UPS reaches deal with Teamsters Union! US retailers successfully escape disaster

According to foreign media reports, on Tuesday (July 25), UPS and the Teamsters Union reached a five-year tentative agreement, thus avoiding a major strike a week later. This is a strike that could disrupt logistics across the United States and is the largest strike in the United States in 60 years. If the strike occurs, it may cause billions of dollars in economic losses.

The tentative deal, which needs to be ratified by the Teamsters' 340,000 members in a vote next month, could bode well for labor negotiations across several key industries in the U.S. The UPS talks are a key test of union workers' clout at a time when wage growth is outpacing inflation.

UPS strike will directly impact online retailers, including some of the biggest ones

According to Digital Commerce 360, 532 of the top 1,000 retailers in North America use UPS to ship goods (directly or indirectly). These retailers will have a total sales of approximately $669.98 billion in 2022. 75 of the top 1,000 retailers use UPS exclusively to ship goods. These 75 retailers will have sales of $24.97 billion in 2022.

In addition, 295 of the top 1,000 retailers in North America use both UPS and FedEx for delivery, while 360 ​​use both UPS and USPS.

“FedEx and USPS don’t have enough staff to fill the void created by the UPS strike, even though this is a quieter time of year for the carriers,” said James Risley, manager and senior analyst at Digital Commerce 360.

Good news and contingency plans for online retailers

“UPS’s agreement with the Teamsters to avoid a strike is great news for millions of retailers and brands around the world,” said Stephen Beard, vice president of transportation at PFS.

"Over the past few months, the uncertainty surrounding negotiations between UPS and the Teamsters has forced retailers to consider worst-case scenarios and the impact such events could have on their customers and reputation," said Stephen Beard, adding that many retailers are making contingency planning a key area of ​​focus. This is especially critical as retailers begin to prepare for the holiday rush and fulfill orders during the busiest season of the year for the retail industry.

Stephen Beard stressed that UPS's fight with the Teamsters is a reminder to retailers that there are always uncontrollable risks in the shipping process, such as weather conditions and staffing issues.

When unexpected issues arise, having the right fulfillment partner can make all the difference, enabling brands to respond quickly to situations and even turn obstacles into opportunities. Inventory planning and adopting a decentralized fulfillment model are also key. A multi-node approach allows brands to distribute goods between multiple smaller distribution centers (DCs), rather than storing and fulfilling from a single DC. With the right distributed order management (DOM) technology, inventory can be easily tracked across these locations, enabling brands to shift orders between multiple distribution stations, thereby optimizing inventory across channels, shortening last-mile delivery distances, and encouraging operator diversification.

Transaction Terms

Teamsters President Sean O'Brien hailed the agreement, calling it the best deal the union has ever secured from UPS.

The union won higher pay and some key concessions from UPS that benefit its members. These included eliminating lower-paid drivers, air conditioning in new vehicles and additional paid vacations. The Teamsters estimated that the contract would provide a total of $30 billion in new funds over five years.

The tentative agreement also received the support of US President Biden, who said the agreement "brings us closer to a better deal for workers that will also strengthen our economic momentum."

UPS did not disclose details of the agreement or confirm the union's financial estimates. A company spokesman said UPS will share specifics of the agreement and update guidance in its second-quarter earnings report.

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