Our prior Supply Chain Matters commentary noted today’s stunning development regarding the suspension of the P3 Network among the top three global ocean container shipping lines. Procurement, logistics and transportation teams have to now place serious weight to the implications and potential scenarios of a shipping industry running out of capacity rationalization options and ripe for more consolidation. Any additional shipping industry moves can well impact shipping assumptions related to tariffs, service levels and routes.
An additional short-term concern relates to a more near-term threat, that of a labor disruption involving 29 U.S. west coast ports over the coming weeks. Negotiations concerning nearly 20,000 dockworkers located among various West Coast ports are approaching expiration of current contract in less than two weeks and the latest reports indicate little progress being made.
While many industry observers are not expecting a prolonged disruption in port activity, these events usually reflect hard ball positioning that usually brings the parties to the brink of contract expiration and beyond. In the past, U.S. regulatory authorities have been quick to exercise a cooling-off period, when the economic conditions warrant such actions, as is the current case.
The implication is that industry supply chains with a strong reliance on west coast ports will face a July or August period of high uncertainty as additional labor actions or potential work slowdowns continue to occur. As industry teams are fully aware, this same period represents the initial surge of container shipment movements from China and other Asian posts destined for U.S. west coast ports to fill the logistics and inventory pipeline for the upcoming seasonal U.S. holiday period occurring towards the end of the year. Transportation industry players are well aware of the implications and rest assured contingency planning is already underway.
Disruptions or slowdowns will equate to more pipeline and safety stock inventories which will all have to be adjusted and rationalized in the coming months.
While U.S. consumers are looking forward to upcoming summer vacations, picnics and celebrations, be mindful that logisticians, procurement and supply chain planning teams will be hard at work in responding to a host of challenges in global transportation movements, both short, and longer-term in scope.