Exclusive: Update on West Coast ports labor negotiations
July 1. That’s the expiration date for the contract that covers the International Longshore and Warehouse Union’s more than 22,000 workers at the 29 ports along the West Coast.
Negotiations are ongoing, but experts think it is unlikely a deal will be reached before July 1. (In the past, contract talks have run beyond the expiration date and led to major disruptions to port operations.) The stakes are especially high this time around, however, as the negotiations are playing out amid a backdrop of global supply chain disruptions.
Chain Store Age spoke with Spencer Shute, senior consultant at procurement and supply chain consultancy Proxima, part of Bain & Company, about the possibility of a shutdown and its impact on retailers.
Given that an agreement is not expected to be reached by July 1, what does this mean for supply chains this summer and for peak season?
The impact for supply chains will vary depending on how severely the flow of goods slows down after July 1st. A full shutdown will be devastating to the U.S. supply chain and will be felt by all retailers and consumers. Limited supply will continue to impact inflationary concerns.
While a full shutdown is the worst-case scenario and both sides are working to avoid that situation, it is likely that the flow of goods through the West Coast ports will slow down. This will cause transit delays as freight that is being processed at a slower rate won’t be available for truckers.
If the slow down happens immediately trucking equipment will be out of position which impacts overall freight rates. The additional delays will create a sense of limited supply impacting consumer buying patterns.
Retailers will begin to encourage holiday shoppers to purchase goods sooner than “normal” (similar to last year). An additional factor in all of this is freight from Shanghai will begin reaching U.S. ports after they have started to reopen from the lockdowns. This will create a sense of volume surge which impacts how the ports process freight. If negotiations are not completed, there will be limited incentive for the laborers to expedite processing ships coming to port.
How will this impact businesses that rely on the ports for the shipping of their goods?
The primary impact will be delays in getting product into businesses’ networks and ultimately available for consumers to purchase. Should the slowdowns dramatically impact carrier equipment balances, shippers will also face higher freight costs to move available product from the ports to their facilities.”
Should the industry have seen this coming … what about alternatives?
Alternatives are limited considering the volume processed through the West Coast ports. The expiration of the current agreement has been known since it was signed and isn’t a completely unforeseen event. What makes this particular negotiation more challenging are all the supply chain disruptions over the last two years and the resulting impacts on supply, demand, costs and labor.
In a normal negotiation cycle shippers could have prepared more easily by ordering product ahead of schedule, looking at air options or shipping to different ports. These options are limited depending on the product category being shipped because of all other disruptions.
In order to properly prepare for this shippers need to understand their supply chains and risks associated with their current network. Using real-time data to analyze their network gives them the best opportunity to mitigate disruptions more easily, or at least react much sooner.