Just as industry supply chains continue to recover from an eight day work stoppage involving the west coast ports of Los Angeles and Long Beach, the threat of a work stoppage impacting multiple U.S. Atlantic and Gulf coast ports looms closer.
Talks among the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX), representing multiple port owners, broke down on Tuesday. If a work stoppage were to occur, it would present far more supply chain wide physical and economic disruption consequences. Some industry sources note that over 90 percent of containerized shipments destined for the U.S. eastern seaboard would be impacted. The threat of a work stoppage involves 36 major ports including the major container facilities of Charleston / Savannah, New York / New Jersey, Hampton Roads, Baltimore, Miami, Port Everglades, New Orleans and Houston. Multiple industry supply chains would be impacted, not the least of which would be those involving petroleum, agriculture, automotive, retail, industrial equipment, construction and other commodities.
Similar to what occurred with the threat of a west coast port disruption earlier, the National Retail Federation (NRF) issued a letter to President Obama on Monday outlining the retail industry concerns for a work stoppage impact, calling on the President to use all means necessary including invoking the Taft Hartley Act, to keep both sides negotiating. Both sides are currently ad-odds over the issues of container royalties which the union receives at the end of every year, which is applied to benefits. The talks broke down in September, and an agreement was made to extend the current contract until December 29. Both sides have since been negotiating with the assistance of the Federal Mediation and Conciliation Service.
Many industry supply chains have no doubt, initiated some forms of contingency planning. As we inch closer to the deadline date, contingency and response planning efforts will have to be further operationalized with the decisions and actions of designated contingency planning teams that involve procurement, planning, logistics and transportation, suppliers and customers.
By our view, because of the scope and sheer impact of a potential work stoppage involving 34 east and Gulf ports, the likelihood of a total stoppage scenario is not as high as scenarios involving isolated work stoppages or labor slowdowns as governmental influence is brought to bear, forcing continued negotiations. However, supply chain teams need to be prepared for all contingencies at this point, including adequate safety stock levels, contracting capacity for alternative air freight usage, or multi-mode sea/rail/surface routings involving Canadian, Latin American or offshore ports. Consideration should also be made for work slowdowns among U.S. west coast ports as union members demonstrate solidarity with their east coast members.
Unfortunately, some procurement and supply chain teams may not be able to take extended time to totally enjoy the upcoming Christmas and New Year’s holidays. Then again, that has been the case of continuous supply chain disruption that teams have dealt with for the past two years.
For our part, Supply Chain Matters will continue to monitor this situation and provide important updates for readers.