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West Coast Port Strike- Supply Chain Matters Update Two

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The ongoing labor stoppage involving the majority of operations at the Ports of Los Angeles and Long Beach has now entered its seventh day.  These combined port facilities account for upwards of 40 percent of U.S. inbound imports, and the cumulative effects of the strike have begun to cascade across some supply chains.

After weekend and all-night talks failed to garner much progress, Los Angeles Mayor Antonio Villaraigosa announced today (Tuesday) that both striking clerical workers and port management have agreed to enter mediation.  A published Reuters report quotes a clerical union spokesperson as indicating that both sides had “made incredible progress”, crediting the mayor with helping the parties to narrow differences. Union members are demanding that jobs traditionally performed by their members remained classified as union work and subject to contract terms, even after employees holding these jobs retire. They have accused management of seeking to outsource these jobs elsewhere for less compensation.  Employers also insist on the right to fill only jobs required and accuse the union of seeking to staff at artificially high levels.

Published reports indicate that thus far, 18 ships have been diverted to other west coast or Mexican ports while an additional 13 ships are at anchorage outside the LA and Long Beach port complex, unable to unload their cargos. Four container terminals within the complex remain open, along with facilities for unloading autos, liquid fuels and break-bulk cargos.

Last week the National Retail Federation called for White House intervention. A coalition of 100 trade associations representing manufacturers, retailers, farmers, and logistics and transportation providers also expressed their concerns to President Obama on Monday. White House Press Secretary Jay Carney indicated that President Obama was “monitoring the situation” and has urged the opposing sides to remain at the bargaining table and work out their differences.

From a transportation and logistics perspectives, the bulk of holiday season shipments have already reached their destinations, which has been confirmed by a number of major retailers. This would have been a far more disruptive situation if this strike occurred in the September/October time frame.  As noted, some ships are in the process of being diverted, which is the normal course of action for certain time sensitive cargos. Ships that remain in waiting most likely have less time sensitive cargoes. However, hundreds of longshoreman, truckers, warehouse and other workers are impacted by the idled port operations.  Some estimates point to an overall economic impact of more than $1 billion a day resulting from this strike.

At this point, it would appear that both sides at headed in the right direction with hopes that the introduction of federal mediation will help to resolve the differences. Broader global supply chain concerns are more focused on a prolonged period of idled port operations that stretch into the New Year.

Supply Chain Matters therefore remains optimistic that both union and management will come to consensus and resolve the current west coast port situation. Supply chain teams will however need to remain diligent in monitoring all west coast port shipments and make alternate arrangements for time sensitive shipments. Scenario planning should be initiated to ascertain impacts if this strike prolongs itself over the next few weeks, but weighting should be conservative.

Bob Ferrari

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