroka also explained that both the PMA and ILWU are keenly aware about West Coast cargo erosion to East Coast and Gulf Coast ports, with both parties wanting to work with West Coast ports to earn the lost volumes back and move forward with organic market growth.

“Collective bargaining is hard work,” he said. “Not only do we need a coastal framework but there are also 29 local agreements up and down the West Coast. And, by and large, these two sides have not negotiated in-depth for about a year. That work has to be done for the generation that is on the docks today and for the next generation of workers. Companies have to have certainty so they come back and invest and continue to drive business through this gateway. This deal may not be done in February or March, but I am confident we will see some real progress in the springtime. We don’t want to give anyone excuses to contract for cargo moving in other geographies or other ports. We have got to give confidence to these negotiators at the table to get the job done the right way.”

In late July, PMA and ILWU said they came to terms on a tentative agreement on terms for health benefits, adding that the tentative agreement is subject to agreement on the other issues in the negotiations.

“The parties have agreed not to discuss the terms of this tentative agreement as negotiations continue,” said ILWU and PMA officials in a statement. “Maintenance of health benefits (MOB) is an important part of the contract being negotiated between employers represented by the PMA and workers represented by the ILWU.”

This is not the first time a contract discussions between the organizations have continued beyond the end of an existing contract. One does not have to go too far back to see how acrimonious negotiations were, as in 2015, in the months prior to the June 30 deadline, it required the U.S. Federal Mediation and Conciliation Service to step in to help the sides find a way to come to an agreement over stalled labor negotiations. What’s more, the ongoing tension between the parties subsequently resulted in hindered productivity and also was a contributing factor in port congestion on the West Coast, especially as it led up to the 2016 holiday season.

The PMA said, at the time, that the state of terminal productivity at the five largest West Coast ports was approaching gridlock, due in large part to what it labeled ILWU-staged shutdowns.  That Sabre Rattling is not really present at these negotiations and that is surely a good thing for all parties concerned.

So, we can’t help but ask, with UPS and the Teamsters continuing their initial dialogue on a new five year contract, will the Teamsters Union agree to extend their negotiations beyond the contract expiration date of July, 31, 2023 in order to reach an agreement, or will they do what they have been threatening to do and walk off the job on July 31st?  Only time will tell.  Reach out to us if you need more information. We’re happy to share what we know with our clients and friends.

Update: International Mail Disruptions and Resumptions

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The following International Mail Services are experiencing disruptions due to the global pandemic.  Additionally, some services are now resuming. 

Please be assured that we will continue to post these service disruptions and resumptions just as soon as we are aware of them and as the list grows, they will be added here. 

Learn How to handle Business Disruptions by Downloading our E-Book: “How to Navigate the COVID19 Crisis”

International Mail Service Resumption Notice

Effective Friday, March 3, 2023, the Postal Service™ will begin resuming acceptance of mail destined to the following:

  • Cuba

This service resumption affects the following mail classes: Priority Mail Express International® (PMEI), Priority Mail International® (PMI), First-Class Mail International® (FCMI), First-Class Package International Service® (FCPIS®), International Priority Airmail® (IPA®), International Surface Air Lift® (ISAL®), and M-Bag® items.

The Postal Service is closely monitoring service impacts related to the COVID-19 pandemic and will continue to update customers until the situation returns to normal.

Read more

New Postal Product: Ground Advantage

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As part of its overall strategy to enhance its shipping offerings, the United States Postal Service (USPS) filed a procedural filing with the Postal Regulatory Commission (PRC) notifying the commission of the Postal Service’s intention to replace its existing First-Class Package Service category with USPS Ground Advantage. USPS Ground Advantage will feature two-to five day service standards for packages up to 70 pounds.

The filing streamlines and simplifies package shipping options for customers and enhances the Postal Service’s ground product offering with the anticipated summer 2023 launch of this improved ground product.

In the filing, the Postal Service is notifying the Commission of its intent to rename the First-Class Package Service product and introduce the Postal Service’s enhanced ground product — USPS Ground Advantage. USPS Retail Ground, Parcel Select Ground, and First-Class Package Service will be incorporated into USPS Ground Advantage.

