Labor Disputes May Impact Small Parcel Delivery

Labor Disputes May Impact Small Parcel Delivery

There are looming labor disputes in the small parcel deliver sector that could impact the supply chain. The United States is currently facing a modern-day labor movement, one of a scale not seen in many decades. From Starbucks baristas to Uber and Lyft drivers, outdoor retailer REI’s “green vest” employees and many in between, the past few years have brought on a surge in unionization, threats of strikes, and actual walkouts, the worker movement is having a moment. Specifically in the world of supply chain management, there have been tense contract negotiations at various ports, within the rail industry, and even in large warehouses. In most cases, disruptions were kept to a minimum, but it is always worthwhile to keep an eye on what may come down the pike from the labor efforts. Emerging from three years of unprecedented supply chain disruption has conditioned supply chain managers to expect the unexpected.

UPS Labor Disputes are Brewing

The latest such threat to smooth supply chain operations is stirring at small parcel carrier UPS. Hundreds of thousands of delivery workers, members of the Teamsters union, are currently threatening to walk off the job if the two parties cannot craft a lasting agreement by July 31. Currently, they are working under a temporary agreement offered up by UPS leaders by June 30, although members have voted to authorize a strike beginning August 1.

To appreciate the scale of a potential UPS strike, it’s important to understand that if it goes forward, it would be the largest ever at a single U.S. employer. There are 340,000 Teamsters at work for

UPS, consisting of both its drivers and its warehouse workers. Together they make up a full third of the entire Teamsters’ U.S. membership. For companies that depend on UPS to deliver their many small parcels, the stakes would be high—UPS manages about 24 percent of all small parcel deliveries in the United States. Competitors like Fed Ex and the US Postal Service wouldn’t be able to make up the difference and supply chains would face certain disruptions.

Labor disputes between the two parties began in April and both sides have come to the table multiple times so far. At the moment, the Teamsters and UPS are stuck on issues surrounding pay and promotions. UPS offered a proposal to raise entry-level wages by 2.8 percent annually through 2027, but the union rejected it.

For full-time drivers at UPS, it takes about four years to hit an average salary of $42 an hour, and the company pays all of their health insurance premiums. This approach has garnered the company a loyal workforce, with nearly half of full-time drivers holding their jobs for at least 15 years. Part-time workers earn $15.50 an hour to start, and UPS agreed to bring that up to $20 an hour by 2025. UPS is surely invested in ending these labor disputes and avoiding a strike—its last employee walkout was in 1997, lasting two weeks and costing the company $600 million in lost business. The stakes are high, as are hopes, that we won’t see a more expensive repeat this year.

OPSdesign ConsultingTM is an independent supply chain logistics consulting organization specializing in the design of warehousing, distribution, and e-commerce fulfillment operations. Our Supply Chain Consultants, Engineers, Analysts, and Project Managers study your business; identify and compare alternatives (processes, systems, infrastructure, and labor); design highly efficient, flexible, and scalable supply chain operations; and always protect your interests.