UPDATE: According to Reuters, “On August 22, U.S. workers at United Parcel Service ratified a new five-year contract, the Teamsters union said on Tuesday, closing the door on a potential strike that could have put timely Christmas deliveries in doubt and sent shipping costs soaring.” While this incident may have come to a close, these issues will continue to arise. Here’s what you need to know about this near miss and potential shipping instability in the future.
On June 25, UPS and the International Brotherhood of Teamsters reached a landmark deal that averted what could have been the most expensive strike in US history.
For many retailers, this news brought a welcome sigh of relief.
A UPS strike would have cost the US economy billions in losses, causing countless delays, stockouts, and other supply chain issues. Though a strike was ultimately avoided, the threat of disruption this catastrophic has brought attention to ongoing vulnerabilities in fulfillment.
However, there could also be large-scale disruption in a brighter sense. Big changes to the shipping and logistics ecosystem, and a new playing field for innovative startups, could lead to better fulfillment strategies for businesses like yours.
Let’s look at the circumstances that led to the strike warning, plus ways to protect your business.
Unpacking the UPS and Teamsters Strike (and Deal)
- A Brief History of the UPS and Teamsters Near-Strike
- The End of an Era: A Million Daily Parcels Move to Other Carriers
- New (or Improved) Fulfillment Options Gain Ground
- What’s Next? 3 Ways to “Strike-Proof” Your Business
A Brief History of the UPS and Teamsters Near-Strike
In early July, negotiations broke down between UPS and the Teamsters Union. This impasse meant that 340,000 UPS workers were slated to walk off the job on August 1st, when their contract expired.
Among the union’s demands were higher pay, better benefits, and stronger workplace protections. The union also demanded an end to forced overtime and the elimination of a wage system with unfair terms for part-time employees.
The agreement reached on July 25 included all of the above, as well as:
- New full-time job opportunities
- An official holiday for Martin Luther King Jr. Day
- Air conditioning in all new delivery vehicles purchased after 2024
- An immediate pay raise for part-time employees
While this “new standard in the labor movement” may seem too good to be true for UPS workers, the strike warning came at an interesting time in US labor history — including the widely publicized SAG-AFTRA and Writers Guild of America strikes.
With huge economic risk and an increasingly large media spotlight, UPS proposed the five-year tentative agreement. This was unanimously endorsed by the UPS Teamsters National Negotiating Committee.
But for many businesses, other plans had already been made.
In the weeks leading up to the contract deadline, business leaders scrambled to shift their shipments to alternate carriers. Providers large and small stepped in to fill the gap (some a tad more assertively than others) as many modern commerce businesses began rethinking their logistics.
The End of an Era: A Million Daily Parcels Move to Other Carriers
In preparation for the potential strike, UPS customers diverted roughly one million daily parcels to other carriers. UPS is now working to win back that volume.
CEO Carol Tome told analysts that in the weeks leading up to the strike, the company lost more volume than expected to other carriers. The company’s revenue has also dipped due to economic concerns and the end of the pandemic era of online shopping.
In recent years, UPS has doubled down on serving small businesses while placing limits on its dealings with Amazon — a move which Amazon has reciprocated by beginning to charge for UPS returns as it continues to fortify its own logistics network.
With carrier rates reaching an all-time high, UPS customers may still need to diversify their shipments to include smaller, newer, and more innovative carriers.
And a growing number of companies are rising up to help them meet that challenge.
New (or Improved) Fulfillment Options Gain Ground
In recent years, a number of companies have stepped up to revolutionize e-commerce fulfillment. From gig-based carriers to franchise delivery networks, the new “post-UPS” era of e-commerce shipping has arrived.
Let’s take a closer look at some of the latest developments in shipping and the new players who have emerged to help you scale more efficiently:
- In April of this year, LaserShip and OnTrac Logistics rebranded as Ontrac and now cover last-mile e-commerce delivery in 31 states, reaching around 80% of the US population. The company is currently investing in expanding capacity and adding new sorting centers to its network.
