Question: How has port congestion affected your business? How long are the delays?
Weitman: We used to get goods hitting the port and getting offloaded and cleared in an average of seven days. Right now, it’s taking almost two months to get goods cleared from the ports, plus we have goods on the water, backlogged, sitting outside the port waiting to come in. I supply garment manufacturers with components that go on the inside of a garment and we foresaw this coming and started building up extra inventory. But it’s a real problem because it’s putting our inventory on razor-thin levels.
Hilterbran: In the beginning, the delays ranged from seven to 14 days and now they’ve increased up to 20 days. It’s a problem that seems to be ongoing and there’s no real end in sight.
Carr: We have shipments that left China that are currently at the ports in Long Beach that are stuck. For future containers, we may have to reroute to the East Coast. But right now, my situation is that I need the goods desperately. You have to be very lucky to have a good retailer that sells (your products) well. Retailers are expanding our products into more stores and we just don’t have the goods to service them.
How do the past few months compare to 2002, when the ports shut down for 10 days because of labor strife?
Sullivan: In 2002, at the peak of the situation, you probably had about 97 cargo ships outside of the harbor. I think today there are probably about 22, so I don’t think it’s reached that level yet.
Farid: We were a lot smaller then, so nothing like this. We had a tremendous increase in our business last year and we’re looking to almost double our business. But when you’re planning for growth, you need all the elements to come together. It’s a constant juggling act.
Weitman: In 2002, especially in my industry, sourcing product from overseas was just starting to really get into motion. I think today our industry is more and more dependent on goods coming from offshore, so I think the dollar amount at risk here is much greater than in 2002.
Is there anything you’ve tried to do to get your goods and meet client orders? For example, have you looked into importing through other ports?
Kushner: We warehouse our goods on the West and East coasts, and we’ve actually sent a lot more inventory to the East Coast. Then, we’re sending goods back by truck to the West Coast. Of course, that’s a lot more cost to Linus, but we’ve done what we need to do to ensure we have adequate stock levels to fulfill our customers’ orders.
Farid: For certain orders, we scrambled and sourced from importers, distributors and local places. But an importer does the same thing I do – buy the yarn and bring it here. Because they have it available, they add their mark-up to it. So, I’m paying anywhere from 10 to 20 percent more. That’s basically my profit margin.
Greenberg: We’ve been trying to build in more lead time to allow for the delays – placing orders earlier, pushing our suppliers to ship earlier. But every time, the delays get longer. I was told we got three containers last week and we have another five outstanding. I got an email about some vessel delays that are three to four weeks, just on the vessel delay, and you just can’t build that time in. That could turn into six weeks by the time the goods get off the vessel and on our trucks. And in six weeks, you could miss a season.
Hilterbran: We’re currently bringing in containers into the New York ports. Recently, our senior director of supply chain, Nicole Vargas, found that there are now trucking (backups) at the New York ports, similar to what is happening here at the Los Angeles ports, because not only are we shipping products to New York but some of the large businesses are doing so as well. So, what we’ve attempted to do is spread it out – bringing containers into the Gulf Coast and into Canada. Another option, usually reserved for smaller products, is air freight. But if we don’t do the math just right, that can certainly hurt our margins overall.
Weitman: We’ve actually looked into bringing some of our goods from some of our Asian suppliers directly into New Jersey and then trucking them down here. But that’s going to add another 7 to 10 percent to the cost because you’re paying not only the ocean freight to get it across country to a different port, but then you’ve got to put it on a truck to then drive it 3,500 miles across the country. It slows things down and it increases cost and it’s crazy that I’m burdened by this as an operator because of this union dispute and nobody is forcing a resolution.
Given the potential problems at other ports – which have their own labor issues, less predictable weather – is it still worth staying on the West Coast?
Hilterbran: We’ve never utilized the New York ports before now and, to be honest with you, we’d like to never utilize them again because it takes time and it takes money and it’s not as efficient as it should be for our business.
Kushner: We have a broad customer base across the nation so it makes sense for us to warehouse on the West and East coasts. If we shipped everything to the East Coast that is a much higher cost. It wouldn’t be economical or efficient for us to do that.
Farid: If something doesn’t happen in a week to 10 days, we’re really going to have to look at a new strategy.
Greenberg: We don’t think there’s a good alternative. Bringing in goods to the East Coast, there’s a lot of logistics in getting those goods to the West Coast because all of our distribution happens in Los Angeles. So for us it’s really not a good alternative.
Has the port congestion put a strain on your relationship with retailers and customers?
Sullivan: You can sometimes see a situation where a product is shipped beyond the stated delivery date that a retailer provides. I think retailers are certainly sensitive to the fact that there are port issues in L.A., but they also have businesses to run and are making it clear to our clients that they still expect them to find a way to meet the stated delivery date on products.
Carr: Some of the brick-and-mortar stores are understanding of the situation, but the catalog companies have printed pages that are being circulated right now. That’s very difficult for them, and they have to explain to their customers why they can’t get the goods right away. Anything online that we sell, those designs have to be taken down.
Farid: They’re trying to work with you because it’s not just your fault – it’s happening to everybody. And if they don’t work with anyone, there won’t be any goods to sell. But the goodwill only goes so far. It’s a matter of survival and nobody is going to just take goods because they’re trying to be nice. It’s a business.
What’s something about the situation that you think people outside of your industry aren’t aware of?
Greenberg: They’re not aware of the squeeze of what it can do to a brand or manufacturer when you’re trying to meet deadlines of your retail customers. We’re in the fashion business so lead times are very fast. It’s like a being a toy manufacturer for Christmas and you miss that season. It can really hurt your bottom line dramatically.
Weitman: Most people are completely clueless about this if they don’t own a company that’s an importer or deal with the ports. I think finally people are paying attention to it, but if you’re just the average consumer out there, you’re not going to know about it until the products that you’re buying aren’t on the shelves.
A federal mediator brought in last month to help the union and the shippers reach a deal doesn’t seem to have sped up negotiations. Do you think the labor secretary will be able to get the two sides to reach a deal soon?
Sullivan: We’re empathetic to both sides in this dispute. I think certainly the government’s involvement is helpful and we do believe everybody is working as diligently as they can. I think the labor secretary’s involvement will only help. It just hasn’t happened as quickly as everyone would like to see it happen.
Weitman: It’s a shame that our government hasn’t stepped in to do anything. I know they’re sending the labor secretary, but part of the problem is, for every politician, their biggest contributor is the union, so it’s kind of a kiss of death to stand up to them. And, meanwhile, businesses and the consumers are going to be suffering big time until this thing is resolved.