Over the past year, the Postal Service has focused on improving its package offerings by improving service reliability, lowering prices, and simplifying shipping product offerings, including:

  • Lower Prices for Shipping Services. In January 2022, the Postal Service implemented new pricing for Shipping Services. As a result of the implementation of approved price changes, shipping rates for USPS Retail Ground products were reduced by 7 percent, and rates for Parcel Select Ground were reduced by 12 percent, on average. USPS Retail Ground and Parcel Select Ground prices remain at the lowered, January 2022 rates.
  • Improved Reliability Through Upgraded Service Standards. In August 2022, the Postal Service implemented upgraded service standards for its USPS Retail Ground and Parcel Select Ground products, aligning service standards with the current First-Class Package Service product within the contiguous United States. Service standards for these products were accelerated from two-to-eight-days to two-to-five-days for the same affordable price.
  • Simplifying Shipping Product Offerings. On October 28, 2022, the Postal Service was granted approval by the PRC to remove USPS Retail Ground from the Competitive product list, eliminate Parcel Select Ground from the Parcel Select product, and expand First Class Package Service to 70lbs among other enhancements.

Clearly USPS is continuing its efforts to compete head on with UPS and FedEx for Ground package services. With a possible work stoppage at UPS this summer, this new service and previous lower price offerings might be just what the doctor ordered.

Need help navigating this change or looking to get a hold of your shipping expenses?  Reach out to one of our parcel experts today to help.

Which way is the economy going?

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Which way is the economy going?  How can we have low unemployment, a hiring boom and mass layoffs all at the same time?  

Well, the answer depends on what industry you are in. Companies are experiencing mass layoffs as defined as 50 or more employees laid off within 30 days and equal to one-third of the workforce or more than 500 employees within 30 days regardless of the size of the workforce.

Is the cause of these layoffs directly related to a slowing economy and inflation fears of buyers?

Yes and No. For example, take a look at the Technology Sector. Technology companies have been hit especially hard, riding a roller coaster the last few years.  2020 & 2021 saw a hiring spree due to low interest rates and increased demand for technology products because people were staying home during the pandemic.  But “post-pandemic” has seen a significant shift in economic conditions, especially rising interest rates, with 2023 headed in the opposite direction.  Tech companies realizing they over hired and are now conducting mass layoffs as the demand for technology products slows.  

During the pandemic, we saw a major shift in employment.  Industries like leisure and hospitality saw huge layoffs while warehouse, delivery and healthcare experienced tremendous growth.  But now a “post pandemic” shift is emerging, reversing the trend.  Leisure and hospitality are once again enjoying rapid growth and a hiring spree. 

Should we classify this as growth or more like a return to pre-pandemic levels?   On the other hand, warehousing and delivery (i.e. Amazon) are going in the opposite direction, with too much space coupled with a slowing demand for their products. So are the former hospitality employees who left the industry returning or are we seeing a new set of recruits?  

Is there a real chance of a recession hitting the US in the coming months? 

We are certainly not an economist and not even the economists can agree on this. What we do know is the business landscape is changing and changing rapidly.  In previous articles, we discussed supply chain disruption, near-shoring and reshoring. We addressed inventory levels which translates into an unexpected capital investment and while interest rates were low, this was less of an issue. But now with interest rates climbing, companies are tying up capital for R&D and employee wages.

So yes, we believe there is a real chance of a recession, but only time will tell.

Is it because we are apparently out of the Covid Pandemic buying period and consumers have therefore slowed their purchases? 

We believe the short answer to this question is YES. As we’ve indicated, the buying spree is over and things are “returning to normal”, so companies need to adjust their thinking.  Retailers inflated their workforces as well as their inventories during the Covid purchasing boom and now realize they need to self-correct in both areas.

Is the slowdown temporary or permanent?

Most slowdowns are temporary with few being permanent. At the turn of the 20th century, as transportation shifted from horse and buggy to the automobile, we can say the slowdown in blacksmiths was permanent. But did we know that then, or only after we reached the tipping-point? 

They say the jobs of the future don’t even exist today.  With self-driving vehicles will we need taxi, truck and Uber drivers in the future?

Ironically, during the pandemic, we saw a shift in workers to the warehousing and delivery sectors. And now the pendulum is beginning the swing back in the other direction.

Online sales are down and Amazon’s warehouses have excess capacity as evidenced by 90 warehouse closures in 2022 with thousands of workers laid off.  

Looking to decrease costs, increase individual warehouse capacity and improve safety, companies are turning to smaller Automated Micro-Fulfillment Centers. Today’s warehouse workers are being replaced by robots. Companies like Takeoff Technologies are partnering with large grocery stores to automate warehouses and put online grocery shopping in the consumer’s hands faster and more efficiently. Takeoff Technologies, started in 2016, has raised $86 million as of October 2022 and is now looking to expand to convenience stores, drug stores and even pet stores.

Greater Volume – Less Expensive

Companies gain from the tremendous cost saving associated with online sales versus brick and mortar stores. An automated micro-fulfillment center can usually do 3 to 4 times the annual sales of a traditional grocery store and for a lot less money.

So where does this lead us?

