Potential still exists for UPS work stoppage amid key labor dispute

According to multiple media reports, negotiations between key unionized voting districts and UPS are still spinning their wheels. Local 89, the Teamsters chapter that represents UPS’s unionized workforce districts in Philadelphia, western Pennsylvania and Louisville, is still at odds with the major shipping giant in these geographic areas over individual supplement and rider contracts.

While the ongoing dispute failed to make any substantial waves in the press prior to last week, it reared its head again when the chapter overwhelmingly voted to reject UPS’s second revision of its proposed labor contract on April 10.

UPS will have one last shot to present a contract supplement that both sides can agree on before the districts in question will be empowered to petition a strike, which could potentially cripple shipping operations around the world.

Louisville, home to UPS’s Worldport – which moves more than 400,000 packages per hour, according to one report – represents a key sticking point since it serves as the main distribution hub for all UPS air delivery services. After voting down UPS’s first pass at an agreement, Local 89 rejected UPS’s subsequent attempt 2,804 to 185 (via Laura Stevens, The Wall Street Journal).

Labor relations have been a headache for UPS of late, both in light of the company’s troubles with Local 89 and the news that UPS has fired 36 drivers in Queens, and announced plans to dismiss an additional 214. Those firings came down after workers participated in a 90-minute work stoppage in protest of the dismissal of a 24-year veteran drive who was an active member of the Teamsters’ Local 804 chapter, according to a report from New York Daily News.

UPS defended its right to dismiss workers who participate in illegal work stoppages, a claim Local 804 disputes, according to the report.

While much has been written about the implications a strike would have on investors, one question that begs an answer for companies relying on UPS to deliver their packages is what the impact will be on those companies’ abilities to service their customers if an agreement cannot be reached.

Though the likelihood of a work stoppage is still relatively slim, each day that passes without a resolution presents heightened cause for concern. Threats of unionized strikes have surfaced in the past, but amicable arrangements have prevailed during the past couple decades (the only nationwide UPS strike occurred in 1997 and lasted 16 days), making speculation merely cautionary at this point.

Still, such news unveils an issue that UPS customers should monitor closely during the coming months. Many shippers across the country are still coming to terms with the widespread service failures that took place during the 2013 holiday season, leaving end customers empty handed on Christmas Day, and some for several days after. A perfect storm of adverse weather conditions and the underestimation of the volume of online shipping volume was a catastrophe, the repercussions of which all businesses surely wants to avoid at all costs.

With this taken into consideration, UPS shippers might be wise to keep an eye on the temperature of the ongoing labor negotiations and perhaps engage in some early-stage strategic planning relative to crisis management in the event that the news does not get better soon.

One key consideration would be to identify non-premium (ground) services that are less likely to be impacted by a work stoppage at the Worldport location, and thus would serve to slow the bleeding long enough to weather any service interruptions.

Companies that rely more heavily on air and/or international services might not have as much wiggle room, which makes taking a look at a temporary diversion of volume to one of the UPS’s competitors seem feasible, if not all that desirable.

The most important takeaway, from a business standpoint, is that though a potential strike is still a ways off, shippers do have some cause for concern and should be taking a serious look at how they will handle this sort of adversity if and when the time arises.

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