- Veho, a gig-based last-mile unicorn valued at $1.5 billion after two massive funding rounds, recently announced plans to expand to the Northeast. Veho claims to have the highest rates of on-time delivery, and lets customers reschedule deliveries, request at-home pickups for returns, and message drivers directly to help combat porch pirates. It also offers drivers more predictable pay than other gig-based companies and gives them the option to decline routes they don’t want to serve.
- In June, AI-enabled freight forwarder Flexport transitioned into last-mile when it announced its acquisition of Shopify Logistics (including Deliverr). Its fulfillment services include two-day shipping and simplified returns for Shopify sellers. The company will also take over Shopify’s Shop Promise feature, which offers sellers a badge for products verified to arrive in five days or less. Shopify sellers may still choose default shipping with USPS, UPS, DHL Express, or FedEx, or can opt-in to take advantage of Flexport’s services.
- In competition with Shopify (and now Flexport) for more last-mile share is Amazon’s Buy with Prime, which enables sellers to use Amazon fulfillment services directly from their own sites, even if their products aren’t listed on the marketplace. Amazon says the feature increases conversions by an average of 25%, but the service is only available to sellers by invitation and shoppers must be enrolled in Amazon Prime to use it.
- DoorDash CEO Tony Xu announced the company’s plans to offer delivery options for all kinds of merchants. The company also made updates to its e-commerce product, Storefront. This enables retailers to build their own DTC websites and fulfill local orders using DoorDash, through their sites. Other delivery services are also jumping on the bandwagon, offering similar options to retailers.
- Legacy shipper (and postage meter-maker) Pitney Bowes has been slowly chipping away at larger carriers’ share of the market by investing in automation and robotic package-handling, working with customers like Shein, Victoria’s Secret, and BarkBox, optimizing fleet routes, and relying more on in-house trucks instead of third-party providers.
- The FRONTdoor Collective uses a franchise model to bring together hundreds of small delivery companies. It is currently targeting delivery company owners with experience at FedEx, Amazon, or USPS. It already has over 100 franchisees and plans to use Canoo’s electric vehicles for last-mile delivery.
Reducing your reliance on large carriers can make your business more resilient to supply chain disruptions. However, it won’t necessarily protect you from future labor movements.
The Teamsters Union has been so vocal about its mission to unionize Amazon workers that Amazon has defense plans.
Fast-delivery platforms have likewise been targeted by labor movements, with Uber drivers striking earlier this year and Shipt facing lawsuits for the way it classifies workers. A new ruling issued in June by the National Labor Relations Board may make it easier for gig workers to unionize. This would increase the chances of strikes across the supply chain.
What’s Next? 3 Ways to “Strike-Proof” Your Business
There’s no surefire way to “strike-proof” your business. However, there are some measures you can take to protect it from future disruption.
1. Use Multiple Carriers
In the future of e-commerce, sellers need to diversify, diversify, and diversify.
Your range of fulfillment options should include large national (or international) carriers, regional offerings, instant delivery startups, and other last-mile innovators. Businesses that can afford their own delivery fleets should consider this option, too.
As more options spring up, alternative carriers could get more affordable for growing merchants. To start, explore the market and invest in a small portfolio of new carriers. Offer your customers different options, or automate your site to select the best option for each scenario.
2. Improve Your Supply Chain Visibility
To keep customers happy as you test your fulfillment options, consider services like Aftership to help them track their packages. Provide real-time tracking updates in their preferred format (e.g., app, email, text), so they feel in control of their orders.
You can also use backend applications that give you better visibility into your supply chain. This allows you to take immediate action on any orders that are delayed or disrupted.
3. Communicate with Customers
Focus on providing the best possible customer service. Inform customers ahead of time if you anticipate shipping delays for any reason. This could include a notice on your website or a targeted email update.
You may also want to invest in omnichannel customer care service. Onepilot, for example, can help your team respond to customer queries right away.
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