3 ways retailers can quickly build supply chain resilience for the holiday surge
Supply chain resilience is essential for retailers year round, but especially during the holiday shopping season. Here are three best practices.
Editor’s note: The International Longshoremen’s Association and the United States Maritime Alliance on Oct. 3 announced a tentative agreement on wages, immediately ending the strike. They extended their contract until Jan. 15 and are returning to the bargaining table for outstanding issues such as the union’s proposed ban on automation.
Thousands of union longshoremen walked off the job Tuesday, following through on their vow to strike at all major East Coast and Gulf Coast ports if their contract demands weren’t met.
Experts warn that the port strike, the first coast-wide strike by the International Longshoremen’s Association in almost 50 years, will lead to supply chain disruption, stock shortages, and higher consumer prices, especially if it’s prolonged.
Even if it lasts only one week, the strike could cost the U.S. economy $3.78 billion, according to The Conference Board.
High stakes: U.S. port strike
The ILA rejected the final proposal offered Monday by the United States Maritime Alliance, saying that it fell far short of of rank-and-file members’ wage and job protection demands. ILA members went on strike at 12:01 a.m. Tuesday at waterfront facilities from Maine to Texas.
“We are now demanding $5 an hour increase in wages for each of the six years of a new ILA-USMX Master Contract,” ILA President Harold Daggett said in a statement. “Plus, we want absolute airtight language that there will be no automation or semi-automation, and we are demanding all Container Royalty monies go to the ILA.”
According to The Conference Board, 36 East and Gulf Coast ports combined handle 57% of US container volume, and $3 trillion of annual US international trade.
Experts say electronics and automobiles will be heavily impacted by the strike, but all kind of products could be impacted by a prolonged work stoppage, including industrial supplies, prescription drugs, and perishable goods like bananas.
The National Association of Manufacturers estimates that the port strike will put $2.1 billion worth of trade at risk each day and reduce GDP by $5 billion a day. Only some of those losses could be recovered by rerouting goods or when longshoremen return to work, according to NAM.
NAM, along with other industry groups, like the National Retail Federation, are calling on President Biden to intervene by invoking the Taft-Hartley Act, a 1947 federal law that would allow him to suspend the strike for an 80-day cooling-off period.
“There will be dire economic consequences on the manufacturing supply chain if a strike occurs for even a brief period,” Jay Timmons, NAM president and CEO, said in a statement.
However, the White House has said it will not invoke Taft-Hartley. Biden in a statement on Tuesday said he urged USMX to “come to the table and present a fair offer” to ILA members.
“It’s only fair that workers, who put themselves at risk during the pandemic to keep ports open, see a meaningful increase in their wages as well,” he said.
Retailers prep for strike impact
With the potential for a port strike looming for months, retailers have been taking steps to reduce the impact, especially as they prepare for the critical holiday shopping season.
Many have stocked up on goods, having items shipped early to avoid problems, but paying more to ship and store the stock, according to a Reuters report.
Retail giant Costco said it also was looking at moving goods to other ports and shipping them across the country if necessary.
The preparation by retailers, manufacturers and others means consumers won’t feel an immediate impact from the port strike, but things could get ugly if workers remain off the job for more than a couple weeks. Experts warn of shortages and more inflation, which could lead the Federal Reserve to be cautious about lowering interest rates.
“A port strike would paralyze US trade and raise prices at a time when consumers and businesses are starting to feel relief from inflation,” Erin McLaughlin, senior economist at The Conference Board, said in a statement.
“There’s no easy Plan B. While shippers have already begun diverting some cargo to the West Coast, capacity for such alternative options are limited.”
A multiplier effect
The port strike comes as the global supply chain has already been taxed by the Red Sea crisis, which forced companies to reroute shipments around Africa, as well as the Panama Canal drought crisis.
A logistics expert told CNBC that supply chain congestion caused by the strike could make recovery from Hurricane Helene even more difficult.
The ILA said it plans demonstrations to continue round the clock for as long as it takes for USMX to meet the demands of its members. “When we fight, we win,” said Bobby Olvera, Jr., president of the International Longshore and Warehouse Union, in what ILA described as a demonstration of international solidarity.
