FedEx details capacity plan as UPS strike fears intensify

FedEx details capacity plan as UPS strike fears intensify.jpg

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Dive Brief:

  • FedEx is accepting additional parcel volume for a limited time as the threat of a UPS strike on Aug. 1 looms, according to a company message obtained by Supply Chain Dive.
  • Volume from July 17 to July 21 will be used as the baseline measurement for capacity in the company’s network, FedEx sales executives said in an email to employees on Thursday. Approaches for volume acceptance vary based on whether the shipper falls into FedEx’s small and medium customer cohort or the large customer cohort.
  • “Should a work stoppage occur, volume above our baseline measurement for each cohort cannot be guaranteed for acceptance into the network,” the message said.

Dive Insight:

The International Brotherhood of Teamsters have vowed to strike Aug. 1, after their current contract expires, if an agreement isn’t in place by then. Negotiations over economic items like pay and benefits recently hit a roadblock.

No single carrier can absorb all of UPS’ volume in the event of a disruption, FedEx’s message noted, meaning delivery providers will limit what they accept in order to keep service levels high for existing customers.

“Therefore, shippers who are considering shifting volume to FedEx, or are currently in discussions with the company to open a new account, are encouraged to begin shipping with FedEx now,” FedEx said in a statement Friday.

Earlier this year, the company urged customers to shift their UPS volumes to FedEx by March 31 to ensure their shipments would be included in capacity planning.

While there’s a healthy amount of delivery capacity in the market as demand remains soft, it’s not enough to absorb UPS’ millions of packages daily. Only 10% to 20% of the company’s shipments could be picked up by other carriers in the event of a strike, according to an estimate from Tommy Storch, transportation procurement expert at Insight Sourcing Group.

“If this were to happen, there’s going to be millions of shipments left, and then there are customers not getting their shipments for days, if not weeks,” Storch said in an interview.

UPS competitors always plan to absorb some of the company’s volume when contract negotiations occur, but they should consider how much of that incremental delivery activity is actually sustainable, Jeremy Tancredi, a partner in West Monroe’s Operations Excellence practice, said in an email.

“Playing on the fear of a strike is a great sales tactic and allows competitors to start taking on some of that volume even before a strike happens, but in the event of a strike, it would not make good business sense to try and ramp up capacity to absorb a large majority of the volume,” Tancredi said. “At some point, the strike will end, and they will be left with excess capacity as volume shifts back to UPS.”

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