UPS skirts labor, port snags as holiday shoppers buy early

United Parcel Service Inc.’s better-than-expected results in the most recent quarter point to the courier’s ability to power through two of the biggest challenges now dragging on Corporate America: supply-chain bottlenecks and labor shortages.

With 75% of its employees under a five-year union labor agreement, UPS has a leg up on competitors that are paying large wage increases to attract workers.

“I feel really good about our ability to manage through the labor cost inflation that many companies are dealing with today,” Chief Executive Officer Carol Tome told analysts on a call Tuesday.

Even so, the courier expects to rack up as much as $130 million in additional costs in the second half of this year to raise part-time worker wages, Chief Financial Officer Brian Newman said on a Tuesday conference call with analysts.

Congestion at U.S. ports is slowing the flow of packages, but UPS said its facilities aren’t causing the backlog. Once UPS gets the containers, the packages are shipped promptly, Tome said, noting that one logistics hub near Los Angeles-area ports has only 50 maritime containers of goods even though it has the capacity to handle 70.

“The end-to-end supply chain is jammed upstream,” she said, referring to the ship-to-port operations.

Early shopping linked to worries about product shortages is prompting some customers to pull ahead holiday promotions, Tome said. Some experts think 50% of holiday shopping could be completed by Cyber Monday, the first Monday after Thanksgiving, she said.