Wednesday, March 4, 2015

The Aftermath of the West Coast Labor Dispute



         If you have had longer than normal supply chain delays as of late, you undoubtedly know that a major reason has been the West coast port closure. Laborers have been in negotiations for better wages, effectively shutting down most West coast ports and leading to massive delays. While we are not the only industry affected by this, it has definitely affected the electronics supply chain.

            While the labor disputes have come to a resolution and imports are now moving, the backlog of shipments and sheer congestion of containers will keep delaying current goods for at least another few weeks. This can last up to 2 months according to Reuters. Delays might not be the only repercussion to this dispute. The fact that labor disputes have plagued West coast ports for generations has forced many companies to reconsider utilizing West coast ports. This is the second full shutdown in the West coast in fifteen years, with the last one happening in 2002.

            While two full shutdowns in fifteen years may not sound like much, the East coast has not had a shutdown since 1977. Since any shutdown can be devastating to companies, many industries have come to the conclusion that constant labor talks are not good for business. In 2002, prior to the shutdown, West coast ports accounted for over 50% of all United States container traffic. This has fallen to 43.5% in 2013 according to the Pacific Maritime Association, and looks to fall even more after this delay. Even before the dispute forced a full shutdown, East coast ports had up to 10.2% growth according to the San Francisco Business Times. This results in the largest growth in 11 business quarters. The Panama and Suez canals saw some growth during the dispute as well as increased traffic.

            While companies are diverting cargo to save their product and profit, the ports themselves have begun looking into automation on a higher level to prevent disputes from shutting down ports completely, as well as improve productivity in general. The biggest change is the growth of “mega-container-ships” according to Breitbart. These massive carriers have increased from a carry capacity of 8,500 containers 20 feet in length in the early 2000’s, to nearly 19,000 today. Capacities of these “mega-container-ships” are expected to increase in the next few years. The major advantage to this is the reduction of longshore workers due to a lower number of vessel calls. The fewer ships that come in, the fewer workers are needed to manage them.

            The truth is, as long as labor is used in importing, there will be disputes. Proper forecasting and forewarning of these events can help your company stay on top of the market. If you have forewarning of these events, you can adjust your schedule as necessary, stock parts in advance, and utilize the import delays to move past your competitors who are stuck in the congestion.

         We respect your input and would love to hear from you.  How have you been affected by this issue? How are you solving it? Let us know you thoughts below!

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