Analyst: UPS-Teamsters 2028 showdown will unleash parcel industry tsunami

How United Parcel Service negotiates with unionized parcel drivers and loaders when the current contract reaches its end in two years will trigger a tsunami that either wipes UPS from the last-mile delivery market or severely damages its competitors, creating a more competitive landscape that benefits online retailers and consumers, an influential industry analyst predicted last week.

UPS (NYSE: UPS) needs to convince the Teamsters union that the current Cadillac-wage structure enshrined in the 2023 contract is unsustainable and the vast majority of parcel delivery jobs will disappear as customers flee to cheaper alternatives, said Satish Jindel, the president of ShipMatrix Inc.

, at a supply chain conference organized by Ohio-based Jarrett Logistics. As the only unionized private parcel carrier, UPS has a greater challenge than FedEx (NYSE: FDX) in stemming the loss of B2C delivery business to large retailers like Amazon (NASDAQ: AMZN) and Walmart (NASDAQ: WMT), and startup couriers.

Teamsters drivers cost about $65 per hour — total compensation when all healthcare and other benefits are included with the $49 hourly rate for senior drivers — compared to FedEx drivers who earn about $35 to $39 per hour on average.

UPS’s direct hourly wage is roughly 20% to 28% higher at the experienced-driver level, according to a contract comparison by LJM, a parcel spend management firm. Regional carriers that heavily rely on contract fleets or gig workers spend about $15 per hour, or less, on last-mile delivery drivers, experts say. window. googletag = window.

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display('div-gpt-ad-1709668545404-0'); }); UPS will trigger a massive market reaction in August 2028, whichever way it deals the Teamsters, said Jindel, an outspoken industry observer and former executive at FedEx Ground’s predecessor whose company now tracks shipping data and helps businesses optimize carrier partnerships.

Labor clash looms as inflection point UPS could end up dominating the market if it takes a hard stand against the powerfulTeamsters, which represents about 330,000 company employees.

Conversely, giving in to worker demands and not lowering its cost to serve, would cause the logistics giant’s parcel business to wither away, said Jindel, according to notes of his presentation provided by an attendee at the Cleveland event.

The carrier “will have to offer much lower pay and require them to allow use of the Roadie platform for residential deliveries, or let them strike,” he said.

In a November commentary, Jindel urged UPS to adopt a hybrid delivery model in which Roadie handles last-mile delivery of e-commerce shipments from thousands of UPS Stores while Teamster drivers, operating large package vans, provide middle-mile transport from regional sortation hubs to the UPS Store.

UPS acquired Roadie, which uses crowd-sourced drivers who supply their own vehicles, to handle urgent same-day, grocery and oversize shipments from local retailers that don’t move through the traditional automated sorting network.

The Teamsters for months have publicly called out UPS for improperly steering shipments to non-union Roadie in violation of its contract. The union alleges Roadie uses UPS labels, tracking and equipment, but provided no concrete evidence Roadie is taking work from Teamster drivers.

“If they strike, UPS should be prepared to replace the drivers with non-union workers hired from FedEx independent contractor base and Amazon delivery service providers, which in turn will drastically reduce the workforce for its two main competitors,” Jindel argued.

And it should lean more heavily on the Roadie network and its gig workers to minimize the strike’s impact, he added. “The result will be that UPS can dominate the parcel market like it did in the 1990s.” In a follow-up phone interview, Jindel said “FedEx and Amazon won’t be able to handle the volume during the disruption and UPS will own the parcel market.

But if they extend the contract they will not be able to compete with the others at half the hourly rate, or less, with the gig workers.” Teamsters boss Sean O’Brien is not the compromising type. He has repeatedly boasted about how he secured an historic contract for members, forcing UPS in 2023 to put $30 billion on the table over the previous contract.

And he has taken a hyper-aggressive stance in holding the company accountable to contract terms, such as providing air conditioning for thousands of delivery vans and limiting job losses through voluntary buyouts, saying management is greedy and can’t be trusted by workers. window. googleta