Port Strike Strains Supply Chain

Overview

Late on Thursday, October 3, the International Longshoremen's Association (ILA) and the US Maritime Alliance (USMX) reached a tentative agreement to end a two-day strike that had the potential to negatively impact the US economy by $5 billion. A continuation of the strike would have almost certainly caused widespread cargo delays and escalating shipping costs.

According to the joint statement released by the organizations, the two parties came to an agreement on wages and will resume work effective immediately. The tentative agreement extends to January 2025, and the parties can negotiate a permanent deal any time between now and then.

While a resolution allows for minimal impact to the supply chain, this event highlights the need for proactive supply chain management and the diversification of logistics networks to withstand labor disruptions.

Risk Mitigation Strategies

Those impacted by the strike should consider implementing a few strategies quickly to help safeguard against further disruption:

• Shippers rerouting/diverting cargo: Ocean carriers like CMA CGM and Hapag-Lloyd have started rerouting shipments to alternative ports in Canada and Mexico & the West Coast to minimize delays.
• Create inventory buffers and incorporate new lead times into your Sales and Operations Planning cycles.
• Use multimodal freight solutions and diversify your modes of transport when possible. Move via air for time-sensitive shipments when it makes sense, though capacity is constrained and costly. Delay non-urgent shipments and utilize Vendor Managed Inventory where possible.
• Leverage industry associations for advocacy: Organizations such as the National Retail Federation (NRF) or the American Association of Port Authorities (AAPA) can act on behalf of businesses to lobby government bodies for intervention. These industry groups typically have strong connections with federal agencies and policymakers.
• Secure specialty insurance where offerings are available: Importers and exporters can explore specialized insurance options, such as trade disruption insurance, to cover potential financial losses from delays. Coverage for spoilage or damage due to extended port congestion may also help mitigate financial risks.

Conclusion

The port strike highlights the vulnerability of global supply chains and underscores the need for businesses to prioritize supply chain resilience through diversification and advanced forecasting. As the situation evolves, adaptability and proactive risk management will be crucial for navigating these challenges.

The Elliott Davis team is here to help navigate this developing situation. Contact us below to learn more.

The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.