Looming Port Strikes: How to Brace for Retail Impact

8/12/2014
As peak season is fast approaching, it's unwelcome news to many retailers that labor negotiations among 20,000 workers at 29 ports along the West Coast are still suspended. Talks resumed on August 4 with the hope that a strike or lockout still could be avoided during this critical time.

Should the talks fail, it could cost the U.S. economy upwards of $2 billion or more each day – and it's happened before. Recall the incident in 2002 when the dissolution of labor negotiations resulted in a 10-day lockout? That single incident was estimated to have cost the economy "$1 billion a day, and disrupted supply chains for six months," according to Jonathon Gold, vice president of National Retail Federation's (NRF) Supply Chain and Customs Policy. The NRF estimates another 10-day stoppage could result in a loss of 169,000 jobs; the West Coast ports account for almost half of all U.S. maritime trade.

Reactive plans demand a high price tag
At this point, most retailers have already put contingency plans in place during the past several months in order to prepare for any disruptions from a strike. However, these measures may have caused unnecessary traffic jams leading into ports in Vancouver, Mexico, the Gulf, and the East Coast. These ports are not accustomed to handling so much cargo overflow and lack the capacity to easily process the volumes that run through the West Coast ports daily.

In June alone, the Los Angeles port handled 736,438 container units, the busiest June on record, and Long Beach similarly saw increased cargo traffic, making June the busiest since 2007. These ports are, respectively, the number one and two in terms of capacity and retailers are now facing a compromising bottleneck. For many, "Plan B" involves relying more heavily on air shipping as the amount of time and cost retailers would incur to re-route to another port almost equals the additional cost required to transport cargo by air.

The answer isn't more forecasting
Retailers everywhere are looking for answers about how to avoid disruption without sacrificing profit. But how are retailers expected to make effective decisions in an unpredictable environment where strikes threaten to collapse sales? Supply chain experts agree it's pointless to try to control the environment or forecast when strikes might occur. The only solution to avoiding massive upheaval is to be able to react to circumstances quickly in the supply chain.

The best way to mitigate the impact of unexpected disasters is to build an agile and transparent supply chain that allows retailers to seamlessly make adjustments in real time. Real-time visibility in any supply chain can allow companies to make up-to-the-minute inventory decisions that are then instantly communicated across the entire supply chain network: to partners, manufacturers, logistics providers, and other stakeholders. In other examples, when disaster does strike, retailers that operate their supply chains as collaborative networks are the ones that are able to carry on business as usual without sacrificing their bottom lines. Those that do not take this approach and simply rely on keeping an ear to the ground will crumble under shipment delays and crushing cost burdens.

While the ideal solution for August is for the negotiations to pass without any issue, there will most certainly be future port lockdown threats. The last reality a retailer wants to face is to run out of Halloween costumes, holiday boxes and gifts, or Valentine's Day lingerie.  But let's face it – there's never a good time for a strike. And it's a simple fix: invest in creating a responsive and transparent supply chain and toss aside the crystal ball.


Leela Rao is retail marketing manager at GT Nexus, a cloud-based supply chain platform that connects more than 25,000 manufacturers, suppliers, retailers, financial institutions, etc. on a network similar to a LinkedIn for global supply chains.
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