Loose capacity could absorb effects of 'highly disruptive' UPS strike

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Updated Jul 12, 2023

A looming August 1 Teamster strike at UPS (CCJ Top 250, No. 2) will have a ripple effect on parcel carriers nationwide but is otherwise doubtful to have a meaningful impact on other freight segments in the near term. 

UPS in January 2021 sold its UPS Freight business to TFI International for $800 million – about $400 million less than UPS paid in 2005 for Overnite Transportation, the acquisition that gave rise to the division. That leaves very little over-the-road freight up for grabs should the union call for a work stoppage just less than four weeks from now. 

"If UPS does strike, it will be highly disruptive for the parcel space given UPS, FedEx and the USPS are the 'big three' in the parcel delivery space, excluding Amazon's quasi-private fleet," said Michigan State Eli Broad College of Business supply chain professor and veteran transportation economist Jason Miller, adding that in terms of a direct impact on trucking, "I'm not anticipating anything too severe, especially given we still have ample capacity in the LTL and TL sectors, in case there was any bleed of UPS volumes to those modes – especially LTL – though I don't anticipate much of that happening."

Miller said the 2017 Economic Census indicates the top four-firms in the courier and express delivery sector account for 91% of industry output, "so we know that losing UPS will be very highly disruptive for parcel delivery. The biggest beneficiary will be FedEx." 

Avery Vise, FTR Transportation Intelligence vice president of trucking, agreed that any fallout from a UPS strike wouldn't influence the broader truck freight market, "unless it were to last long enough to affect consumer buying behavior – (for example), spending less because they do not know when they might get their purchases."

It's likely, Vise said, major parcel shippers have already made contingency plans for handling shipments through other providers – primarily FedEx, Amazon and USPS – but he added, "LTL carriers theoretically could participate in that as well, but the only volume that really works for LTL would be shipments that are not delivered directly to consumers as opposed to stores for curbside or in store pickup."

Any disruption in distribution of goods could create some upside pressure on dry van spot rates, Vise said, but it would still depend largely on the duration of a strike.

"It probably would have very little effect unless the strike lasts more than a week, and even after that, trucking capacity is loose enough now that the effect might not be all that significant," he added. "If the strike were to extend into weeks, there's the possibility that we would see a reduction in consumers' purchasing that would slightly depress TL and LTL volumes that feed UPS deliveries. However, that reduction might be offset significantly by increased purchasing of goods at brick-and-mortar locations."

Jason Cannon has written about trucking and transportation for more than a decade and serves as Chief Editor of Commercial Carrier Journal. A Class A CDL holder, Jason is a graduate of the Porsche Sport Driving School, an honorary Duckmaster at The Peabody in Memphis, Tennessee, and a purple belt in Brazilian jiu jitsu. Reach him at [email protected].