The supply chain world breathed a sigh of relief in late July, when UPS and the International Brotherhood of Teamsters, came to an agreement on a new contract and again in late August when the members ratified the deal. The Teamsters represent every employee group within UPS except pilots, who have a separate union.
The signing of the contract represents progress on a number of employee demands, such as the right to have air conditioning in vehicles and a variety of pay raises across the workforce. Now, as a leader at a business that works with UPS or one of its competitors for your parcel services, you may be asking what the ratification will mean for your shipping costs.
Measuring the Impact of UPS's New Contract
A first assumption about the deal between UPS and the union might have been that it would force shipping rates to increase, to counteract the budget effect of higher wages. Procurement expert Tommy Storch told Supply Chain Dive the price raise could reach 8% in the immediate aftermath However, FedEx forced UPS's hand by announcing its own rate increase of 5.9% for 2024, basically in line with industry standards.
Following the FedEx announcement, UPS announced the same increase — 5.9%. This move was designed to keep UPS competitive, though Supply Chain Drive adds that surcharges on bulky shipments are rising.
The fact that these supply chain giants are both active and competing for business is good news for you as an organization negotiating a shipping contract. The Retail Industry Leaders Association released a statement highlighting the relief that comes from having no service interruption at UPS, pointing out that entering the end-of-year rush amid a work stoppage would have been costly.
It's a Good Time to Manage Your Transportation Spend
The uncertainty of the negotiation period is over — now comes the new uncertainty, around what rate you can lock in for the year ahead. Whenever you're dealing with a fluctuating transportation cost picture, which is basically all the time these days, it's important to take a strategic approach to managing your spending.
Now is an especially critical moment to negotiate new shipping contracts. After companies shifted en masse to FedEx based on the uncertainty of UPS's contract situation, UPS is negotiating hard to bring business back on board, and engaging in a back-and-forth battle with FedEx over rate rises for the year ahead. By striking now, you can lock in a rate that will help your own bottom line for the near future.
By working with a partner that can apply industry expertise and advanced technology to issues of negotiating optimal rates, detecting unnecessary expenses and adding efficiency to spend management, you can put money back in your pocket and gain peace of mind. At Zero Down Supply Chain Solutions, this is what we do — reach out to talk more about how we can help you.
