As we enter into 2023, we are starting to see more and more noise in the press about the upcoming UPS Teamsters contract negotiations, (the current UPS/Teamster agreement expires on July 31st, 2023). This is not surprising given the hard line approach to these negotiations that the current Teamster Leadership team has been touting. It is important to understand what has transpired within the Teamster organization over the past several years, to give shippers some perspective on what to expect this year.
In November of 2021, Current Teamster President, Sean O’Brien scored a decisive victory over then Teamster President, James P. Hoffa, Jr’s endorsed candidate, Steve Vairma. James Hoffa had chosen to not seek re-election following more than two decades in the role. He had been facing a great deal of criticism for not being assertive in dealings with UPS, or with efforts to organize workers at Amazon.
Prior to O’Brien’s win, there was a great deal of dissatisfaction within the UPS Teamster ranks. A lot of the discontent stemmed from the results of the 2018 UPS Teamster contract negotiations. These negotiations resulted in the Hoffa team accepting UPS’s contract offer, despite the fact that 54% of Teamsters who voted on the contract had voted no. James Hoffa and his leadership team invoked the 2/3 rule that was in effect at that time, in their decision to ratify the contract.
This rule required that the Teamsters have two-thirds of their members vote “No” to reject a contract, if fewer than half of the members voted, (only 44% of eligible UPS teamsters voted on this agreement), which allowed Hoffa and his team to ratify the agreement despite the fact that a majority of voting Teamsters turned down the deal. So, in the eyes of many of the UPS Teamster members, the contract had been forced upon them.
So now it is time for Sean O’Brien and his leadership team to deliver on their promises to take a much more aggressive approach in their dealings and contract negotiations with UPS. The new Teamster Leadership is also empowered by the fact that the 2/3 Rule was eliminated in June of 2021. So with this, an agreement can be rejected with a majority vote of no regardless of the percentage of Teamsters that vote on the contract.
This has, and will lead to a great deal of anxiety and risk for shippers in 2023. Customers have been told by UPS sales people that negotiations will be “Loud & Late”, suggesting that there will be a great deal of sabre rattling by both UPS and the Teamsters, and that it is not likely that the agreement will be negotiated in advance of its expiration. There are also rumors of UPS Management employees being told that they cannot schedule PTO or vacations in Late July/ August of 2023.
Going on strike may not be a great option for the Teamsters, given the fact that a lot has changed in the market since their last strike in 1997. At that time, there were only a handful of carriers that could compete with UPS services. Within the last few years however the number of options that shippers have has exploded.
FedEx has certainly established themselves as a major competitor for UPS since 1997. The USPS has definitely upped their game, especially with their final mile capabilities and options. Regional Carriers have been coming on strong as well, with the Laser Ship/On-Trac merger creating what can be viewed as a new integrated Carrier/ competitor. It is also hard to ignore the ongoing efforts and ability for Amazon to handle Small Parcel volume other than their own. Additionally, we are constantly hearing about new First Mile, Middle Mile, and Final Mile carrier options. Gig Driver/ Crowd sourcing is another option for shippers that has been gaining some traction.
UPS is even tapping into the Gig Driver/ Crowd Sourcing market through their acquisition of Final Mile/ Same day delivery provider- Roadie. Additionally, they have developed the technology and processes for individuals to deliver packages from their personal vehicles. There are postings for these seasonal positions on the UPS website https://www.jobs-ups.com/personal-vehicle-driver.
One can only wonder if there are plans for them to use this option to complete deliveries should the Teamsters decide to go on strike. This could be an interesting option for UPS if they could somehow keep volume flowing through their network by tapping into the capabilities of their Technology driven, FTL/ LTL Brokerage business, (Coyote Logistics).
So what does this mean for the Teamsters? In our opinion, a lot less leverage than they had back in 1997. There are already a lot of packages being delivered through less costly/ non-Teamster options. Yes of course the time in transit, visibility, and quality of the delivery work being performed might not be as good as services provided by the UPS Teamsters. However, competitors are focused on building out their networks, enhancing service, and improving performance.
Additionally, there are a lot of shippers that don’t have the Profit Margins to support the ever increasing prices that UPS charges. Many have been forced to seek out and develop less costly options for their Parcel deliveries. Surveys have shown that some customers are willing to accept slower time in transit in return for reduced cost. With the slowing economy, there will be more and more consumers focusing on cost over delivery times. At the same time, the anxiety that these contentious negotiations will create will drive more customers to explore other options. This could lead to less volume for UPS and their Teamster drivers now and into the future.
The bigger question here is, what does this mean for Shippers? There are a couple of things to consider. First and foremost is trying to decide if a UPS Teamster strike will become a reality in 2023. If you consider the stance of the current Teamster Leadership team, you might think that a Strike is likely.
However, if Teamster Leadership truly understands what is happening in the Small Parcel Marketplace, they may continue to portray an aggressive approach publicly/ in the media, while taking measures behind the scenes to avoid a strike. At this point, it does not seem that the Teamsters will be willing to show any signs of weakness in the process. So, this will not help the uncertainty that Shippers will be feeling as these negotiations progress.
The most important thing that Shippers need to do is to consider their options. They need to determine if they can/ will develop a contingency plan to minimize the impact of a UPS Teamster Strike, if it were to occur. If a shipper is considering a contingency plan, then they need to address this in the short term. The bottom line is that other carriers will not be willing or able to take on new last minute volume in the event of a UPS Teamster strike. Plans will need to be implemented by the end of the first quarter/ beginning of the 2nd quarter of this new year.
There are many areas to address when onboarding a new carrier including; Pricing/ New Agreements, Operating Plans, Shipping System Updates/ Upgrades, Post-Sale Shipment Visibility, Invoice Payment and Auditing, etc. There is only a small window of time to get this in place. So it will be challenging for Shippers to develop a contingency plan, even if they want to.
Given the great deal of uncertainty and challenges that the UPS/ Teamsters negotiations will create, it is important to emphasize that ICC Logistics can be a valuable asset for shippers to use to navigate these difficult waters. We will be closely monitoring the situation, and will provide our customers with updates and insight throughout the process. Additionally, we are well equipped to help shippers seeking to quickly implement contingency plans. Our experience, expertise and unique insight can help shippers make the right choices to insure a best in class Fulfillment and Delivery program.
Feel free to reach out to us to find out how.
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