After port congestion caused by the labor crisis between the Pacific Maritime Association (PMA) and the International Longshoremen and Warehouse Union (ILWU) reached critical levels, the PMA temporarily suspended all vessel loading and unloading operations at the West Coast’s 29 ports this past weekend. The PMA’s decision to halt vessel operations, which resumed on Monday, was carried out in an effort to move through the backlog of containers that has been building up over the past several months.
Since July 1, 2014 (when the ILWU’s contract ran out), the two organizations have been engaged in a bitter back-and-forth exchange of words and demands. Having failed thus far to come to any sort of agreement, the problem has fallen primarily on the backs of importers, exporters, and businesses across the U.S. that rely on goods sent to and from Asia.
“The entire supply chain – from agriculture to manufacturing and retail to transportation – have been dealing with the lack of a West Coast port contract for the last nine months,” said Jonathan Gold, the National Retail Federation’s (NRA) vice president of supply chain and customs policy. “Enough is enough. The escalating rhetoric, the threats, the dueling press releases and the inability to find common ground between the two sides are simply driving up the cost of products, jeopardizing American jobs and threatening the long term viability of businesses large and small.”
The Financial Impact of West Coast Port Congestion
According to global management consulting firm Kurt Salmon, West Coast port congestion could lead retailers to lose as much as $7 billion this year. If this past weekend’s operational suspension is any sign of things to come, the NRA and the National Association of Manufacturers have estimated that a full 10-day shutdown could result in a daily loss of up to $2.1 billion on the overall economy.
Delayed Transportation via West Coast
With ships forced to anchor at bay for weeks at a time and container yards stacked to the sky, transportation times between Asia and the U.S. have spiraled from 20-30 days to as long as 90 days in many cases.
Nearly all aspects of supply chains that utilize West Coast ports have been affected. At the Port of Oakland, for example, a truck driver may have to wait as long as eight hours to get into the terminal to pick up a container. This means the driver is also losing money because he or she is not able to perform as many shipments per day as they previously had. Because of the increased time that goods are stuck in transit and storage at ports, prices for most transportation services have increased as well.
Finding a Solution to the Port Problem
Considering that about 50 percent of international imports enter the U.S. through the West Coast, and approximately 33 percent comes through the Los Angeles and Long Beach ports, numerous shippers are now scrambling to find alternatives.
One alternative is to identify existing weaknesses in a supply chain that shippers do have the ability to correct or optimize. For example, the port congestion at the Los Angeles and Long Beach ports has also contributed to a slowdown in freight moving via land bridge (rail) after being unloaded. However, taking advantage of Averitt’s PortSide service capabilities allows drivers to pick up the containers at the ports and then transload them on to trucks at the company’s nearby facility in Hawthorne for expedited delivery.
Secondly, many shippers have begun to reroute their freight to East Coast ports, including Houston and Charleston. For businesses that have depended on carriers based in California and the West Coast, identifying a reliable transportation provider on the East Coast will be another task. Averitt, for example, offers four decades of supply chain experience and a strong infrastructure in the Southeast with capabilities of moving freight throughout North America.
A third option for working around the West Coast situation is through air transportation. While air freight services may not be able to fulfill the needs of every shipper, it may provide a short-term solution in some cases.
Even if the PMA and ILWU were to find a magical solution tomorrow, the massive congestion created over the course of the past nine months will take several months to stabilize. For shippers and their logistics providers, such as Averitt, the ability to work closely together to adapt to the current situation or to devise an alternative plan is the best solution to the West Coast port problem.