What Can Shippers Do When Their Freight Carriers Go Out of Business?

Potential Supply Chain Disruptions on the Horizon

The past couple of years have seen supply chain disruptions aplenty for shippers, making it even more critical to practice supply chain risk management. But two recent disruption risks are significant for shippers doing business with LTL carrier Yellow or freight giant UPS, making it essential for these shippers to have a Plan B for securing reliable LTL and parcel haulage.

LTL Carrier Yellow Reportedly in Hot Water but Things May Change

LTL carrier Yellow is the third largest LTL carrier in the United States and has filed for bankruptcy as of July 31, 2023. The carrier’s struggles began when it attempted to integrate its trucking networks. The Teamsters union represents some 22,000 of Yellow’s 30,000 employees and has rejected Yellow’s recent proposals to change operations.

Yellow filed a $137 million lawsuit against the Teamsters on June 27, 2023, for blocking the company’s change of operations. Yellow has managed to avoid collapse through a waiver of covenants with a group of lenders made effective retroactive to June 30, 2023. Teamsters were scheduled to go on strike on July 24, but decided not to strike when Central States Funds agreed to extend health care benefits for YRC Freight employees. The company had 30 days to pay $50 million to catch up on its benefits payments, and the Teamsters fully believed payments will be made. However, when employees arrived at terminals on July 31, they were met with notes on the gate saying, “The Company Has Ceased Operations.”

Yellow’s recent declines in revenue, shipments, tonnage, and other metrics have been some of the steepest compared to other competitors during the recent freight recession. The company has been offering “aggressive” pricing to its customers– primarily shippers with freight spends of $100 million or below. Shippers need to work with a knowledgeable third-party logistics provider now, like Nexterus to help them manage their freight, find capacity, and lower freight costs.

The UPS Strike Will Affect Parcel Shipments if it Goes Through

For its part, a UPS Teamsters said they would strike August 1, 2023, however UPS and the Teamsters have reached a tentative agreement on a new contract. Should UPS have gone on strike, the actions would have significant consequences for the company, the e-commerce industry, and the supply chain.

The tentative deal is a major step toward averting a strike that could keep UPS from delivering millions of packages a day. According to the Pitney Bowes Parcel Shipping Index, UPS handles about one-quarter of the tens of millions of packages shipped daily in the United States. Experts have said competitors need more scale to replace that lost capacity seamlessly.

The UPS strike demands include better wages and conditions —part of that is adding air-conditioning to their package delivery vehicles (UPS trucks). However, the bargaining process between corporate and the Teamsters isn’t over yet as the union needs to present the tentative agreement to UPS employees, who will review and vote on it.

The UPS strike will occur within the context of a significant recent trend: The industry suffered a loss of 14,000 supply-chain jobs last month — 7000 of which came from parcel carriers. The cost to ship a 10-pound package via UPS Ground between 600 and 999 miles in the United States in 2023 is $13.79, including service charges, up about 58% from $8.71 five years ago.

If uncertainty surrounds delivering timely, cost-effective shipments, consider discussing your supply chain strategy with a 3PL like Nexterus that has a vast network of quality carriers ready to contract to carry your loads. Let Nexterus work hard to find the best carrier for your shipments. Contact Nexterus today.

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