May 18, 2024

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The looming UPS strike is causing some companies to rethink supply chains

The looming UPS strike is causing some companies to rethink supply chains

Katherine Keeler and her husband, Stuart DeHave, own an olive oil company in the hills of central California. The couple spend their days harvesting olives, bottling oil, labeling bottles and shipping them, relying primarily on UPS to get their produce to kitchens across the United States.

They are far from alone. UPS handles about a quarter of the packages shipped each day in the United States, according to UPS Pitney Bowes Parcel Shipping Indexmany of them to small businesses like Mrs. Keeler’s Company, Rancho Azul and Y Oro.

But with the employment contract between UPS and 325,000 of its workers expiring at the end of the month and a potential strike looming, business owners across the country are facing what could be the latest in a series of supply chain disruptions they have faced since the start of the pandemic.

Some are preemptively turning to FedEx, the second largest private carrier in the United States, or the Postal Service. Others contact third-party shippers—companies that work with the likes of UPS, FedEx, and DHL to handle their customers’ shipping needs—to make sure their packages can still reach their final destinations even if there’s a strike.

The logistical challenge is just one additional burden on companies that have been stressed over the past few years.

“Maybe a larger company can handle those kinds of situations,” said Ms. Keeler. But as a small business owner, she and her husband “don’t have a lot of extra time in our day to talk on the phone with the post office or FedEx.”

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Since 2020, the pandemic has strained the global supply chain in several ways. E-commerce has reached record levels as Americans stuck at home buy clothes, furniture, exercise equipment and groceries online. Companies have had to contend with Covid-related shutdowns at factories in China and Vietnam. There were delays around the world when a large container ship got stuck in the Suez Canal, causing containers to pile up at the Port of Los Angeles. Those attitudes affected the way goods arrived in the United States.

The UPS strike could hamper the way brands move their merchandise domestically.

“This is something that is affecting us in our land, and how do we solve that?” said Ron Robinson, CEO of BeautyStat Cosmetics, which uses UPS to ship skin care products to retailers like Ulta and Macy’s.

He said one of the strategies his team will rely on is to try to group packets, and send as many packets as possible at once.

Switching to another carrier will cost the company some.

Ryan Colfer, CEO of Platterful, a monthly charcuterie board subscription service, also uses UPS. Switching to FedEx Express—necessary to ensure packaged meat reaches consumers in a timely manner—would cost about $5 to $10 more per delivery.

Terri Johnson, founder of the Harlem Candle Company, received an email on June 26 from her third-party shipper about a possible UPS strike. He suggested they switch to FedEx. That would cost her about $2 more per candle shipped in the greater New York area. Sending her candles to California would cost more.

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“We really don’t have a choice right now,” Ms. Johnson said.

FedEx said it is accepting additional volume for a limited time and will evaluate how much capacity its network can handle. “Shippers who are considering converting volume to FedEx, or who are currently in discussions with the company to open a new account, are encouraged to begin shipping with FedEx now,” the company said in a post on its website Thursday.

The Postal Service said in an emailed statement that it “has a strong network and we have the ability to deliver what is offered to us.”

Larger companies rely on sophisticated backup plans that have been tested over the past few years. The pandemic and past tariff wars have prompted many major retailers with global supply chains to diversify the countries in which their sellers are located and the package carriers they use.

“We’ve been focused on investing in a lot of transportation solutions that allow us to move freight between carriers more gracefully,” said Alexis DePree, Nordstrom’s chief supply chain officer. “We can do this with more flexibility and speed than we’ve been able to do in the past.”

Some third-party carriers are seeing a boost in their business as the possibility of a UPS strike comes into focus for their customers. Stord, an Atlanta-based third-party logistics and technology company whose clients include apparel makers and consumer package companies, sends out emails telling its customers not to worry. Stord uses a cloud-based platform to provide services such as warehousing and fulfillment and handles tens of thousands of its packages per day.

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By combining the size of its broad portfolio of customer brands and using software to make decisions, Stord has the ability to better negotiate rates with large package carriers, said Sean Henry, the company’s CEO.

“We’ve been negotiating rates with FedEx and the USPS around UPS so our customers don’t have to do that,” he said.

Stord said more of her clients have asked her to negotiate with carriers on their behalf. He said that equates to “tens of millions of dollars in annual revenue” for his business.

However, some business owners aren’t letting the prospect of a UPS strike pressure them just yet.

Bill McHenry, president of Widgeteer, which sells cookware to major retailers, said he felt a “kind of numbness” after navigating the challenges associated with the pandemic. He said, “I’ve seen a lot of things and stories I’ve heard and things we’ve had to go through and live — not just pricing but the turmoil of thinking you have a container but don’t.” .

He said a possible railway strike last December was a greater concern for him.

Meanwhile, there remains the possibility of a deal being struck between UPS and the union representing its workers, the International Brotherhood of Teamsters. The union announced on Wednesday that negotiations had collapsed after earlier saying the two sides had reached a preliminary agreement. If no agreement is reached, a strike could occur as early as August 1.

If that happened, said Ms. Keeler, “we’d be collateral damage.”