The January jobs report just came out with 517,000 new jobs.  This is much higher than expected.  We continue to see the lowest unemployment in decades, currently at 3.4% and there are 11 million job openings as of December 2022.  First-time unemployment claims are at a 9-month low and those laid off are finding new jobs within 1-3 months.

With the fear of the pandemic behind us, travel is on the rise again and airlines are hiring.  Which means, hotels, car rentals and leisure venues will hire as well.  Chipotle is hiring, GM is looking for techies (that’s good because of all the layoffs in the tech sector) and the U.S. Post Office is also hiring.

While we are feeling the slowdown from the pandemic peak, we also see inflation falling and opportunities abound in new fields and new industries. Products and services must move through the system, maybe a little different than before.

We may hit a recession, but the long term prospects are bright as we “return to normal” or at least a “new normal.”  With ICC by your side, helping you navigate every step along the supply chain way, you’ll have the support to navigate whatever comes your way.  

UPS Teamsters Update

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In our last article related to the UPS/Teamsters negotiations that we published on January 17th, 2023, we mentioned that UPS had made limited comments regarding this topic, due to their desire to “leave the negotiations at the bargaining table.” However, UPS leadership became more vocal about this topic over the last couple of weeks. So, we felt it was important to provide our customers and followers with details of what has since transpired. 

First of all, on January 18th, 2023, UPS published their first ever Jobs and Opportunities report.

https://www.globenewswire.com/news-release/2023/01/18/2590718/30428/en/UPS-Releases-First-Jobs-and-Opportunity-Report.html

Although at first glance this might appear to have nothing to do with the upcoming Teamster contract negotiations, one has to consider the timing of the release of this report. This report was released immediately following the aggressive statements made by Teamster leadership earlier this year, which we detailed in our January 17th article. 

Additionally, the details provided in this report showcase the quality of the compensation and benefits that UPS provides to their 350K Teamster employees. The report highlights the fact that Full Time UPS Drivers receive an average of $95K in base salary, top notch healthcare benefits, along with $23K per year in defined pension contributions. So, this certainly points to UPS efforts to inform the public, their customers, and existing employees that UPS Teamsters are already the highest paid in the industry. This does appear to be a major positioning move on behalf of UPS 

In addition to the UPS Jobs report, the UPS Leadership team has made recent comments related to the upcoming Teamster negotiations. On the UPS 4th Quarter 2022/Full Year earnings call that was held on January 31st, 2023, UPS CEO, Carol Tomé, proactively made statements during her address to the investor community. On the call she stated that “We are well prepared for negotiations and are focused on achieving an agreement that is a win for our employees, a win for the Teamsters, and a win for UPS and our customers. We have great jobs with industry-leading pay and benefits.”  However, she then went on to restate her position, that UPS feels that it is best to leave the details of the negotiations at the bargaining table. 

Later in the call, one of the Financial Analysts covering the call stated that there has been a great deal of rhetoric and big press about the situation which might make customers uneasy about the situation. He went on to ask Carol what message she would want to provide to customers in an effort to ease their concerns. Carol’s response provided a little more insight than has been provided to date. 

parcel and freight contract audit service

She said that “Without getting into the details of what will take place at the bargaining table, I think it’s important to remember that Teamsters have been part of the UPS family for more than 100 years. So, over 10 decades, we’ve negotiated many, many contracts. This is not our first rodeo.” She then went on to make additional comments that were designed to ease some of the fears customers are facing. Carol mentioned that “a win, win, win is very achievable because we are not far apart on the issues.”

 She then described some of the things that UPS and Teamsters agree on, including the fact that both Teamsters and UPS agree that a healthy and growing UPS is good for all. She also mentioned mutual concern for the amount of days and hours that drivers are forced to work, due to the e-commerce explosion that has occurred over the last few years.

In the last UPS-Teamster contract, a new/ lower paid driver category was created, called a 22.4 Driver. These drivers work Tuesday through Saturday and carry a maximum hourly wage of $30.24, vs regular drivers who max out at $42.00 per hour. However, the current UPS-Teamster agreement limits the number of 22.4 Drivers that the company can hire. Therefore, the company often pays weekday drivers overtime to work on Saturdays. 

Carol Tomé implied that concerns about extreme driver working hours should not be a difficult issue to overcome. She stated “And candidly, we think, with just a few tweaks to our existing contract, we can work this out. So, we’re not far apart. We’re aligned. We just need to work it out.”

Teamster General President Sean O’Brien has stated in the past that “We’re open to finding a solution to the seven-day week delivery because that’s what the competition is doing, but the existing staffing solution is not working for us. So, his comments do suggest that the Teamsters are aligned and agree that there needs to be a solution to the issue. 

