Brands prepare for port disruptions and supply chain snafus as East Coast dockworkers strike looms
On Tuesday, members of the International Longshoremen’s Association (ILA) are expected to walk off the job across the East Coast and Gulf Coast, impacting some of the busiest ports in the U.S.
After months of fruitless negotiations for a new labor contract, union workers are expected to strike for the first time since 1977. They are demanding higher wages and a ban on the automation of cranes, gates and container movements. A reported 45,000 workers at 36 ports are due to walk off at midnight on October 1.
According to a JPMorgan transportation analysis, the strike could cost the U.S. economy an estimated $5 billion a day, as the impacted hubs move 60% of U.S. shipping traffic and roughly 10% of global container trade. Retailers and brands now face potential product shortages that are reminiscent of the pandemic supply chain disruptions throughout 2021. While the extent of delays remains unknown, brands and retailers have already been making preparations to minimize the damage from incurring delays at a busy time for sales.
Logistics experts say it’s tough to predict how long the strike can last, but it is expected to create bottlenecks at the impacted ports.
Joseph Firrincieli, sales manager at New York-based logistics service OEC Group, said if the ILA ends up striking for just one week, that is equivalent to about a month of backlog, congestion and delays. “Some sources have noted that the strike is rumored to last three weeks, which will cause supply chain snarls through the rest of the year,” Firrincieli said.
As such, brands and logistics companies will be tasked with finding ways to minimize delays and expenses. While some companies may be able to afford to wait for their goods, Firrincieli said those selling seasonal merchandise or perishable goods such as foodstuff will need to reroute or purchase cargo insurance.
Baby and kids brand Lalo first heard of the potential strike in July and began creating a contingency plan to ensure merchandise arrived in time for the holidays. Much of Lalo’s products come in from suppliers in China, Thailand, and Vietnam. The company’s most used ports are the Port of New York and ports in New Jersey and Baltimore.
Lalo founder and CEO Greg Davidson told Modern Retail that the company “decided to take a proactive approach knowing this [strike] was highly possible.”
Last month, Lalo committed to building out a contingency plan to order inventory early to avoid having out-of-stocks during the holiday season. Luckily, Davidson said the company opened a California warehouse in January to help alleviate pressure off its East Coast distribution.
“We thought: is there an opportunity to heavy up shipments on the West Coast?” he said. “Ultimately, we made a decision about five or six weeks ago to book containers ahead of time.” Now, Lalo is sending about 75% of its Asia shipments to the West Coast and “taking a chance with the other 25%,” Davidson said.
Some containers carrying Lalo products began trickling in recent weeks, with more due to arrive in the first half of October. “We have about 35 to 45 containers on the water right now, with more due to go out soon,” Davidson said.
Beyond the likely bottleneck, brands are also expecting rising costs per container. Davidson said his company was warned that once a strike starts, the rate of new container bookings can spike “by 25%, 30% or 40% depending on category.” This comes on the heels of a spike in rates earlier this summer due to shipping disruptions in the Red Sea caused by ongoing conflicts in the Middle East.
With brands like Lalo getting ahead of the issue by diverting containers to the U.S. and Canadian West Coast, Firrincieli said this solution will move the pressure there.
By default, he said, this practice has caused space issues onboard container vessels destined for the West Coast and rail delays for cargo to the inland U.S. “Overall, the port and berthing congestion unfortunately will only get worse as the strike persists,” Firrincieli said.
On the other hand, retailers can take steps to at least manage the customer experience.
Heather Hoover-Salomon, CEO of shipping marketplace uShip, whose customers include Etsy, eBay, and AptDeco, said this is a time when retailers “must dust off their post-pandemic playbooks” on how to balance inventory levels.
“The reality is that more and more stores now have limited in-store inventory, and many will look to mitigate any supply chain shortages by pointing customers online rather than in-store,” Hoover-Salomon said. “In doing so, companies will likely minimize any visible disruptions from the port strike.” She said retailers may have to begin alerting customers about holiday shipping cutoffs even earlier this year, especially given the shortened holiday season.
Davidson said the hope a deal can be reached within days to avoid major disruptions in the coming months.
“Given the time frame of the holiday season mixed with an impending election, the timing is beyond tenuous,” Davidson said. “It’s yet another thing you have to have on your radar.”