Unless you’ve been living under a rock, you’ve undoubtedly seen the big July headlines being brought to you by the colors Yellow and Brown (aka UPS).
But just in case you haven’t, here’s a quick recap: According to some reports, the former will file for bankruptcy on Monday, July 31 (although this has not been confirmed by Yellow). Plus, after months of turmoil, the latter has finally reached an agreement with the Teamsters to head off the major strike that has been hanging over all of our heads for months.
But enough about them. The real question is, how could these two pieces of big news affect you – and your LTL and parcel spend?
The short answer is, plenty.
“Even though these stories are in two very different places, they both have something very important in common: these issues will have inflationary effects on their respective modes,” said AFS President of LTL, Kevin Day. “Due to the unfolding story with Yellow, most other LTL carriers have already started to price with the expectation that there will be less industry capacity.”
But hopefully not for long: “The market should expect a few weeks of messiness – rescuing freight and getting back to where lenders want it. However, unless there is a significant rebound in demand, we should make a fairly quick return to where we are now,” said AFS Chief Executive Officer, Tom Nightingale.
It’s a similar story for Parcel, but with a potentially longer-lasting impact. The new UPS-Teamster’s contract could add as much as $30 billion to UPS’s new costs over the next five years, and much of that is likely to be passed along in some form or fashion to UPS customers.
“This agreement will increase UPS employees’ wage structure significantly, and that could be followed by a UPS rate increase to cover those costs. And since FedEx and UPS usually announce identical General Rate Increase percentages each year . . . well, you fill in the blanks” said AFS President of Parcel, Micheal McDonagh.
We’ll be talking more about this in an upcoming AFS Viewpoint, so watch your inboxes. Meanwhile, make sure you’re continuing to bring your A-game when it comes to parcel and LTL rate negotiations – or that you have someone in your corner who can help you negotiate fair rates in spite of all of the chaos and uncertainty.
