The 2:00 Minute Warning

A couple of months ago, we warned shippers that some related labor negotiations could impact their supply chains. Well, as one of my friends used to say, it's "Game On!"

Almost two weeks ago the Ports at Los Angeles and Long Beach shut down for about 24 hours. While some folks wanted to dismiss it as a big "Nothingburger," others viewed it more seriously as a sign that the ILWU members are growing increasingly frustrated that since July 1, 2022, they have been operating without a contract.

Gene Seroka, the Executive Director of the Port of Los Angeles, recently stated that: “Not only do we need a coastal framework but there are also 29 local agreements up and down the West Coast. And, by and large, these two sides have not negotiated in-depth for about a year."

Reading that, last week we reached into our great network to get a "behind the scenes" update on what is really going on. It's not too encouraging. We learned that there is a tremendous amount of uncertainty. While the strike could be settled any day, no one is willing to bet when that might actually occur.

Consequently, port volumes at Los Angeles have declined and were reported to be down 32% this March compared to this time last year. In tandem, East Coast ports like New York and Savannah have seen a significant increase in container volumes over the past year. Here is a key question for you: What is your contingency plan if the ILWU stages a prolonged work stoppage (a.k.a. strike) at the West Coast ports or if the PMA locks them out?

Now, for some more depressing (and Xanax inducing) news. Negotiations began this Monday between the UPS and the Teamsters for the current five-year contract expiring on July 31, 2023 and the Teamsters have communicated that there will be a strike if a deal is not reached by then.

What do the the Teamsters want?

A recent article in Transport Topics detailed several of the items that are sought from the new contract. “O’Brien aims to win pay increases for UPS workers — including for part-time package handlers that make far less than well-compensated drivers — and do away with a two-tiered pay system that was put into the current UPS contract. The union wants to win other worker protections, including safer conditions to prevent heat strokes during increasingly hot summers and air conditioning in all of the hundreds of thousands UPS trucks. Other priorities are to add full-time jobs, cut the use of drivers who use their own cars to drop off UPS packages, and stop what they call ‘forced overtime.’”

While there has only been one strike in the history of UPS which occurred in 1997 and lasted for 16 days, the climate appears heated at the outset. Teamsters President Sean O’Brien has held a series of rallies leading up to the negotiations and communicated that they plan to take a strong stance. Beyond the rallies, Mr. O'Brien has made some public statements that indicate that these negotiations could be contentious and intense.

For example, with these negotiations, the Teamsters will, according to Mr. O'Brien: "set the tone for organized labor and the entire country with this contract. There is no better organization to set that bar high than the International Brotherhood of Teamsters," He also stated that: "We are not going to accept and take what UPS gives us. UPS Teamsters have fire in their eyes and the intestinal fortitude to take on this company." And these are just a sampling of his comments.

Mr. O'Brien also believes that his members have made significant sacrifices that have allowed UPS to achieve record revenue and profitability. According to Transport Topics, "UPS reported revenue of more than $100 billion in 2022, and profits of $1.55 billion.”

I'm not an expert on labor negotiations, but you have to ask: Is Mr. O'Brien intent on negotiating an agreement with UPS, or is he looking to, as some experts have suggested, use these negotiations as a catalyst to grow the Teamster membership by trying to unionize other large companies such as Amazon? The one important factor that could potentially hurt the Teamsters is that a prolonged strike could deplete their Strike Fund in a hurry.

While few may know the real intent of the Teamsters in these negotiations, one thing we do know is that there's more uncertainty for shippers as we head into the summer. Since a strike of any length could have great magnitude (since UPS delivers millions of packages each day), we have to ask once again, what are your contingency plans if there is a prolonged strike at UPS?

Looking for help?

At TranzAct, we have a wealth of expertise in helping shippers understand alternatives and options that can protect their supply chains in this sea of uncertainty. So if you need ideas or support in your scenario planning or building a contingency plan, we encourage you to get in touch.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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