UPS strike debacle reminds us how fragile supply chains remain

Don’t look now but Irish and, indeed, global trade appears to have narrowly avoided potentially significant disruption in the past week.

Workers at United Parcel Service (UPS) in the US, represented by the International Brotherhood of Teamsters, are now voting on the terms of a deal with their employer over pay and conditions that would, if ratified, avert industrial action that could impact about a quarter of the world’s largest economy’s parcel deliveries, a whopping 5 or 6 per cent of US gross domestic product by some estimates. Needless to say, sighs of relief are practically audible from the other side of Atlantic with the Teamsters urging its members to back the agreement it negotiated.

But businesses and consumers on this side of the pond should perhaps be equally relieved. In the event of a strike, any Irish company connected with the US through the UPS network would face more supply chain ructions not dissimilar to the turmoil that roiled international trade during the first two years of the pandemic when public health restrictions disrupted capacity and shipping costs soared.

Speaking to The Irish Times before a tentative agreement was reached between the union and the company last week, David Warrick, executive vice-president at Irish-founded supply chain company Overhaul, said the prospect of even a brief spell of industrial action could have seriously upset the delicate balance of global freight transport.

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Apart from the immediate delays and the ensuing scramble for alternative options, Warrick said the issue was that for businesses already in the UPS network, “there’s a fair chance that you’re not just going to switch to another partner and get the same pricing. Whenever there’s a certain amount of capacity taken out [of the worldwide network], it’s in the interest of the other players to actually increase their [prices] so you’re gonna have to pay more.” Higher shipping costs means higher consumer prices, a fact that will not be lost on anyone after the past few years of eye-watering inflation.

Supply chains have substantially recovered while shipping costs continue to return to Earth after the worst excesses of the Covid years. But recent developments at UPS are a timely reminder of how, in the era of just-in-time inventory and next-day shipping, a pebble or two thrown in at any one point can cause ripples that spread far and wide through the global system.