October 1st will mark a significant date for supply chains across the world as US port workers along the East and Gulf Coasts enter into strike. As many as 45,000 workers plan on participating in this strike, potentially causing major delays to shipments entering and leaving the US from this date onwards.
The International Longshoremen’s Association, the union leading the strike, is demanding pay increases and an agreement from ports to reduce the use of automation. With the East and Gulf Coast ports receiving trade from Europe and Latin America, these strikes could create a world-wide disruption to maritime trade.
Let’s explore the history of US port strikes, unveil the likely effects of this event—and discover how to build a resilient supply chain in the face of potential disruptions.
Major Port Strikes in US History
The upcoming October port strikes are far from the first major port strike in US history. We can draw from previous examples of port strikes and labour walkouts to trace how they impact major industries and disrupt the US supply chain.
It’s worth noting that the union leading the strike, the ILA, launched a strike campaign back in 1977 that had a dramatic impact on US trade. If negotiations are not settled upon by October, we could see history repeat itself again.
Let’s discuss three central examples of major US port strikes in history:
- The ILA Strike of 1977: The International Longshoremen’s Association union demanded higher hourly wages, larger pension and welfare payments, and a reduction in working hours back in 1977. When their demands were not met, they went on strike, with as many as 1,000 workers refusing to work. Ships carrying citrus, rubber, plastics, cocoa beans, and more all sat in the docks without anyone to unload them. This strike brought US trade to a halt, demonstrating just how essential port operations are.
- The West Coast Port Lockout of 2002: The International Longshore and Warehouse Union (ILWU) could not come to terms with the Pacific Maritime Association during contract renegotiations, causing major disruptions during the negotiation period. Around 12.5% of the U.S. GDP moves through ports on the West Coast, with the lockout period causing several billion dollars in disruptions and lost economic gain. While this only lasted for 10 days, it created shipping backlogs of over 100 days.
- The West Coast Slowdowns of 2014-15: Every 6 years, the US West Coast ports enter into negotiations to renew labour contracts with the ILWU. Similarly to the 2002 lockout, ineffective negotiation led to a major shutdown of ports throughout the West Coast. Over 10 years since the last occurrence, these labour disruptions resulted in over $7 billion in direct losses and indirect supply chain logistics impacts that cost between $3-5 billion.
These historic examples demonstrate how susceptible the US economy is to disruption due to port strikes. Labour strikes can cause billions of dollars of losses and create backlogs for providers across the world.
Anatomy of October Port Strikes: Current State of Negotiations
The International Longshoremen’s Association union is at the forefront of the coming October strikes. This union represents over 85,000 maritime workers across 100 ports, with the main concentration of ports being on the East Coast and the Gulf Coast. These ports typically receive and handle shipments from both Europe and Latin America, representing a significant disruption for global supply chain trade.
The main demands behind the strikes are wage increases and a generalised ban on port automation. The workers see increasing automation in ports as a threat to their future livelihood, with investment into AI technology and automated systems reducing the need for labour. For example, the Auto Gate System that processes trucks removes the need for manual tracking and direction within ports, removing a subsection of operational jobs entirely.
The ILA demands a 77% wage increase over the next six years, seeking to be compensated for their contributions to the industry and to combat inflation. Port and harbour operations in the USA have increased steadily over the last 12 years, yet workers wages have increased by a far smaller percentage.
Source: Industry revenue of “port and harbour operations” in the US from 2012 to 2024.
Other unions across the United States, like the ILWU, have expressed solidarity with the ILA. If the ILA cannot come to a contractual agreement where all parties are satisfied, this strike could create major disruptions and create a significant delay in global shipments.
Mediation Efforts
The National Retail Federation (NFR) and other industry groups have called on the Biden administration to intervene and help avoid the strike.
The Federal Mediation & Conciliation Service (FMCS) has also reached out to the United States Maritime Alliance and the ILA to open up discussions. However, these parties cannot settle on an agreement.
The mediation efforts will continue until September 30th, 2024. If no resolution has been reached by this point, the strikes will begin on the following day.
Immediate Effects on US Ports
While the strike does not officially start till October 1st, the looming threat posed to companies that rely on these ports has already started to cause problems.
Here are some immediate effects that US ports are experiencing:
- Cargo backlogs and delays: In an attempt to stay ahead of the strikes, businesses are accelerating their import schedules. A spike in demand for port labour has created bottlenecks. In strike situations, Sea-Intelligence predicts that one day of inaction can create 5 days of delay. That considered, even a one-week strike in October could create delays that last through November, impacting the end-of-year spike in commerce and trade.
- Port congestion and capacity issues: Ports along the West Coast are experiencing a peak in demand as suppliers scramble to change their transport routes to get product delivered to ports, with unions not planning on striking. Ports like Los Angeles, New York, and New Jersey have all seen a rise in cargo shipments, causing longer rail container dwell times, increased detention fees, and general congestion.
