Longshoremen on Strike at US Atlantic & Gulf Coast Ports: The Ripple Effects on Supply Chains

Global commerce relies heavily on the smooth operation of maritime logistics, and recent events have cast a spotlight on the fragility of our interconnected supply chains. The ongoing strike by the International Longshoremen's Association (ILA) — the first since 1977 — affecting 14 major ports on the US Atlantic and Gulf coasts, comes as yet another challenge in what has already been a tumultuous year for ocean shipping.

The shipping industry has faced a barrage of obstacles in recent months:

1. Conflict in the Red Sea disrupting vital trade routes
2. Drought impacting transit through the Panama Canal
3. The Baltimore bridge collapse temporarily closing that major port

Now, with labor disputes halting operations at key Atlantic and Gulf Coast ports, businesses are grappling with this additional level of uncertainty. Businesses — and the economy, in general — do not like uncertainty.

While the strike involves port works loading and unloading cargo ships, the impact of this strike extends beyond the docks.

Fresh Produce at Risk During Port Strike

Central and South American exports of perishables like mangoes, bananas, and asparagus are particularly vulnerable. These items' short shelf life and susceptibility to damage make them ill-suited for extended waits on cargo ships. Unlike non-perishable goods, fresh produce can't be stockpiled in advance.

Uneven Impact Across Industries and Regions

European shippers utilizing Atlantic ports face greater challenges compared to their Asian counterparts using Pacific routes. Key industries challenged here include European spirits and auto parts. Central and South American importers of coffee, sugar, cocoa, and other key products (some of which have already dealt with supply challenges and rising prices due to climate change) will also see delivery challenges.

Additionally, domestic suppliers with limited inventory capacity and smaller operations that cannot afford to maintain larger stocks of products or components are feeling the squeeze. Not all companies can afford or have the space to maintain stocks to last. While fewer companies operate on the razor thin lines of just-in-time deliveries post-pandemic era, many still retain limited inventories for space and/or cost reasons.

Furthermore, as we are heading toward the holiday shopping season, seasonal goods and items meant for gifting are heading toward ports and could face potential delays if forced to sit offshore for too long.

Durable Goods: A Different Kind of Challenge

While less urgent than perishables, items like tires and auto parts from Europe and Central/South America are at risk of extended port delays. The lack of immediate urgency may paradoxically lead to longer-term disruptions for these supply chains.

Adaptive Strategies for Supply Chains

As businesses scramble to maintain their supply chains, we're seeing a range of responses.

Some shippers are opting for air cargo, especially for perishables, despite the significant cost increase. This shift could lead to a ripple effect, driving up costs across air freight as competition for cargo space intensifies.

Others are rerouting shipments through other ports, where possible. If enough make this move, it could lead to crunches at transit points and unloading at other ports. Additionally, with the extra time and cost of rerouting, the companies that are doing so seem to be betting that the strike will not be short lived.

Others stocked key products and components in advance, hoping to have enough to last through what many hope will be a short strike.

Others sought other sources for products and components that could arrive via land transit or from West coast ports. However, there are cost and potential quality challenges with working with new suppliers.

Potentially Limiting Factors

Despite the challenges, there's room for cautious optimism.

• Companies have become more adaptable after years of supply chain disruptions.
• The advance warning of a potential strike allowed for some degree of preemptive planning, as the possibility has been in the news for months.
• While the two sides are currently far apart, the timing with the approaching the holiday season has potentially put the ILA in a good bargaining position as pressure could be on the United Maritime Alliance to resolve things quickly and keep the economy moving.

Looking Ahead: Navigating Uncertainty

As we monitor the situation, the duration of the strike will be crucial in determining its long-term impact. The effects will get worse and the impacts will be more widespread, the longer it lasts. Overall, businesses must walk a tightrope between overreacting — potentially incurring unnecessary costs — and underreacting, which could lead to critical shortages.

Still, there are opportunities for domestic operators who can provide alternatives to imported options. Additionally, companies that use components that are sourced from areas not impacted by the strike will see gains from being able to achieve price advantages.

The current crisis serves as a stark reminder of the need for robust, flexible supply chain strategies in an increasingly unpredictable global marketplace.

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About the blogger: Jennifer Mapes-Christ is a seasoned analyst and research manager at The Freedonia Group and Packaged Facts. Her analysis has appeared in The Wall Street Journal, The Washington Post, The New York Times, and many other trade publications.