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If there ever was a holiday season for consumers to get their holiday shopping done early, this may be it.

In the last year, supply chains have seen their share of labor challenges, including low unemployment rates that have made it hard to find employees and work stoppages at key shipping ports. And now, with the holidays coming fast, there are mounting labor tensions at FedEx and UPS. These are the companies consumers count on most to ensure their holiday deliveries arrive on time, but the labor tensions could potentially impact deliveries from retailers to their customers in the latter part of 2022 and into 2023.

The different labor models employed by FedEx and UPS are important to this story. As you’ll learn, that carriers operate in very different ways, but the impact on your ability to deliver customer orders many be the same.

FedEx Ground Partners Threatening a Shutdown

The most immediate threat to a smooth holiday delivery season in 2022 is the frustrations of many FedEx delivery contractors. FedEx Ground uses a network of more than 6,000 small independent businesses to execute many commercial and residential deliveries. And presently, many of these contractors say delivering for FedEx is actually costing them money due to higher costs for everything — trucks, fuel, salaries/wages. They’ve begun to pressure the carrier for some relief by forming a trade group and threatening a shutdown to gain better compensation.

While these contractors aren’t FedEx employees and are not allowed to take coordinated strike action, there’s still talk about a pre–Black Friday shutdown.

FedEx Says No Way, No How

Many contractors say they are losing money. For example, a Nashville-based contractor says driver wages are up 37%, truck prices are up 30%, and the current diesel price is still 52% more than last year, despite recent declines. Despite a historical profit margin of about 10%, the company is dealing with losses of 5% to 10%.

In a statement issued by FedEx Ground, the carrier states, “We recognize that current economic conditions are posing new challenges” and that they are “committed to working with service provider businesses individually to address the challenges specific to their situation.” Reports are, however, that no contractor has received better terms from FedEx.

And now, FedEx has filed a federal lawsuit against the contractor who spoke up, with the aim to legally stop the contractor from instigating other FedEx Ground service providers to take part in a shutdown and demanding monetary damages. Other contractors claim to be maintaining financial stability despite current economic problems. And others who are losing money nonetheless refuse to be part of a shutdown. Regardless, shippers should still be worried about the impact a shutdown would have if a significant number of contractors took part.

Will There Be a Replay in 2023 With UPS?

The problems at UPS may not be as urgent, but if what’s brewing there isn’t resolved, it could become one of the biggest strikes in U.S. history. While UPS has until July 2023 before its contract with the Teamsters Union expires, and talks aren’t expected to begin until the spring, industry experts see a strike as a sure thing.

About 350,000 Teamsters work at UPS as drivers and package sorters, out of a global workforce of 534,000 permanent employees. And that number is growing fast — the company has added some 72,000 Teamster-represented jobs since the pandemic began.

If it happens, a strike at UPS would affect nearly every household in the country. An estimated 6% of the nation’s gross domestic product is moved in UPS trucks yearly. The explosive growth of online retail has made the company and its drivers more crucial than ever to the nation’s struggling supply chain. Beyond the company’s home deliveries, it also delivers many of the goods found in stores, factories, and offices.

What Should Companies Do?                                                                            

Chances are many shipping managers will become more familiar with labor relations in the next twelve months, because what happens between FedEx and its contractors and UPS and the Teamsters could significantly impact companies’ ability to make customer deliveries.

Our advice? Watch the situation very closely and start thinking about contingency plans. For example, now is a good time to start or strengthen your company’s multi-carrier strategy. It’s also a good time to renegotiate your small parcel contracts. FedEx and UPS understand shippers like you are concerned about what’s developing, and it has become a shipper’s market for the first time in a while. Contact info@transimpact.com for our ideas on how you can take advantage now that the negotiating leverage has come back to you.

Brian Byrd joined TransImpact in 2012. As EVP of Operations he helps ensure that TransImpact remains an industry leader in developing innovative technological solutions that help our clients to grow their companies.

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