DEEPER DIVES: From Ports, To Planes, And Trains... And Now Mail

Good Morning,

First, as always, thank you for joining.

Everyone is feeling the surge of activity as peak season ramps up.

So let’s jump right in.

Here’s what this issue brings:

• With all of the attention going to other supply chain pain points labour disruptions cause, not too many people talked about the mail.
  
  USPS workers finally reached a (terrible?) deal, signing a new contract. We’re going to review it and I’ll share my thoughts as to why this makes a looming Canada Post strike more likely
  

• Analysts are predicting higher seasonal spending. But where’s it going and what impact does it have on your logistics activity (both as a brand and service provider)?
  

• Former Yellow employees seem to be lined up to get more of a holiday “bonus” than they probably thought would happen

Imagine Controlling The Most Volume, But Having The Least Bargaining Power

United States Postal Workers signed a new (tentative) contract this week.

This is a deal between USPS and NALC (National Association of Letter Carriers) which represents approximately 200,000 city mail carriers.

For context, the USPS workforce and labour unions is a bit of a dog’s breakfast compared to some other industries.

There are five “crafts” that make up nearly 90% of the Postal Service's workforce:

• City Carriers

• Rural Carriers

• Mail Handlers

• Clerks

• Building and Equipment Maintenance

Rural mail carriers are represented by a different union, the National Rural Letter Carriers' Association (NRLCA).

And the American Postal Workers Union (APWU) represents over 200,000 postal workers in different crafts.

While the NALC agreement is important, it doesn't cover all mail carriers or set a universal precedent for all USPS employees.

The Deal

The new agreement runs through November 2026 (it still needs to be ratified by union members - which is expected to take several weeks).

The deal includes three annual pay raises of 1.3% each by 2025, with some increases to be paid retroactively from November 2023.

Workers will also receive retroactive and future cost-of-living adjustments.

The agreement also increases the top pay and reduces the time it takes for new workers to reach that level - hopefully creating more interest for people to join the ranks of the USPS.

On the safety side, air conditioning has been a huge issue for letter carriers.

As part of this new contract agreement, the USPS has committed to "make every effort" to provide mail trucks with air-conditioning. The Postal Service has already begun rolling out new electric delivery vehicles equipped with air-conditioning.

This is the second contract negotiated since Postmaster General Louis DeJoy was appointed in 2020.

While Brian Renfroe (the president of the NALC) and Doug Tulino (deputy postmaster general and chief human resources officer) are praising the deal for meeting their goals and rewarding the members through good faith negotiations, the initial reaction on social media from postal workers paints a different picture.

Initial Reaction

Many people are expressing massive disappointment with the tentative contract.

They view the proposed pay raises (three 1.3% increases) as a joke, particularly given high inflation rates and the long wait for a new contract.

(The previous contract expired in May 2023)

Other recently signed contracts seem to be also angering USPS workers who felt their increase is wildly out of step with the UAW's 25% raise and Boeing workers' 35% increase.

There are numerous other complaints about poor working conditions, including:

• Lack of air conditioning in many delivery vehicles

• Intense management pressure and surveillance

• Long working hours, often extending late into the evening

• GPS tracking and monitoring of "stationary time"

While the new agreement somewhat addresses the air conditioning, it doesn’t do anything towards these other issues.

In all fairness however, these other complaints that USPS workers are raising are common in the logistics industry, and last mile in particular.

With the never ending messaging that “shipping is free”, it has forced ALL carriers to be far more operationally effective. This means that you need to master time and be able to account for every second of the activity (I have written about these models in previous newsletters).

So, this type of management is necessary, there’s a fine line between effective management and bad practices.

Why Will The Agreement Likely Pass

Postal workers in the US are legally prohibited from striking, which significantly limits their bargaining power.

The choice often comes down to accepting the negotiated agreement or going to binding arbitration, which could potentially result in worse terms.

While many workers feel the raises aren’t enough, the agreement does include some improvements, such as backdated pay raises and the promise of air-conditioned trucks.

After working without a new contract since May 2023, some workers may simply want to see the negotiation process end, even if the result is not ideal.

How Does This Potentially Influence Canada Post

Canada Post has been dealing with their own labour situation.

It hasn’t gotten much attention in the news, but the Canadian Union of Postal Workers (CUPW) has had a strike vote that began on September 9 and will conclude today (October 20, 2024).

The key issues in Canada are pretty much the same as in the US:

• Job security

• Wage increases

• Improved working conditions

Unlike USPS workers however, Canada Post employees do have the legal right to strike.

This right is protected under Canadian labor laws, specifically the Canada Labour Code, which governs federally regulated industries like postal services (however the government is able to mandate them back to work).

Like all labour negotiations, it’s a closed process.

That said, information coming through isn’t looking good.

At the moment, it seems likely that there will be labour disruptions starting November 2 or 3.

What’s not clear at the moment is if CUPW will execute a full strike or a series of rolling strikes across the country, impacting various depots and regions.

