Possible UPS Strike, Yellow Shutdown are the latest Supply Chain Challenges

Already weary from COVID disruptions, raw material shortages, port congestion, a shortage of truck capacity and giant ships getting stuck in the Suez Canal, supply chains are now facing a potential double whammy of challenges: a strike of UPS Teamster members and the possible bankruptcy and shutdown of less-than-truckload carrier Yellow Corp.

It’s as if the saying “the new normal” truly means there is no level of supply chain normality anymore.

“The impact of a supply chain disruption is no longer an academic exercise. 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,” a Wednesday statement from the Retail Industry Leaders Association proclaimed.

Twin challenges

With both a potential strike of 340,000 Teamsters members and the closing of Yellow looming, the shipping community faces dual threats that could slow or even stop hundreds of thousands of shipments per day.

According to John Luciani, COO of LTL Solutions at A. Duie Pyle, Yellow handles about 55,000 shipments per day.

“Yes, my concerns are … about the timing of a [Yellow] failure and a UPS strike happening at the same time,” he tells Supply Chain Management Review. “We are already receiving requests from existing customers that also use UPS wanting to know how small of a shipment we will handle and how many shipments would we consider handling.”

Just say no

Luciani says that because any UPS-related business would likely be temporary, Pyle is telling the majority of customers they will not handle any UPS shipments. But, he did say that existing customers of Pyle and UPS would be taken care of.

“At Pyle, we are being disciplined to support customers that use both UPS and Pyle in our Northeast footprint and have set a minimum shipment size moving on a pallet,” he says. “At Pyle, we are not equipped to [handle] loose cartons or envelopes. We are, however, planning to support existing customers that communicate with us in advance so that we can understand, plan and protect service and quality to our existing customers.”

Luciani says a carrier without discipline in this time could face challenges.

“From an LTL perspective, a carrier that is not disciplined could easily be overrun with small package shipments that could cause long-term damage to customer relationships. We will not allow that to happen at Pyle,” he says. “UPS is a significant service provider, operating in many verticals, and I believe any labor disruption will have significant impacts across a broad spectrum of service providers, including hospitals, pharmaceuticals, retailers, e-commerce, financial institutions, real estate companies, government agencies, along with many more industries not even considered during this response.”

Pilots could close the skies

It is estimated that a UPS strike could impact about 30% of parcels, according to reporting from FreightWaves. That does not include a potential impact from UPS’ pilot’s association. The Independent Pilots Association (IPA) said it would support a Teamsters strike, which has been authorized or Aug. 1 if no deal can be reached.

“Just as we did in 1997, the IPA is committed to exercising our contractual rights, both domestically and internationally, to honor any potential IBT strike and act in sympathy with our fellow workers at UPS by not working. No one wants a work stoppage, but should a legal IBT strike be initiated, you and the IBT can count on the IPA for support,” IPA president Capt. Robert Travis wrote in a July 3 letter to Teamsters General President Sean O’Brien.

While it is expected that any UPS strike would be limited, a shutdown of Yellow, which has about 10% market share in the LTL market, could cause some immediate disruption that has some lingering effects.

“Yellow handles about 55,000 shipments per day, and if Yellow is forced to close, or its employees strike, coupled with a UPS strike, there would be serious damage to the domestic supply chain for many of the reasons stated above and others reasons not considered,” Luciani says.

Yellow failed to make $50 million in benefits contributions on July 17, and the Teamsters, which represents about 20,000 Yellow employees, immediately authorized a strike notice for July 24.

“Yellow has failed its workers once again and continues to neglect its responsibilities,” said O’Brien in a statement. “This corporation’s gross mismanagement is another affront to the livelihoods and well-being of 22,000 Teamsters nationwide. Following years of worker givebacks, federal loans, and other bailouts, this deadbeat company has only itself to blame for being in this embarrassing position.”

Absorbing Yellow freight

Given the size of Yellow, it is expected that the LTL industry can absorb the following, with Luciani noting that Pyle could “hire up” fairly quickly should the situation call for it, a 10% increase in volume “could cause some short-term pain.”

A UPS strike, though, could create “potential service impact[s] to an LTL network if there is a significant increase in parcel-type shipments,” he adds.

For shippers of the two companies, many in the retail industry, the two challenges are coming at a time when sentiment is improving and hopes for a strong peak shipping season are emerging.

“As leaders within the U.S. economy, we are growing increasingly concerned with the stalled contract negotiations between UPS and the Teamsters,” the RILA said. “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. Uncertainty is like kryptonite for supply chains.”

The association remains hopeful a resolution will be reached. The Teamsters have not gone out on strike at UPS since 1997.

“We remain optimistic that, with the nationwide implications in mind, a resolution can be reached soon. We urge all negotiating parties to remain at the table until a deal is reached that keeps this vital supply chain link operating at full capacity,” RILA said.

SC
MR