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California Port Strike Enters its Fourth Day- Time for Risk Mitigation Planning

6 comments

It has been another busy and hectic week in our global supply chain world.  Even we at Supply Chain Matters cannot keep up.

A labor dispute involving 800 clerical workers at the Ports of Los Angeles and Long Beach has just about shut down operations involving 40 percent of the U.S. import trade.  According to a published Bloomberg report, seven or eight terminals at the Port of LA and three of six terminals at the Port of Long Beach have halted operations. Union clerical workers, which handle most of the paperwork for ships entering these ports, walked out on Tuesday of this week amid an impasse on contract talks, and other union longshoremen have honored the clerical worker’s picket lines. According to an Associated Press report, at least 18 ships have been unable to either load or unload, since the strike began on Wednesday. Other anchored or inbound container or cargo vessels are being re-routed to other west coast ports such as Oakland, Seattle or possibly Mexico.

Since the Ports are operated by the city of Los Angeles, that city’s mayor has urged clerical workers to return to bargaining and reach an agreement, including the assistance of a mediator. A statement from the clerical workers indicates that they have been working without a contract for 30 months, with the main stumbling block being outsourcing of clerical work. According to the Bloomberg report, port officials claim that work has not been outsourced and that the issue is about promoting “featherbedding”, requiring the engagement of employees even when there is no work to perform.

The National Retail Federation has asked President Barack Obama to intervene citing that the 10-day west coast port strike that occurred in 2002 cost the U.S. economy about $1 billion a day and disrupted supply chains for at least six months.  The AP story indicates that the chief negotiator for the shippers remained hopeful about a resolution, and indicated that talks have been professional and courteous. Thus, Supply Chain Matters believes that any federal governmental intervention is not likely to occur immediately, at least not until the economy is seriously impacted.  The bulk of the holiday inbound goods have already arrived and have been moved from west coast ports weeks ago.

This walkout comes on the heels of stalled labor negotiations among longshoremen and 14 east coast ports including New York and New Jersey.  The Federal Mediation and Conciliation Service is involved in these negotiations and a strike could come in January if an agreement is not reached. If the ports on both U.S. coasts are affected by a work stoppage, that would be a disruption of a far greater magnitude and will likely draw more intervention. Also, the specific Ports of New York and New Jersey are still dealing with the effects of infrastructure and facilities damage brought about from super storm Sandy in early November.

In the meantime, manufacturing, retail and service supply chain teams, if they have not done so,  need to be initiating risk mitigation response planning concerning both U.S. west and east coast container bound shipments and inventory.

As we noted in our commentary opening, there is never a lull period in the world of global supply chains.

Bob Ferrari

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  1. Louise Ho says:

    I’ve had the opportunity to tour the Port of Long Beach with Target and my supply chain class from the University of Texas. Holiday shipping began back in August. While diverting shipment to other ports on the East Cost is an option, corporations like Target will need to expend additional resources getting inventory to their West Cost distribution centers.

    In any given circumstance, a supply chain should have a Plan B (and C, D, ect.) but I wonder how many options a company has to respond to an issue such as labor strike or natural disaster. Awareness in these cases is probably more useful than responsiveness. As my Professor Michael Hasler says, “bad news is good news and no news is bad news.” Thank you for sharing your thoughts on the strike.

  2. Kyle Moser says:

    Thanks for posting an update on the situation in California. I’m a student studying Supply Chain Management, so it’s extremely helpful to get a good summary of this information.

    It will be very interesting to see how supply chain teams adjust their logistics strategy in response to these new challenges. Hope to be reading a post on that soon!

  3. Brandan Bindel says:

    This strike highlights the importance of multi-sourcing, as it is one of the most important methods of risk mitigation. By not being able to import into these valuable ports, it will be interesting to see how companies adopt their logistics strategy and how these changes will ultimately impact the customer waiting to receive the product. Considering the large price increase associated with air versus freight shipping, air transport does not seem feasible. The root cause of the problem seems to be the lack of contract infrastructure with the clerical workers. It is mind boggling that these workers have been working for 30 months without contracts. Contracts are key not only for businesses establishing relationships with each other, but also for employees to create a relationship with a company.

  4. Regan Davis says:

    Of course the strike takes place when the port needs the workers the most, that is not a surprise. What I think is most damaging is that dock workers are now honoring the picket line, so it adds volume (and value) to the clerical workers demands. As others have responded, Plan B’s and multi-sourcing are great ways to be prepared and get ahead of any problems. However, at this critical time, I believe it will be more about speed and contacts. Every company that uses the port will be looking for alternatives, but that excess capacity will soon be gone. The slow-movers will be the market losers, no matter how thorough their business continuity plans are.

  5. Considering that Ports of Las Angeles and Long Beach primarily trade with China, Japan, and South Korea, I would assume apparel & footwear retailers and auto manufacturers will get the most impact from this strike. Also, raw material importers will probably have a greater supply chain disruption than finished goods importers (10-day west coast port strike causes at least 6 months of supply chain disruption) I think there is some sort of “Reversed Bullwhip Effect” for importers. Since variability in supply can cause larger and larger swings in inventory response along with supply chain upstream. Anyway, this incident reaffirms the importance of risk assessment and business continuity planning in supply chain modeling.

  6. Bob Ferrari says:

    Hello Everyone,

    First, I want to thank all of the previous authors of Comments related to our coverage of the west coast labor shortage. All of these thoughts were perceptive.

    Good news to share- both parties in the U.S. west coast labor dispute have reached a tentative agreement with workers scheduled to return to work today.

    Our Supply Chain Matters follow-up commentary can be accessed at the web link below:

    http://bit.ly/R7KhOu

    Thanks again to all.

    Bob Ferrari