Ask Waves: Can parcel-delivery players absorb enough parcels if a job action impacts UPS?
UPS (NYSE: UPS) moves ~20M daily packages in the U.S. Smaller carriers must gain the scale to manage volume spikes if UPS is shut down or curtailed. Shippers should have contingency plans in case of a strike, but they have yet to begin exploring alternatives. Rob Martinez, founder/co-CEO of Shipware LLC, said shippers planned to explore options in January 2023, but it didn’t happen.
Joe Wilkinson, head of professional services for Intelligent Audit, said shippers are making a mistake if they aren’t now looking around for alternate capacity. He said FedEx Corp. (NYSE: FDX) is telling UPS shippers to “get in now or don’t get in.” Shekar Natarajan, president of Quiet Platforms, said the company could scale quickly to handle delivery surges, having gone from zero to 50 million packages a year in nine months.
As of early February, most alternate delivery firms are pretty wide open, with LaserShip OnTrac having plenty of capacity after a $100 million build-out in 2022.
A source close to the company said it expects to accept new shippers by September. Nationwide space is expected to be filled by mid-June. However, this could change if UPS and the Teamsters jointly announce significant progress in negotiations and minimize the strike threat.
As summer approaches, regional carriers will benefit from increased volume commitments, according to Martinez. However, shippers must commit to a relationship rather than just using the regionals as a backup in case of a strike.
How this plays out depends on UPS’ behavior: they have notified managers to refrain from taking vacation days in July and August. No one expects them to operate at total capacity if a work stoppage occurs. According to Wilkinson, the key to minimizing service disruptions is whether they run at 80%, 60%, or some other percentage. “That number matters,” he said.
John Haber, Transportation Insight Holding Co.’s chief strategy officer, said carriers are leveraging a potential strike to push up volume commitments. Even if there isn’t a strike, things will get tight due to an ongoing labor shortage.
Regional carriers have seen their market share growth due to a surge in delivery volumes and high rates/surcharges from FedEx & UPS. However, regionals typically don’t offer the same value proposition or geographic footprint as nationals and can sometimes not beat them on pricing.
Another factor preventing shippers from shifting volumes to regional is that they may lose their price discounts from UPS and FedEx, according to Martinez. Carriers set values based on volume thresholds, and discounts can be forfeited if volumes fall below these thresholds.
https://www.freightwaves.com/news/can-the-minnows-pick-up-the-slack-if-the-brown-whale-is-beached
Leave a Comment