US Dockworker strike and the lessons from prior strikes
Dockworkers may be an overlooked profession even with international trade and exim profesionals but around the world dockworkers have been striking and walking off the job for many reasons many about pay and safety measures.
Port Strike in the US
The impact of these disruptions can reverberate through various sectors, affecting everything from consumer goods availability to the stability of international trade partnerships. Immediate attention and action are critical to mitigate these risks and ensure the seamless flow of goods essential for economic vitality.
An imminent dockworker strike on the U.S. East and Gulf Coasts started to disrupt all aspects of the business long before the strike was announced. Businesses that dependent on these critical ports have complained about delays, lack of consistent processes and poor management. These same business could face immediate and severe disruptions in the face of an immenent strike by dock workers.
The potential consequences are immense, with supply chains likely grinding to a halt and delays spiraling into costly bottlenecks. Given that these ports handle over 40% of the nation's imports, every day of work stoppage could set the economy back billions of dollars. Time-sensitive industries, such as retail and manufacturing, risk catastrophic production slowdowns and shortages.
With more strikes imminent, businesses must prepare for major operational challenges—before it's too late.
Possible Scenarios:
Port Congestion and Delays: Similar to other recent port strikes, the immediate result would likely be massive congestion as ships pile up waiting for port operations to resume. This would create a backlog that could take weeks or months to resolve, further delaying shipments and disrupting delivery schedules. A strike could impact over 1 million TEUs (twenty-foot equivalent units) per month at major ports like New York, Savannah, and Charleston, significantly reducing the flow of goods.
Supply Chain Disruptions: With delays at the ports, supply chains across industries such as retail, manufacturing, and agriculture could face disruptions. Retailers, particularly during the holiday season, might experience product shortages or increased costs as they try to meet demand. Similarly, manufacturers dependent on just-in-time delivery of raw materials could see their production timelines thrown into disarray, resulting in potential slowdowns or halts in production.
Increased Shipping and Storage Costs: If the strike persists, carriers may start imposing surcharges due to congestion and delays. For example, some shipping companies have already announced potential fees of up to $3,000 per container to account for the extra operational costs. Additionally, businesses could face demurrage and detention charges as containers remain at terminals longer than expected.
Alternate Routes and Congestion at Other Ports: Many companies may look to reroute shipments through West Coast ports or Canadian ports. However, this could lead to significant congestion at these alternate locations, which are already handling increased volumes due to previous supply chain challenges. While some shippers may turn to air freight for critical goods, this option is significantly more expensive and may not be viable for all businesses.
Government Intervention: Historically, the U.S. government has intervened in labor disputes that threaten the national economy. The last time the Taft-Hartley Act was invoked was during the West Coast port lockout in 2002. Although President Biden has shown support for labor unions, if the strike creates a national emergency, there could be pressure to invoke Taft-Hartley, which would temporarily pause the strike for 80 days while negotiations continue. However, this would depend on how long the strike drags on and the broader economic impact.
Recommendations for Your Business:
Diversify Your Freight Sources: Consider alternate supply routes, including inland or West Coast alternatives, and negotiate with suppliers for earlier shipments to reduce the impact.
Manage Cash Flow: Prepare for potential disruptions by building a financial cushion. Anticipate higher shipping and operational costs during this period.
Communicate with Clients: Proactively inform your customers about possible delays and work with them to adjust timelines to maintain strong business relationships.
Explore Long-term Alternatives: Given the growing labor issues in the global logistics industry, it may be wise to invest in long-term strategies like increasing warehouse capacity for inventory or exploring new markets for imports.