Contract negotiations between U.S. West Coast port workers and management have continued into June, and retailers that import goods from West Coast ports are starting to put contingency plans in place to avoid possible supply chain setbacks.
Talks began May 12 and a resolution between the International Longshore and Warehouse Union (ILWU), which represents the dockworkers, and Pacific Maritime Association (PMA), which represents the terminal operators, has yet to be reached. The current contract expires June 30, 2014.
According to a National Retail Federation (NRF) blog post, many feel the talks will extend past the deadline and now the question is whether that will lead to disruptions along the supply chain.
“While it is still unknown what will happen in the negotiations, the good news is that the parties have already started talking and continue to remain at the negotiating table (a positive sign). Now, following normal protocols, there will be a media blackout from both sides throughout the negotiations,” NRF noted.
As the talks continue, manufacturers, retailers and other supply chain stakeholders are putting plans in place to divert goods away from West Coast ports to skirt any possible cargo delays.
A Journal of Commerce study conducted last month found that 66 percent of shippers had plans to reroute goods away from West Coast ports this summer.
“The risk of a strike, lockout or other form of disruption is greatest during times of waterfront contract negotiations, and thus these are the times when cargo interests take precautionary action to avoid ports that might be affected,” the study noted.
Of the 66 percent of shippers that said they had plans for cargo diversion, 73 percent said they would ship through East or Gulf Coast ports, 25 percent said they would ship through Canadian ports and 2 percent through Mexico. In addition, 29 percent said they would divert less than 10 percent of their total cargo volume, 31 percent said they would divert 10 to 25 percent and 40 percent said they would divert more than 25 percent of their volume.
But these contingency plans, like early shipping, diverting product to alternate ports or airing goods, all come at a cost and if shippers and retailers are forced to pay more, these costs could trickle down to consumers.
“While we do not think there will be a repeat of the 2002 port fiasco, it is important for retailers, shippers and other port stakeholders to be ready and prepared for any possibility,” NRF noted.