Although there appears to be alignment on some of the key issues that UPS and the Teamsters are facing, there are still some major questions and concerns that need to be considered;

  1. How flexible will UPS and Teamsters be on the issues that they are aligned on? 
  2. What issues are they not aligned on? 
  3. Will the Teamsters push to eliminate the lower paid driver category, and demand more full time/full paid driver jobs? 
  4. Can UPS support the added costs driven by the need to add jobs, increase wages, and improve working conditions?
  5. Will the Teamsters agree to accept a lower annual wage increase for current workers, in return for more job creation?
  6. Can all of these items be worked out in advance of the agreement expiration on July 31st, 2023?

But the biggest questions of all are: 

  1. How will all of this impact shippers that have already had to absorb major increases in rates, driven by record level rate increases?
  2. What can shippers do to protect themselves from the increase in costs that a new UPS-Teamster agreement will likely drive?

Thankfully, ICC Logistics will continue to monitor this situation to ensure that our customers and followers are aware of key developments in the process. Also, please be sure to reach out for us to discuss ways that we can help you mitigate the impact of ever increasing carrier costs. We are certain that this will be a valuable investment of your time. 

UPS Teamsters Negotiations Begin

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Let the Games Begin- Knives Out!

On January 3rd, 2023, we published an article that described the challenges that shippers will face this year due to the upcoming UPS/ Teamsters Contract negotiations, (the agreement expires on July 31st, 2023). Our article provided some history and insight regarding how shippers will experience anxiety and risk this year, due to the contentious relationship that has developed between the Teamsters and UPS. Our article suggested that these negotiations will be “Loud & Late”, and that there would be a great deal of saber rattling. Well it looks like the predictions that we made have come to fruition very quickly!

On January 9th, 2023, the Teamster Leadership team kicked off a National Screening Committee meeting in Washington, DC to review proposals for the National Master Agreement negotiations. The committee was tasked with reviewing more than 4,000 pages of national proposals submitted by locals to the Package Division. In total, the Division received more than 11,000 Master Agreement proposals.

There were some very fiery and aggressive statements made during this kick-off meeting; 

“We’re going into these negotiations with a clear message to UPS that we’re not going past August 1,” stated Teamster President, Sean O’Brien in his remarks to the committee. “We have to deal with 22.4s, PVDs, subcontracting, part-time wages and other issues that we’re taking a hard line on with the company.” 

General Secretary-Treasurer Fred Zuckerman stated that “Sean is going to pick a fight with this company, and that fight is to get the very best contract we can get for our members. This contract is going to be unlike the contracts of the past 25 years where UPS comes in and says they want a cost-neutral contract. It’s not going to be a cost-neutral contract. We’re going to take from them what our members deserve.” 

However, UPS CEO Carol B. Tomé, who will be sitting in on her first contract negotiation, has said she expects the agreement to yield mutual benefits. Which helps to solidify the fact that the two parties are approaching these negotiations with very different expectations. 

The teamsters have also publicly stated that they have amassed a $350 million strike fund and shortened the time it takes for members to receive a payout from eight days to one. President Sean O’Brien has stated that “That’s some pretty good leverage. So, obviously the Teamster leadership has remained consistent in their promises to take a hard stance against UPS with their new agreement.  

UPS leadership has not made many public statements about these negotiations up until this point. Besides the comments listed above, Carole Tome stated on the company’s July 26th earnings call, that “We’re going to leave the negotiations at the bargaining table,” according to a transcript from Sentieo. 

She has also suggested that UPS Teamsters already receive better compensation than the rest of the delivery workforce. 

“Our workforce is very different than a lot of the workforces that you hear in the media every day that are trying to be organized. They’re not paid the way that our Teamsters are paid. These are great jobs that we value very much,” she said.

Based on the way that UPS has handled communications related to UPS Teamster Contracts in the past, we don’t expect to see a lot of public statements being made by UPS Leadership as these negotiations progress. UPS has historically chosen to keep customers updated about labor negotiations through direct contact from their management team. Typically, these communications are strictly verbal, which makes it harder for shippers to share details of the negotiation process with others in their organization. So, this will only add to the anxiety that UPS customers will be facing during these negotiating sessions. 

So, given the expectation that Teamsters leadership will continue to threaten and publicize their fight with UPS, while UPS leadership will limit their public comments, it will be extremely important for shippers to develop ways to obtain accurate and up to date information about the progress of these negotiations. Therefore, the ICC Logistics Services team is committed to staying close to this situation to ensure that we provide the most accurate and up to date information possible.

 

We will utilize our long term experience, expertise, unique insight and resources to provide timely and meaningful updates to our customers and followers. Don’t hesitate to reach out to ICC Logistics for questions related to this, or for help with any of your other Logistics needs!