As negotiations stall with railroad labor unions, Chain Store Age spoke with Spencer Shute, senior consultant at procurement and supply chain consultancy Proxima, about the impact a rail strike would have on the nation’s supply chain.
Given that the unions are poised to go on strike on September 16, what does this mean for supply chains — especially for peak season? It will have a significant impact on the U.S. supply chain and fairly quickly. This means trucking rates are likely to increase and delays could become quite extensive as a backlog begins to build.
We’ve already seen embargos announced to prevent freight from getting stuck in the intermodal network. This could be catastrophic for the U.S. economy which is why the government is working to prevent any type of shutdown.
How will this impact businesses that rely on the rails for the shipping of their goods? Businesses are going to see rates increase quickly and capacity drop significantly. Automotive, fertilizer and food (primarily dry goods) companies move a significant portion of their volume via rail. Any strike could result in shutting down about 30% of the U.S. freight movement.
Could anything have done anything to prepare for this? The labor union agreements have been known for some time and discussions have been taking place for several months. Given the state of supply chain there is little that could have been done as an alternative to alleviate the challenges a strike will present.
Rail moves a significant amount of product every day, roughly the equivalent of what 467,000-plus long-haul drives can move. The shortage of truck drivers already occurring in the U.S. means a solution would have had to have been started long ago.
Will the administration take any action? Congress has the power to block or delay a railroad strike and can vote to appoint a panel to resolve the remaining five unions agreement discussions. However, any action by this administration will likely face criticism as they would likely go against unions to resolve the strike. But is it already facing a struggling economy heading into the mid-terms which puts the pro-union administration in a bind.