Uncertainty around UPS is ‘kryptonite’ to supply chains, trade group warns

Uncertainty around UPS is ‘kryptonite to supply chains trade group.jpg

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Dive Brief:

  • Stalled talks between UPS and the International Brotherhood of Teamsters union put supply chains and the entire economy at risk, the Retail Industry Leaders Association warned on Wednesday. Their five-year contract expires July 31.

  • Retailers have been setting up alternatives as negotiations have wobbled, but that “won’t shield retailers or consumers from the impact of shutting down a key component in the supply chain as we head full-steam into back-to-school and then holiday shopping seasons,” RILA said in a statement.

  • Earlier this month labor and logistics experts said a strike by UPS workers is increasingly likely as disagreements around pay and benefits remain roadblocks. The retail industry group urged a “quick resolution” to the impasse.

Dive Insight:

A looming strike at one of the major carriers in the U.S. threatens to reignite supply chain woes, in a year when logistics snafus caused or worsened by the pandemic seemed to finally be easing.

“The impact of a supply chain disruption is no longer an academic exercise,” RILA said on Wednesday. “We need only look in our rear-view mirror to see the economic and consumer harm that resulted from supply chain bottlenecks and delays that rippled throughout the economy post pandemic. Having worked through these challenges methodically over the past two years, retailers are loathe to stress-test contingency plans again.”

UPS is also working on contingency plans. The company this week said it will train managers to deliver packages in the event of a strike. The union said the company is unlikely to be able to get enough people trained and working to avoid disruption. Rival carrier FedEx said it has expanded parcel volume in light of the slowdown, and the U.S. Postal Service has highlighted its availability in case of a strike.

U.S. government officials have said they are monitoring the situation, though so far President Biden hasn’t weighed in. Last year the president signed legislation that prevented a rail strike, though lawmakers have unique authority under the Railway Labor Act to intervene in negotiations.

The troubles at UPS could upend consumer expectations at a time when e-commerce is surging and complicate retailers’ preparation for their all-important back-to-school and holiday shopping seasons.

“Reliable and quick shipping — ensuring the timely delivery of essential goods such as groceries, medicine, and school supplies to customers’ doorsteps — is the hallmark of our industry and the UPS fleet plays a critical role in that operation,” RILA said.

“Uncertainty is like kryptonite for supply chains,” the group added, referring to the mythical alien substance that saps comic book hero Superman’s powers.

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