Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
The UPS Inc. of 2023 may be a very different company from the one that exists today. By then, brown drones may fill the skies. Package cars may operate with the driver in the passenger seat. Sunday deliveries may become routine. Local deliveries might be handled by citizen drivers using their personal vehicles instead of by professionals in the ubiquitous UPS vans. UPS robots could be walking parcels from one urban location to another. Deliveries may be made in 30 to 45 minutes after an order is received. Amazon.com Inc. may no longer be a big UPS customer, but rather a full-fledged competitor.
If all that sounds far-fetched, consider that in 2013, "A.I." was known as a Steven Spielberg film. Robots and drones were lab experiments. Sunday was a day of rest, not delivery routes. All vehicles had people driving them. Lockers were designed to hold clothes or books, not parcels. The "last mile" was a phrase associated more with death row than with packages. Amazon was a force in selling stuff, not shipping it.
The parcel industry has undergone profound changes in the past five years, and the next five are likely to be just as transformative. It is against this backdrop that UPS and the Teamsters union will hammer out collective bargaining agreements for the carrier's small-package and less-than-truckload (LTL) operations to replace the five-year pacts that expire July 31. At stake are the livelihoods of 268,000 employees, relationships with 1.5million regular customers, and the direction of the $100 billion U.S. parcel market, and, by extension, the nation's commerce.
As of mid-May, when this story was written, tentative agreements had been reached on the fringe non-economic issues that typically get dispensed with early on during negotiations. Ahead lies the bargaining over bread-and-butter stuff like wages and benefits, as well as the operational flexibility that UPS needs from the union in order to implement new services or expand existing ones. Neither UPS nor the Teamsters would comment on the status of negotiations.
With the talks heating up, one huge question looms: How far will UPS push the envelope to compete in a new world of parcel delivery, and how far will the Teamsters be willing to bend? In decades past, UPS has been able to convince the Teamsters that new services would mean more packages and more union jobs. That might be a harder sell this time around. UPS views autonomous vehicles, drones, and robotics as the necessary tools of 21st century logistics. The Teamsters, on the other hand, perceive such changes as threats to their jobs.
The union sees a crowded field of newcomers—many with different ideas about logistics than those who've come before them—vying to take packages from UPS and, by extension, food off Teamster tables. It has seen the growth of e-commerce—expected to reach 17 to 20 percent of U.S. retail sales by 2022 from about 12 percent today—further shift UPS's business mix from the higher-margin business-to-business traffic that the company has long dominated to the business-to-consumer segment that is more competitive and not nearly so profitable. The Teamsters have watched as more final-mile deliveries have been siphoned to the U.S. Postal Service (USPS), whose universal service network is used by UPS to deliver parcels to remote locales where it would be cost-prohibitive for the company to send its trucks and drivers.
The Teamsters have tried unsuccessfully to negotiate the demise of the service, known at UPS as "SurePost," and it will likely continue to push for its closure. UPS, for its part, has developed a low-cost pricing matrix for ultra-short-haul deliveries designed to divert parcels from the Postal Service to its own network. But it is believed the company is not moving fast enough to implement the initiative.
SLEEPLESS ABOUT SEATTLE
Then there is Amazon. A relative non-factor in logistics in 2013, the Seattle-based e-tailer has since spent billions of dollars on planes, tractor-trailers, hubs, and fulfillment and distribution centers. From starting out just shipping orders placed on its website, Amazon has expanded into third-party fulfillment, which today accounts for about 45 percent of the company's total revenue. Through its new "Shipping with Amazon" service, it is now trying to lure non-customer merchants into its fulfillment network by offering low-cost deliveries.
Amazon remains a heavy UPS user because it can't manage its burgeoning volumes on its own. However, every merchant that signs up for Amazon's fulfillment services means one less business that directly uses UPS. It will be that much easier for Amazon to convert companies already using its fulfillment operations to its shipping services as it relentlessly builds scale.
Amazon also offers Sunday deliveries in conjunction with the Postal Service, something that didn't exist five years ago. Its significance, even if it is nothing more than the proverbial "another arrow in the quiver," is not lost on UPS or the Teamsters. UPS delivers on Saturdays through its air and ground operations, the latter starting in early 2017 in response to the changes in ordering and delivery demands wrought by e-commerce. However, it has never delivered on Sundays.
