Nation Slows as UPS Stops
Catalog firms and factories feel pinch. Strike will only hurt economy if it lasts.
NEW YORK — It's usually parked between the Q&T convenience store next door and the loading platform.
Habitat, a manufacturer of silk-screened shirts in Montrose, Colo., uses United Parcel Service so much that the delivery firm just leaves a tractor trailer in the parking lot.
But as part of its strike preparations, UPS pulled the trailer. Habitat is now scrambling to find other ways to deliver about 100 cartons daily of its whale and dolphin emblazoned shirts to museum shops and catalog customers. The delays are "costing our customers more money," says Margo Poynter, Habitat's sales manager.
From CD stores to appliance manufacturers nationwide, the gap in service left by the "brown shirts" is being felt.
UPS has cornered the small-package market, shipping 80 to 90 percent of the "delayed delivery" (2 to 5 days) parcels that weigh under 100 pounds.
At a time when American companies have come to rely on "just-in-time" deliveries, and busy, two-income families have become accustomed to the speedy arrival of catalog products, the Teamsters strike at UPS acts like a brake on the nation's economy.
"Everything will slow down," says Ed Rastatter of the National Industrial Transportation League, which represents the shipping departments of major companies.
It is as if someone has managed to throw a few grains of sand on well-oiled machinery.
The grit became apparent almost immediately yesterday morning. Phone lines to other carriers were jammed. The US Postal Service, warning of delays, decided to restrict the number of parcels taken across windows at local post offices to no more than four. And, Federal Express dropped its money-back on-time guarantee and says it will not open any new accounts.
Although most UPS customers had started preparing for the strike a few weeks ago, the nation's shipping departments still expected a crunch. Every day, UPS employees carry 12 million packages. It's estimated that UPS carries about 3 percent of the nation's total production.
If the UPS strike were to continue for any length of time, economists say it could start to slow the US economy later in the year. Factories waiting for parts or UPS trucks to deliver finished products will start to slow production. Initially, this may not have much impact since the nation's inventory levels are already quite high.
But, as production slows and inventories shrink, "both are associated with lower GDP," says Gordon Richards, chief economist for the National Association of Manufacturers.
The UPS strike underscores the growing reliance of American industry on just-in-time manufacturing, which counts on the timely delivery of goods to factories and warehouses.
The strike also shows how integral the company has become in the delivery of parts and catalog items. For example, when an auto dealer orders a part, it frequently comes from a "parts bank" that is run by a package express company. The same is true for videotapes advertised on late-night television. Such companies as UPS or Federal Express ship the product, maintain the inventory, and send the invoices for the companies. "This will definitely slow down the catalog companies," says Mr. Rastatter.
The strike is driving many companies and retailers to search for alternative means of moving their goods. Jim Pellegrino, director of operations for De Choix Speciality Food Co. in New York, is trying to use a combination of other carriers and private messenger services. "You never want to disappoint a customer," he says.
Companies that ship perishables by UPS are particularly concerned. Greg Santos at Orwasher's Handmade Bread, expects to lose some out-of-town business since the breads don't have preservatives in them. "The situation could definitely become problematic," he says.
As delivery problems multiply, pressure will grow on both UPS and the Teamsters to reach an agreement. Both have left the bargaining table. Yesterday, the White House said it would not yet intervene in the labor dispute since there is no evidence that the strike will imperil the national health or safety.
* Monitor staff writer Skip Thurman in Washington and Laura Siegel in New York contributed to this article.
* Delivered 3.15 billion parcels and documents in 1996.
* Handles 80 percent of US packages shipped by ground - 12 million parcels a day.
* Serves more than 200 countries and territories, and 2,400 US locations.
* 302,000 employees in the US; 185,000 represented by the Teamsters Union.
* Three-fifths of employees work part-time.
* Part-time workers earn $9 an hour, full-time workers earn $19.95 an hour.
Source: United Parcel Service