Q&A on West Coast ports labor negotiations

Spencer Shute, principal consultant at procurement and supply chain consultancy Proxima, discusses the resumed negotiations in the West Coast ports labor dispute.

What can we expect from the negotiations?
Thus far, news from the resumed communications has been limited. Given the Congress intervention in the rail negotiations, we should expect the labor unions to dig into their positions even more.

While we won’t see government intervention in the port negotiations, labor unions are more empowered to see their demands be met.

What are the potential logistical challenges of spreading imports along the East Coast and the Gulf Coast?
Initial shifting of volume created backlogs and delays at various ports on the East and Gulf Coasts. As demand and volume has declined over the last two quarters, ports have regained balance.

Gulf and East Coast ports have worked to improve efficiency, thru-put, and implemented many enhancements to accommodate additional volumes. All of which has resulted in limited long-lasting challenges from the volume shifts.

How does it impact the greater supply chain in terms of trucking, cargo, and freight networks?
The shift in volume has also shifted other supply chain modes and network footprints, particularly along the East Coast. New York/New Jersey ports have surpassed Long Beach/LA in terms of overall volume. This has created a bigger need for drayage, yard space, and trucking capacity to accommodate the increased volume.

Because the volume shift wasn’t immediate, and with sailing times increased, other logistics modes have been able to adjust and adapt with more success, which is why we haven’t heard of major, long-lasting impacts.

Are there additional steps companies can take to reduce risk and prepare for potential disruption?
Most shippers are seeing a surge in ocean shipping capacity and have already adjusted their shipping lanes to other ports. Continuing this practice until the negotiations have completed is the best practice to reduce risk.

What are the potential economic impacts?
Ultimately, this could impact labor costs, which will have an impact on inflation and will drive up logistics costs when shipping through the West Coast. These negotiations and the rail negotiations could also be used as a model for any future labor union negotiation.