The U.S. economy is still weak and U.S. port strikes are not helping matters. The LA/Long Beach clerical union strike that lasted 8 days in late November-early December, 2012 shutdown a total of 10 container terminals, and caused a vessel and container backlog that showed its affects 2 weeks after the strike ended. The strike cost companies an estimated $1 billion in lost revenue per day of the strike. At a time when the last of the holiday imports are arriving to the U.S. and as stores are trying to make last minute sales, product/parts delays of any kind limit those U.S. sales.
On December 29, 2012 we may see a U.S. East Coast union strike, costing companies billions more in lost revenue since import/export containers will be delayed at the ports. As stated in the article, “Potential US East and Gulf Coast Port Labor Strike Could Further Destabilize International Trade”, in the maritime-executive, “Those not prepared for such disruption could face adverse operational and economic impacts including increased expenses, decreased revenues, loss of market share, and reputational damage due to their profit-driven strategy of keeping inventory levels low and the sudden and severe backlog and rerouting pressures caused by a work stoppage”. So those companies who were trying to limit carrying costs of inventory and who have moved production overseas, now may see a disadvantage of this strategy as potential port strikes become a reality.
Now many companies are looking at options to build up inventories and keep imports moving into the U.S. Since the issues on the West Coast are cleaned up and the strike has ended, some importers have moved vessels to the West Coast instead of the East Coast, causing extra transportation costs and shipment delays. Some U.S. companies have been building supplies of inventory in their warehouses, at the possibility that a strike could happen. A major factor in limiting supply chain delays will be increased visibility throughout the companies supply chain. Perhaps in the future companies will invest in warehousing at multiple port locations in order to create options in case of strikes or even use this as a reason to either keep factories in the U.S. or this will make a company think twice before outsourcing production overseas.
In the end union strikes are difficult to plan for, especially as there are extra costs in order to manage these possible risks. However, by having proper risk management in place and being ready for this type of situation a prepared company can take market share from those who are not prepared.
Sources:
An East Coast Port Strike Could Have Devastating Impact
http://investorplace.com/2012/12/an-east-coast-port-strike-could-have-devastating-impact/
California Ports Strike Disrupts Holiday-Shopping Cargos
L.A. Port Workers Reach Agreement to End Eight-Day Strike
Potential US East and Gulf Coast Port Labor Strike Could Further Destabilize International Trade
Worries mount about possible East Coast port strike
http://money.cnn.com/2012/12/14/news/economy/east-coast-port-strike/