Why some UPS shippers haven’t diverted volume even as a potential strike looms

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The looming threat of a UPS strike hasn’t been enough for many companies to shift some of their package volumes elsewhere.

The delivery giant’s national contract agreement with the International Brotherhood of Teamsters, which represents around 330,000 UPS employees, expires at the end of the month. The union plans to strike Aug. 1 without a tentative deal for a new contract in place, which would hobble the company’s network and spur supply chain disruptions.

But even with this risk and the growing popularity of carrier diversification, some shippers have maintained their current volume levels with UPS, according to parcel delivery experts. A company’s size, current carrier mix and confidence in negotiators to reach a deal all play a part in that decision, in addition to the nuances of their particular shipping contract.

That’s not to say all shippers are unmoved by the strike threat. With the contract expiration date fast approaching, there are still companies scrambling to implement alternative carriers.

“What I’ve seen here in the last month or so is the tone has changed,” Stephen Beard, VP of transportation at e-commerce fulfillment provider PFS, told Supply Chain Dive. “Now I’ve got all of these clients wanting to talk to us about how they can move volume away from UPS.”

Here’s why some UPS shippers are holding steady, even as others ramp up their mitigation plans.

The benefits to sticking with UPS

AFS Logistics, a 3PL, hasn’t seen any significant shifts in their customers’ volume away from UPS. There is a blend of reasons why this has been the case, said Micheal McDonagh, AFS Logistics’ president of parcel.

Several shippers are simply confident a deal between the company and the Teamsters will be reached before a strike could occur. Larger-scale clients also may be concerned about losing volume-based shipping discounts, which can be noticeable even with just a week or two of diversions, and complexities involved with adjusting their carrier mix.

“You’re talking about testing your system, testing the routes, testing the pickup times and training your staff for a change that may not happen,” McDonagh said.

Additionally, strict contract language can disincentivize shippers from diverting their packages to other carriers.

PFS’ Beard has seen shippers locked into deals that come with a large financial penalty if they don’t provide the carrier with the agreed-upon volume level for the year. These sorts of arrangements became more common after capacity constraints driven by heightened delivery demand during the COVID-19 pandemic.

“For three years it was like, ‘Can I just get my stuff picked up at any price?'” Beard said. “During that time period, the carriers took advantage of that leverage. They were able to insert clauses in contracts that never got done before, and I think that is creating some of this stickiness right now.”

A UPS worker delivers boxes in Manhattan on April 26, 2022 in New York City.

A UPS worker delivers boxes in Manhattan on April 26, 2022 in New York City.

Spencer Platt via Getty Images


Small- and medium-sized businesses are particularly vulnerable to strike-related disruptions, experts say, as they don’t have the volume or purchasing power to secure capacity from alternative carriers as easily. Many remain single-sourced with a national carrier like UPS.

UPS has also worked hard to retain business amid cooling delivery demand, assigning executives to its major customers in order to sway them to keep their packages in its network. The company’s tactic appears to have helped, as rival FedEx didn’t see any material benefit from the contract negotiations in its most recently reported quarter.

These factors have resulted in a range of companies vulnerable to a UPS strike, if it does happen.

Williams-Sonoma and headphones company Koss Corporation have flagged the unsettled contract negotiations as a risk to their operations in securities filings this year. Nicokick, a tobacco-free nicotine product seller that uses various UPS shipping services, warned on its website that customers should consider placing their next orders soon to avoid potential delays.

“Orders shipped before July 31st will most likely be unaffected,” Nicokick said.

Other shippers work on contingency plans

Other firms have already laid the groundwork to mitigate the impacts of a UPS strike.

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