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Labor Latest Supply-Chain Wrinkle In Need of Ironing Out

Labor is proving to be the wild card of the summer for beleaguered supply chains globally as worker unrest has given way to protests and strikes in the U.S. and abroad.

“A slowdown of any kind, and at any point, in shipping operations is going to have ramifications—especially now, as we enter the busiest time of the year for retailers,” Douglas Kent, executive vice president of strategy and alliances at the Association for Supply Chain Management (ASCM), told Sourcing Journal.

Although labor unrest has implications for the broader movement of goods, it’s not the sole factor, as with anything in the supply chain, when it comes to understanding congestion.

“In any complex system, it is a combination of factors. It is always a combination of factors,” Nathan Strang, Flexport director of ocean trade lane management, said last week in a webinar update on the state of North American ports and trucking. “There are certain things that drive it more than others that can influence it more, but there are a lot of different chokepoints within that [ocean] ecosystem.”

Ships waiting to berth was highest at the Port of Savannah, which counted 42 vessels. Los Angeles and Long Beach counted 20, with New York/New Jersey at 17. On the West Coast, cargo bound for rail is sitting for 30 days or as much as 40 days in some cases before those containers are moved out of port terminals.

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“Terminals, either ocean or rail, are not designed to be storage facilities,” Strang said. “So when someone who imports a container, and it gets to Chicago, and they don’t pick it up, they are now immensely negatively impacting the system because that container is only designed to sit at that rail terminal for 24 to 48 hours, leave and then come back as an empty. It’s not designed to sit there seven, 10, 14 days. It’s especially not designed to sit there seven, 10, 14 days on a chassis. When a container is dwelling on a chassis for three days, that is three, four, five, six deliveries that are not happening with that chassis.”

Logistics sector workers are coming off a rocky couple of years in which they continued to move record amounts of goods during the pandemic. Now, as their contracts come due, unions argue workers should have their fair share of the profits carriers notched during that same period.

Shippers and industry watchers in the U.S. are carefully monitoring labor across all modes of transportation.

West Coast dockworkers have been working without a contract since July 1 as negotiations, which began May 10, continue. The latest update from the International Longshore and Warehouse Union and Pacific Maritime Association, the group representing employers, came last week when the two said they struck a tentative deal on healthcare benefits.

In the case of rail, some 115,000 U.S. rail workers were prepared to strike as early as last month after a cooling off period following a failed round of mediation. The White House stepped in before that could happen, establishing a Presidential Emergency Board (PEB) that wrapped hearings investigating the dispute last week.

Truckers ground operations at the Port of Oakland to a near halt late last month, although the cause of the disruption was in protest against the state’s Assembly Bill 5 (AB5), also referred to as the gig-worker law, that uses a three-part test to determine worker classification.

Port officials, at the end of day four of the protest, set up what it called a Free Speech Zone for protestors, threatening citations or other penalties by law enforcement for anyone disrupting business operations.

“The protests clearly come at a very fragile time for supply chain logistics,” American Apparel and Footwear Association president and CEO Steve Lamar said of the AB5 protests.

Lamar pointed out that while less than 2 percent of apparel and footwear imports came through the Port of Oakland over the past five months, “carriers must seek alternative ports that are already congested while we all await the results of the West Coast port labor contract negotiations.”

Outside of the U.S., collective bargaining disputes bore out in a rocky July for the movement of goods. Lufthansa ground workers’ one-day strike froze flights. Dockworkers in Germany conducted a two-day warning strike at all German ports. Unite union workers have until Aug. 15 to vote on a work stoppage that could come as early as the end of the month.

Meanwhile, workers at the U.K. port of Felixstowe voted in favor of a strike this month over a dispute with the Felixstowe Dock and Railway Company over pay increases.

“Workers should not be paying the price for the pandemic with a pay cut,” Unite general secretary Sharon Graham said in a statement confirming 92 percent of the membership’s vote in favor of a strike.

Felixstowe handles about 48 percent of the U.K.’s container trade, with Maersk warning customers a work stoppage “could result in significant delays across supply chains in the U.K.”

Unite has yet to specify an exact start date for the strike.

“Talent is the largest and most important asset,” ASCM’s Kent said. “Unfortunately, workforce challenges and capacity constraints have wreaked havoc on supply chains in recent years. Now, ongoing factors such as the rise of e-commerce and labor negotiations will only further this congestion and therefore talent investment and optimization need to be a top priority in supply chain planning.”

That means more training and a focus on worker development, Kent said, adding, “[Employers] need to understand the needs of labor, especially cross-skilling and career pathways, which are crucial for retention.”