With 2022’s peak shipping season and the start of the 2023 general rate increases (GRIs) behind us, most shippers are looking toward what’s to come for the rest of the year. And the thing most companies are thinking about when it comes to their small parcel shipping is a potential strike at UPS.
A work stoppage at the carrier is significant as both a risk and an opportunity for shippers using UPS or FedEx—which warrants attention. Here are some reasons why and advice on what companies should do about it.
The Risk
A strike by UPS workers would create obvious and urgent problems for the company’s customers. A factor also at play in shippers’ minds is what happened the last time there was a major work stoppage at the carrier. There are many logistics managers who still remember the impact of a 15-day strike in 1997. It was that bad.
What’s important today is that UPS knows its reputation was affected by the strike and wants to avoid a similar situation. At the same time, there are some serious issues that both sides of the negotiating table want to address.
The workers want to be acknowledged and to benefit from the financial good times for the carrier. UPS has reported higher margins, and its profits have soared (rising 51% to $13.1 billion in 2021 from $8.7 billion in 2020.) As this chart shows, meanwhile, wages have not increased as a percentage of sales. They have declined overall since the last work stoppage and have fallen even faster in the past two years. The following chart is from Bloomberg.com.
At the same time, market conditions are deteriorating, and UPS is being impacted like most other businesses by the state of the economy. Labor inflation and declining shipping volumes are ongoing concerns. FedEx has its own business challenges that are also relevant, which we’ll explain shortly.
Taken altogether, it’s easy to see the potential for both sides to dig their heels in and lead to a potential stoppage when the current UPS labor contract ends on July 31.
The Opportunity
While the risks to UPS and its customers are significant, so is the opportunity for ALL parcel shippers (FedEx customers included). Why? Because the uncertainties regarding labor and the state of the market have both carriers on the defensive.
With volumes declining, FedEx and UPS are already looking to hold on to as much market share as possible. Now, with a UPS strike looming, FedEx is looking to leverage that as a way to gain customers from UPS. Add into the mix two-plus years of shippers feeling they’ve been pushed around by the carriers, and there are a lot of companies looking to take advantage by putting their volumes out to bid again.
The opportunity is that the carriers will go to great lengths right now to both protect their volumes and earn new business. This means it’s a great time to renegotiate your parcel contracts.
How Can You Take Advantage?
First, remember there is actually never a bad time to renegotiate your small parcel contracts. You don’t have to wait until the agreement expires, and you do not need to fear you will anger the carriers by seeking better rates.
And it’s actually easy and fast to know what your rates could be with renegotiated contracts. TransImpact will perform a no-obligation analysis that shows you what your rates could be with UPS and FedEx based on the current market conditions to within 1/10 of 1 percent. Then, we’ll show you how to get those new rates at no cost. Email info@transimpact.com to get started.