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MANAGEMENT

11.19.98  
With a Strike Looming, Are You Too Dependent on FedEx?
Line up your alternatives now in case of a walkout

Federal Express keeps business flowing at Shore to Door Seafood in Margate, Fla. Using FedEx's trademark overnight delivery service, Shore to Door airlifts its daily catch of mussel, stone crab, salmon, and other delicacies to wholesalers and retail customers across the U.S. "We're sending a fresh product, not a frozen one," boasts manager Jim McCallum.

The 18-employee company may find its business on ice, however, if the FedEx pilots' union decides to walk out on Dec. 3. A pilots' strike wouldn't hit as hard as last year's far-ranging Teamsters strike at rival United Parcel Service. FedEx is a smaller company, and a strike wouldn't affect as broad a range of workers. But a work stoppage could disrupt thousands of companies -- many of them small businesses like Shore to Door -- that depend on just-in-time delivery. FedEx hasn't announced complete contingency plans, though a strike would likely delay delivery on some overnight services by two or three days, as packages move via land instead of air. The company also warns of delays on international cargo and a possible suspension of its Saturday and Sunday pickup and delivery service (see table for details).

FedEx assures customers that, in any case, there will be only minor disruptions, since 98% of its 143,000 employees will continue to work. The company is also lining up contract aircrews to replace strikers. Still, Shore to Door's McCallum is worried about even a minor hiccup in service. "We could go with dry ice and ship it second day," he says. "But it wouldn't be fresh."

The timing couldn't be worse, either: The strike would hit during the peak holiday delivery season. The combined effects of heavy volume and fewer pilots could hurt a wide cross-section of industries. At Micro Plastics Inc., a maker of threaded nylon fasteners in Flippin, Ark., President Tom Hill monitors the strike talks daily. And for good reason: Micro Plastics ships more than 2,000 packages weekly, 80% of which are sent via FedEx. Ironically, the company switched to FedEx after the UPS 15-day strike in August, 1997, which "had the potential to basically shut down our business." FedEx, says Hill, "got us out of hot water during the UPS strike."

Hill says he would switch back to using UPS only if the strike were prolonged enough to stop workflow. Meanwhile, he adds that Micro Plastics is better prepared for a shipping shutdown -- the company diversified its roster of delivery services after the strike last year.

STRIKE-PROOF SOLUTIONS. Contingency planning is essential for any business that's too dependent on one carrier. At the very least, small companies should consider opening accounts with competing couriers. Of course, the downside of using several delivery companies is that you're unlikely to generate enough volume to get much of a discount. But that would be a minor inconvenience compared with being unable to deliver merchandise. "Even if you don't use it, open one," says Jamie Midlicott, manager of a Mailboxes, Etc. franchise in Alexandria, Va. "When a strike happens, they won't take any new accounts." That's the case at UPS, whose systems will be taxed under the holiday crunch. Says UPS spokesperson Norman Black: "We've got to have time to plan. You can't come to us the week before Christmas and say, 'Help me.' "

During the UPS strike, FedEx and other competing overnight delivery companies won and kept new customers, even offering sweetheart deals. But with the services already pushed to capacity, don't expect new offers. "We're not contemplating any special discounts," says UPS's Black. At international shipper DHL, the company says its first priority will be servicing existing customers, followed by those willing to sign contracts beyond the period of a strike. But there will be no new price inducements, says marketing manager David Fonkalsrud, adding that the delivery business is already highly discounted.

Worrywarts can take heart from the fact that any potential strike remains more than two weeks away -- and both sides appear to be negotiating in good faith. Still, the price of not preparing for a slowdown could remain high. Just ask McCallum at Shore to Door. "I'll lose a lot of business if it happens," the seafood company manager speculates. That's a prospect that would stink for any company.


By Dennis Berman in New York
dennis_berman@businessweek.com


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