Late last week came the news that after a week of review, a membership caucus of International Longshore and Warehouse Union (ILWU) delegates have recommended approval of the new five year contract agreement reached with the Pacific Maritime Association in late February, representing the majority of U.S. west coast ports. This supposedly paves the way for the process of full ratification by secret ballot of all members of the labor union working at the various 29 ports. The final count is scheduled for late May, thus uncertainty still remains as to whether any local issues or disputes will stand in the way of full ratification.
Over the last weeks and months, the full impact of the U.S. west coast port disruptions as result of labor contract negotiations have come to light. Manufacturers and retailers, including Boeing, Lululemon Athletica, Restoration Hardware and even Wal-Mart have each cited the effects of shipping delays on their operating results.
As U.S. west coast ports continue efforts to dig out from cargo backlogs, underlying structural issues remain in areas of how to speed-up the unloading and re-loading of larger container mega-ships that now carry containers representing multiple shipping lines. The imbalance of available truck chassis pools and needs for higher levels of overall port automation and productivity remain as added challenges.
With the pending expansion of the Panama Canal, manufacturers and retailers continue evaluating further shipping and logistics options, and already there are reports of new warehouse and distribution investments being made at major U.S. east coast ports such as Baltimore, Miami and Savannah.
The U.S. west coast port disruption may be moving toward a new labor agreement ratification but the underlying port challenges will remain as uncertainties for many months to come.
There are many procurement implications that are brought to life with this labor agreement. Not only are there logistical issues, but the speed and reliability of the shipments are compromised because of the lack of efficiency at the ports. Downstream, customers are upset because their products are more expensive, and not as readily available. (I know I can’t handle any more expense on LuLu Lemon price tags.) Furthermore, expectations for the speed, safety, cost effectiveness, and reliability of shipping through ports does not decline when labor and managers disagree. The US West Coast port operations have been anything but efficient these last few months, and I think it is time for companies that utilize them to transition into alternate routes of transporting goods.
The article mentions alternatives such as the expansion of the Panama Canal, and the opening of the East coast ports for west coast shipments. The logistics of these two options appear to be long term, viable solutions, that will not satisfy the current need of an operational west coast port.
I think it is time to transition into a heavier air flight supply chain until the ports show sign of long term reliability. There is no telling when the Labor Union Caucus will reach an agreement, and waiting for a decision is hurting the manufacturers and retailers that use the West Coast Port for their logistics. Although the rights and privileges of the union workers should be satisfied, companies that utilize the ports should not be inhibited because an agreement has not been reached. Constricting the companies to one method of transportation is limiting. By transitioning the companies to a supply chain with an emphasis on an air transportation, reliability will be restored.
Thanks for sharing your observations and perspectives. A focus toward more air freight considerations has cost implications for certain lower margin industries. The overriding message however, is indeed that while the immediate crisis may have been temporarily solved, the structural efficiency and logistics throughput challenges remain for U.S. west coast ports.