Unfortunately for most customers, the most notice you will receive will be the required 72-hour advance notice.

Given the current state of discontent between Canada Post mangement and its employees, the advantageous time of year and the fact that Canada Post absolutely needs to stay relevant, I think a strike is likely.

If I were a shipper right now with volume in Canada, I would start securing alternative go to market options for my Canada Post volume.

All of Canada Post’s larger customers have been made aware of the current situation and the dates related to particular labour disruptions.

That means that many shippers are currently securing additional space with alternative carriers.

While you might think you are “already diversified” because you aren’t sole sourced, this doesn’t mean that you are necessarily protected.

If everyone starts pushing more volume to other carriers, those carriers will quickly fill any available capacity they have.

This means that they will then have to start managing parcel activity by account. And no matter what ANYONE will officially tell you, triage and prioritization activity 100% takes place.

No carrier will risk their business with a strong customer that’s been with them for years to try to take on opportunistic volume with someone using them just because there’s a strike.

What often happens in those situations is that shippers pushing last minute volume increases to alternative networks get hit with higher charges and suffer with lower service levels since your volume has no options and you don’t have a solid agreement in place with the “new” carrier.

Be strategic about what you do and how.

(If this is an area you need help with, feel free to reach out).

Inflation Continues to Influence. Deal-Hunting Consumers Shaping Retail Strategy

The current state of the retail and logistics market for the 2024 holiday season is a combination of optimism, shifting consumer behavior, and multiple operational challenges.

The NRF (National Retail Federation) forecasts that winter holiday spending for 2024 is expected to grow between 2.5% and 3.5% over 2023.

This translates to a total holiday spending of between $979.5 billion and $989 billion in November and December, compared with $955.6 billion during the same period last year.

Looking at the September results, we do see positive indicators:

• Total retail sales rose 0.4% compared to August and 1.7% annually

• Non-store retailers (including e-commerce) saw a 7.1% annual increase

• Core retail sales increased 0.7% month-over-month and 2.4% annually

Inflation remains a critical factor influencing both consumer behavior and retailer strategies.

With consumers being more cost aware of how they are spending, they are making more intentional purchases to get the most for their spend.

Inventory and returns have also been a major factor for most retailers going into the holiday season.

A deal-hunting mindset has emerged among consumers.

Nearly 80% of shoppers indicated they would participate in early sales events this year—up significantly from 61% in the previous year.

This means that using historical information to plan for activity will need to have a broader buffer to account of unexpected spikes.

It also means that trends and stability that may have been there in years past shouldn’t be relied on as heavily as you normally would.

With the holiday season expected to see a more promotional retail environment than last year, it puts even more pressure on your inventory management and operational execution to take advantage of every opportunity.

Stores and online inventories need to be faster to react, and 3PL service providers and delivery partners need to be able to accommodate large shifts in day to day activity.

Bridging with the needs to drive more sales, returns is once again a massive topic for the holidays.

60% of retailers have raised prices in the past 12 months to offset costs associated with returns. Returns fraud cost retailers nearly $102 billion in 2023, up 20% year-over-year and 63% of retailers still categorize returns as a severe or significant problem this year (this is however down from 73% last year).

With more customers looking to spend early, then possibly making returns if they find a better deal or product, they’ll be more of a need (and value) for providers to be able to quickly process and turn returns to get as much as possible back to stock and ready to sell.

Here are the top-line strategies that retailers are using to address the current market challenges:

1. Early Promotions - 47% of retailers started holiday promotions before or in early September to offload excess inventory

2. Return Policies - Retailers are implementing return shipping fees, limiting free returns to loyalty members, and offering free in-store returns

3. Technology Adoption - 47.4% of retailers are using AI to minimize return rates by providing more detailed product information

4. Fraud Prevention - Retailers are partnering with technology solutions to combat returns fraud, which worsens during the holiday season

What can you do as a service provider to provide the highest performance to your customers?

Details Of Yellow’s Bankruptcy Plan Just Came Out

Yellow Corp., has filed its final Chapter 11 plan with a federal bankruptcy court in Delaware.

The plan outlines how the company intends to settle its debts and distribute its remaining assets.

It includes full payment of employee paid time off (PTO) and commission claims, estimated to be between $75 million and $100 million.

This is what’s breaking out for creditors:

• Secured and priority claims are expected to be paid in full

• General unsecured claims are marked as "impaired" with recovery projections ranging from 0% to 26%, depending on the final settlement of pension fund claims

(The total pension fund claims, including withdrawal liability claims, amount to approximately $7.5 billion. However, a recent court ruling suggests these claims may be settled for a lower amount)

The final outcome of Yellow's bankruptcy and its full impact on the LTL industry will continue to unfold in the coming months as the court processes the plan and outstanding claims are resolved.

Yellow is still involved in various legal matters, including WARN Act litigation regarding employee layoff notifications and an EPA claim related to terminal contamination.

That’s it for this week. Thanks for being here.