'Catastrophic' Port Shut Down Looms Over Global Supply Chain

Retailers, beware. What’s been called a “catastrophic” West Coast Port Shutdown could be as soon as 5 days away. In a press conference with reporters this morning, the Pacific Maritime Association (PMA) announced that they would issue a “lockout” of dockworkers if the union doesn’t accept their latest terms.

What can you do to help safeguard your supply chain from this disaster? We examine the details below.

WHAT’S HAPPENING

  • 29 West Coast ports including Los Angeles and Long Beach might shut down until an agreement is reached between the workers’ union and Pacific Maritime Association (PMA) over pay and benefits.

  • The PMA claims that for the past few months there’s been a worker productivity slowdown of up to 60%. Union reps deny claims of intentional worker delay and cite chassis and issues by container-rail interface.

  • A federal mediator stepped in last month, but has been unable to bring both parties to agreement.

  • If a lockout does happen, President Obama could order both sides to work again during an 80 day cooling off period. Following that period, if no agreement is reached, Congress could order workers back to the docks. This would still leave ports extremely jammed in the interim.

Image: Statistics on dockworker slowdown, as alleged by the PMA.

WHAT IT MEANS FOR SUPPLY CHAIN

  • The impact of a complete West Coast Port Down would be unprecedented in scope: shipments going through ports of Los Angeles and Long Beach alone account for 40% of all US imports. In total, West Coast Ports handle 43.5% of containerized cargo in the U.S and transit cargo accounted for 12.5% of US GDP.

  • Retailers will see even steeper delays in getting their products shipped to the US from overseas in the coming months.

  • Port backup will trickle down to other nearby ports.

WHAT SUPPLIERS CAN DO

  • Many retailers, including Honda and the maker of Subaru parts are shipping parts via airlift, despite its higher cost. Fuji Heavy, the maker of Subaru parts, said the switch to air delivery may increase costs by $60 million per month.

  • Consider rerouting shipments to other ports such as Vancouver, although those will also see a “trickle down” of increased traffic.

  • Keep close track of the ongoing negotiations and adjust your shipment schedules accordingly.

For more continued coverage of the port strike, visit our west coast labor dispute page.

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