With talks under way on a new contract for dockworkers at the Port of Los Angeles and other West Coast ports, the big fear for retailers and other businesses that rely on those facilities is the threat of a strike or shutdown. Longshoremen carrying picket signs instead of manning cranes while cargo sits on the dock and ships back up in San Pedro Bay is the last thing retailers want to see as the back-to-school season approaches and merchandise begins to arrive for the winter holidays.
But it doesn’t take a full-blown strike – or a lockout by management like we saw in 2002 – to have an impact on the retail industry and other shippers. Lots of smaller disruptions can cause nearly as much trouble.
If a segment of L.A. and Long Beach port truck drivers go on strike again – as they have three times in the past eight months – that would certainly impact terminal operations. And even if nobody decides to stage an intentional disruption, ordinary backups at the gates as truckers wait to pick up their loads already cause delays on a daily basis.
The fact is that a supply chain disruption is a supply chain disruption regardless of the cause. Nobody – not labor, management, retailers or other shippers – wins when cargo stops moving. And that’s why the National Retail Federation has urged both labor and management to settle on a new contract before the current agreement expires June 30. Even if the contract expires, we’ve asked both parties to keep talking and keep the ports operating without disruption until a new agreement can be reached.
The sooner labor and management can agree on a new contract, the better it is for everyone who relies on the ports. We don’t want to see a repeat of 2002, when a 10-day lockout in the middle of the holiday season left a backlog of cargo that took months to clear. Or another situation like those in 2012 and 2013, when the industry had to deal with the constant threat of a strike at East Coast and Gulf Coast ports as labor and management went through contentious negotiations.
Uncertainty
Even with no disruptions so far, the very fact that contract negotiations are going on causes supply chain uncertainty that has already affected retailers. The NRF’s Global Port Tracker report shows that major U.S. ports are expected to handle an unusually high 1.43 million inbound cargo containers in June, a sign that retailers are bringing merchandise into the country early to protect themselves against any disruptions. Two-thirds of those containers will come through West Coast ports.
Retailers have a variety of contingency plans in place, with one recent survey showing two-thirds of shippers plan to divert freight away from the West Coast to the East Coast or even Mexico or Canada if necessary. While contingency plans are necessary, they are also costly – sending cargo to another port can result in extra maritime costs and added rail or trucking expenses to get it where it belongs. Even storing merchandise that comes in early results in increased warehouse costs.
In addition, at least a dozen shipping companies have filed plans with the Federal Maritime Commission for congestion surcharges, saying they want to charge extra if their ships get stuck waiting to be unloaded because of a disruption.
Efficient movement of cargo is essential to the heavily seasonal retail industry – we can’t sell bathing suits that arrive in October or Christmas gifts that arrive in January.
The ports of Los Angeles and Long Beach face a lot of competition in today’s global supply chain. A new contract gained without disruption would help ensure that the ports remain a global competitor for years to come. However, the ports, along with all stakeholders, must continue to address all issues that impact operational efficiency to ensure that the ports can handle expected trade growth.
Jonathan Gold is vice president for supply chain and customs policy at the National Retail Federation in Washington, D.C.
