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As the deadline looms for the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) to reach a labor agreement, shippers are being put on high alert. C.H. Robinson’s Director of North American Ocean, Mia Ginter, emphasizes that the time to prepare for a potential strike is now, given the ongoing disruptions affecting North American shipping. Still uncertain, the potential impact of a strike on the East and Gulf Coasts could reverberate across multiple industries, prompting the need for logistics planning and strategic contingency measures.
With labor negotiations ongoing, the possibility of a coastwide strike is escalating, with the current contract set to expire in less than two months. A coastwide strike, the first of its kind in nearly fifty years, significantly affects ports that handle a substantial amount of cargo. The East Coast and Gulf Coast ports manage five of the top ten busiest ports in North America, including the ports in New York, New Jersey, and Savannah, Georgia. A disruption in these vital shipping hubs could lead to widespread ramifications, impacting regional and national economies alike.
Importantly, industries that rely on just-in-time inventory models, such as automotive and pharmaceuticals, face heightened risks. For example, a two-day strike could result in severe operational disruptions for automotive manufacturers who depend on the rapid delivery of parts and components. Conversely, exporters who send goods to Europe, Latin America, and the Indian Subcontinent are equally vulnerable as shipments primarily leave from the U.S. East Coast. According to data from Port Tracker, disruptions at these ports could translate into increased costs and extended transit times for all U.S. shipments.
The ripple effects could also extend to Canada and Mexico. A study from McKinsey & Company, revealed that a one-week port shutdown could result in delays lasting up to one month in a cargo's journey. This data underscores the interconnectedness of supply chains across North America.
As shippers contemplate their course of action, they are faced with two primary options: either wait for a resolution to the labor disputes or proactively build contingency plans to mitigate potential impacts. Given that the Biden administration may intervene in negotiations, as seen during the rail strike in 2022, there remains a glimmer of hope for a resolution. However, the ILA leadership has expressed reluctance for government involvement, preferring to resolve issues independently.
For shippers opting for the proactive route, several strategies emerge. Early shipping this year has already positioned some importers ahead of potential disruptions. This tactic not only considers the possibility of an ILA strike but other challenges such as rerouting due to geopolitical tensions in regions like the Red Sea.
To optimize operations, shippers should evaluate alternative port destinations, such as non-union ports in Portland, Maine, and Chester, Pennsylvania. However, these ports serve niche markets and may have limited capacity, necessitating timely bookings. Should shippers need to reroute to U.S. West Coast ports, careful planning of inland transport will be vital, as capacity and congestion are likely to increase significantly.
Should a strike occur, exporters may find their cargo stranded at closed ports. Delays in clearing backlogged containers could exacerbate the situation, increasing overall transportation costs. As the National Retail Federation indicates, such bottlenecks can affect prices and availability of goods — particularly significant as consumer demand fluctuates.
For some shippers, converting shipments to air transport may be an option, but this route tends to be more expensive and capacity is currently limited due to high demand. As a result, shippers will need to carefully weigh the costs and benefits of each transport option to minimize disruptions and maintain supply chain continuity.
In the event of a strike, proactive measures and flexible logistics planning will be essential to mitigate the impact on operations. Shippers should stay informed about potential labor actions and consider a range of contingency plans to navigate the challenges that may arise.
As the situation develops, the ability to adapt quickly and make strategic decisions will be critical for maintaining business operations and meeting consumer expectations.
