West Coast Ports continue to struggle

westcoastportIn a previous blog post, we discussed some of the material shortages being experienced throughout the global supply chain caused by a log jam at the West Coast Ports (West Coast port congestion causing real pain).   Specifically the 2 biggest ports, Los Angeles and Long Beach have had congestion problems since November 2014.

The associations of port operators who have blamed the congestion on a union slow down; have decided to shut the ports down this upcoming weekend (Presidents day) to avoid paying overtime.   The unions which include the International Long shore and Warehouse Union say that the congestion is caused by factors outside of their control like the availability of flat bed trucks to move cargo from the docks and claim the shutdown is a negotiation tactic.

Up to now the congestion problems have not had a major impact on the US economy, despite a number of anecdotal stories such as a shortage of McDonald French Fries in Japan reported last December.  However according to NBC News, the congestion could have a 7 Billion dollar impact on US retailers in 2015 as they are experiencing higher costs due to air shipments and lost revenue due to material shortages.  Many retailers already have shipping contingency plans in place that include air shipment or rerouting via East Coast ports.

The association of operators and the unions are scheduled to get back together on February 19th, but many believe that a lot more pain will be caused before any solution is reached.  Even if a settlement is reached soon, experts are saying that it would take most of 2015 to clear the current congestions.

This labor dispute has a number of winners and losers:

Potential Winners:

  • Retailers with flexible supply chain strategies that can work around the West Coast congestion with alternatives.
  • Most of the fashion industry that already has air freight costs built into its pricing.
  • Air Freight Companies
  • Eastern and South Eastern ports will get added business as goods are being rerouted to avoid the West Coast ports
  • US manufacturers, many are saying that some local manufacturers will pick up business normally supplied by Asia. We have had several posts on the “reshoring” trends; this issue may push some businesses to finally make that commitment.

Potential Losers:

  • Regional retailers selling large bulky products that would be too expensive to air ship and are too close to the West Coast to use other water methods.
  • West Coast ports: Many companies are quite frankly tired of this and may just permanently choose to avoid the West Coast.  The pending completion of the Panama Canal expansion may be too late to relieve this specific slow down, but shippers with long memories may decide to use the Panama Canal as a long term option over the West Coast Ports.
  • Unions: West Coast dock workers make great wages and have the best benefit packages around,  major economic pain could cause a backlash.

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