Every time the United Parcel Service/Teamster labor contract comes due for renewal, the memories come rushing back and I laugh to myself. Not because those two organizations have to square off again (although the thought of that is entertaining in itself), but rather it brings back old memories from my days of working at FedEx Ground.
While at FedEx Ground one of my departments was responsible for creating the company’s contingency plan just in case UPS’ loyal workers did, indeed, decide to strike. It was a thorough plan but constrained by a very simple fact – FedEx Ground didn’t have a snowballs chance of absorbing even a small fraction of the possible volume that could be diverted from UPS. Everyone in the company knew it and acknowledged it, nevertheless, the planning continued in rigorous fashion and in painstaking detail.
Since the independent contractors who picked up and delivered FedEx Ground packages were already operating at close to their daily capacity, there wasn’t much hope of servicing more volume unless additional drivers were contracted. But who in their right mind would assume the commitment and risk of becoming a contractor with the uncertainty in the marketplace. So that wasn’t much of an option! Likewise, the Achilles Heel of FedEx Ground’s ‘network’ is its limitation in hub capacity. Although FedEx Ground gained a productivity advantage by equipping their hubs with automated sortation systems, system capacity could not be quickly increased by simply adding package handlers. So the ability to service a significant amount of additional packages was out of the question.
Nevertheless, the package capacity of each operating facility was calculated based on its sortation and pick-up and delivery capacity. This theoretical capacity was compared to actual packages serviced and the amount of new package volume that could be handled was determined. So “package quotas” were established and provided to all facilities around the country. And each terminal manager was provided strict instructions – anyone whose daily package volume exceeds their quota would have the option of either facing a firing squad or death by boogie woogie! As I’m sure you’ll agree, neither option is particularly appealing.
The last thing a carrier wants to do is disappoint its customers or turn away potential customers. A real dilemma exists when thousands of sales representatives, who spend their waking hours either entertaining existing customers or courting new ones, are told they cannot under any circumstance secure additional or new business. The last thing a salesperson wants to do is inform a prospect that there is no way their packages can be serviced especially when they are begging. Now factor in that a salesperson is compensated, in part, by the amount of business they generate. You get the picture. Aren’t labor negotiations fun?
Another dynamic that occurs simultaneously on the shipping side is trying to find a way to get packages delivered. In reality, all other carriers combined cannot absorb the daily volume serviced by UPS. But I can picture shipping managers throughout the country, as the threat of strike is imminent, telling their boss that they have “all the bases covered”. The conversation goes something like this, “Yes sir, I have talked to all the available carriers and I’ve been assured that there is available capacity for our packages if the need arises. I told them that if they ever have a hope of sniffing our business then they better come through for us! Don’t you worry sir, I’ve got it all covered.” And the boss responds, “You better Johnson or you’ll be operating a forklift next week!” Despite the false hope provided by a carrier rep or a shipping manager, a UPS strike would be crippling to shippers and carriers, alike.
As the deadline approaches, we all remember too well the last time a strike occurred and its crippling impact on commerce. To be sure, untold hours will be spent throughout the parcel shipping industry preparing for the impossible. But that’s okay. Take it in stride. And let’s hope a strike is avoided. But in the end, we’ll have more memories and maybe a laugh or two!
Joe Loughran is President of Parcel Rate Solutions and an expert in the parcel industry. Parcel Rate Solutions is a transportation consulting company offering services in Carrier Rate Analysis and Carrier Agreement Analysis. Joe can be reached by phone at (724) 934-0626 or email: firstname.lastname@example.org.