- Labour shortages and operational challenges: The US Bureau of Labour Statistics has revealed a major labour shortage across many states that are integral to US port operations. This labour shortage has been intensifying for nearly two years, with leaders drawing a connection between the lack of available workers and limited economic growth in the industry. A lack of port workers reduces operational efficiency in ports, creates long waits for shippers, and increases import costs.
Source: Worker labour shortages in the USA.
While all industries that use US ports will feel the effects of the October workers strike, the automotive and manufacturing sectors will experience the most dramatic impact. These industries use a just-in-time supply chain model, making them highly sensitive to disruptions. Without a constant flow of critical components, their ability to produce and deliver products is severely impacted.
Building Long-Term Supply Chain Resilience
The October strikes will be a pivotal moment in many supply chain businesses, with the disruptions they cause creating major economic impacts. While a strike of this kind has not happened for several years, any number of events could cause disruptions to the supply chain.
Businesses that want to create a highly resilient supply chain must look to four central areas.
Risk Assessment and Planning
The first step to creating a resilient supply chain is to ensure your business has an extensive risk assessment and planning system in place. Identifying potential risks that could cause disruptions and creating contingency plans will help you overcome disruptive events.
Disruptions can come in many forms, spanning environmental, political, regulatory, economic, or even social factors, as we are seeing with the US port strikes. Preparing for these disruptions with risk identification and management is essential to the success of a supply chain business.
Prewave offers a superintelligence platform that provides real-time supplier monitoring and offers extensive risk analysis for your business. You can determine which suppliers could pose a risk in the future and begin to create and deploy strategies to mitigate these disruptions. Prewave utilises AI to deliver real-time insight, giving you the agile edge you need to create comprehensive contingency plans and stay one step ahead of supply chain disruptions.
Determining Alternative Shipping Routes
Another central strategy to help create supply chain resilience is developing a range of alternative shipping routes, suppliers, and logistics providers. When a business relies on a singular port, supplier, or logistics provider, they create single points of failure. If anything goes wrong with these partners, the business is unable to operate.
If a supply chain business establishes a wider network of secondary suppliers and partners that they can use, they reduce their overall risk profile. Instead of a single point of failure, the supply chain has numerous potential solutions when any social, logistical, environmental, or economic problem arises.
In response to the looming US port strikes, we’ve noted how companies are already redirecting shipments to other ports in LA and New York. However, businesses could take this even further by building a network of distributed ports to receive their shipments. Supply chain businesses can utilise ports in Canada and Mexico, leveraging new logistics partners to create effective routes if their primary option ever becomes unavailable.
Preparation and foresight allow businesses to create layers of mitigation, preventing disruptions from impacting their company.
Supply Chain Visibility Tools
Behind every stable supply chain is a comprehensive level of visibility over the connections, suppliers, and pathways that make up the supply chain. By implementing real-time analytics platforms, businesses can better understand the risk profile of suppliers at any given moment. Small changes in regulation or the political climate of a country could alter a supplier’s stability, with real-time analysis giving your company as much time as possible to respond.
Supply chain visibility is vital as it offers you a comprehensive overview of risk, stability, and the overall health of your supply chain. Prewave is an enhanced risk management and supply chain visibility system that can provide a 360-degree view of your suppliers and their risk profiles.
With our cloud-based system and real-time insights, you can access faster decision-making to keep your supply chain running smoothly.
Communication with Stakeholders
When out of the loop, stakeholders can intensify disruptions by causing internal roadblocks. For example, let’s say you have a contingency plan in place for the October strikes. If you haven’t communicated this to stakeholders, the sudden shift of shipping routes could create internal issues that cause your stakeholders to freeze contracts or question your decision-making.
To avoid internal conflict and unnecessary roadblocks, your supply chain business should endeavour to constantly communicate with stakeholders. Sharing plans, strategies, and the data-driven logic behind your decisions will help to ensure everyone is on board.
By including stakeholders in the conversation, you can maintain smooth operations during disruptions.
Final Thoughts
The October US port strikes will likely have wide-ranging impacts on supply chains across the globe. Depending on how long they continue for, these strikes may even create major disruptions during the end-of-year holiday period. The US is set to experience the most extreme economic impact from these strikes, but other countries around the world will also suffer knock-on effects of these disruptions.
To prepare for these eventualities, businesses must adopt robust mitigation strategies. Investing in better supply chain visibility, comprehensive contingency planning, and stakeholder communication will help streamline supply chain management. The long-term consequences of these strikes will have the most dramatic impact on companies that do not adapt and leave themselves exposed to supply chain disruptions.
By leveraging Prewave, supply chain businesses can create an unparalleled level of visibility into their supply chain. With real-time analytics and insights, Prewave empowers businesses to create resilient, stable, and optimised supply chains. Find out more by booking a demo today.