In what some might consider a bend on the union's part, Denis Taylor, who heads the Teamsters' package division (which negotiates the UPS contracts), floated a proposal in early May to create a classification of "hybrid" small-package drivers who would work Sundays through Thursdays, or Tuesdays through Saturdays. The proposal calls for these employees to perform any "recognized part-time work" such as package loading and washing cars, but not to deliver packages full-time. It would also establish a two-tier wage scale, where the hybrids would be paid less because they would not be on a Monday-through-Friday schedule.
Teamster dissident group Teamsters for a Democratic Union (TDU) said that while the hybrids would get 40 hours of work, thus fulfilling a 2013 contractual pledge to combine 40,000 part-time jobs into 20,000 full-time positions, they would not be paid overtime wages normally called for to drive on the weekends. The proposal would create a "caste system" within the package division, TDU said. The group, which loathes mainstream Teamster leadership, called Taylor's offer "the worst giveback" in the history of the union's relationship with UPS, which dates back more than a century.
Taylor also drew the wrath of some members in February when first he demanded that UPS be barred from using autonomous vehicles and drones, and then withdrew the demand. Some said it was highly unusual for the union to reverse course so early in the negotiating cycle.
There is concern that the Teamsters will adopt such a rigid negotiating strategy that they will lose sight of UPS's need to adjust to the parcel industry's new realities. Even those who care little for the company acknowledge that it needs to explore new delivery avenues to stay ahead of current and future trends. "The company thinks ahead of itself," said Ken Paff, TDU's national organizer. "The Teamsters have to think ahead as well."
A HOUSE DIVIDED
With so much at stake, it behooves the Teamsters to present a united front when going up against UPS, which prepares for contract talks much like an athlete training for the Olympics. However, the Teamster leadership is as splintered today as at any time in recent memory. James P. Hoffa, who has been general-president since 1998, came within a whisker of losing the union's November 2016 elections to Fred Zuckerman, the firebrand leader of Louisville's Local 89, which represents more UPS workers than any other local because it's located in the home of its global air hub.
Zuckerman outpolled Hoffa in the U.S. but lost the election because he was soundly beaten in Canada. Perhaps more significant as it relates to the UPS talks, Zuckerman captured the majority of votes cast by the company's workers, a sign of little or waning confidence among many UPSers in the mainstream leadership.
Discontent with Hoffa and the-then package division chief, Ken Hall, had been building as far back as the last contract cycle. Three Teamster locals, including Local 89, repeatedly rejected their local addendums known as "supplements," thus preventing the national contract, which had already been ratified, from being implemented. The dispute dragged on for about nine months until the Washington leadership in April 2014 took the extraordinary step of imposing the national contract on all UPS members. The decision left a bitter taste in many members' mouths, and their angst was reflected 31 months later at the ballot box.
Last September, Hoffa sacked Package Division Chief Sean M. O'Brien just seven months into his tenure and replaced him with Taylor. In explaining the move, Hoffa said the union needed to head in a different leadership direction. In an unusually public display of pique, O'Brien said he wanted to include local representatives who disagreed with Hoffa's strategy in the contract talks but was blocked from doing so because it was "considered treasonous" by the leadership. Hoffa's critics said that O'Brien was removed because he wanted to give Zuckerman a more active role in the negotiations.
In March, Taylor removed Mike Rankin, a member of Local 89, from the negotiating committee at UPS Freight, whose contract covers 12,000 of the 268,000 UPS employees, for purportedly publicly disclosing some of his concerns with the direction of the talks. Then in May, he removed three more members of the negotiating committee, including two from Local 89, for opposing the hybrid employee proposal.
DON'T WORRY, BE BROWN!
UPS customers appear to be reacting to these issues with a collective shrug. They believe negotiations are progressing as smoothly as could be expected and are not looking to shift business to rivals out of fear of labor-related service disruptions. Rob Martinez, president and CEO of Shipware LLC, a parcel consultancy, said none of his UPS customers have diverted traffic to FedEx Corp., UPS's chief competitor, even though some are "crossing their fingers" in the hope that a labor agreement is quickly reached.
A large medical distributor, which Martinez didn't identify, was told by FedEx that if it didn't convert at least 40 percent of its business in the next few weeks, the carrier would not support the company in the event of disruptions at UPS, he said. FedEx has used that tack with other high-volume shippers, invoking memories of the 15-day Teamster strike in 1997 that blindsided many UPS customers and left them scrambling for alternatives, Martinez said.
UPS has assured the medical distributor that talks are going well and are on track for settlement, Martinez said. Besides, the shipper thinks that FedEx's promises to come to the rescue ring hollow and that it couldn't provide remedies if, as Martinez put it, "the shit hit the fan."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.