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Ask Ahab

Welcome to Ask Ahab, where supply chain professionals from around the world bring their white whale questions to OEC’s resident captain in the storm. This month, the questions facing Ahab are focused on the upcoming labor negotiations between the International Longshoremen’s Association (ILA) and the employers at ports right now.

Dear Ahab, what do ports and the ILA disagree on right now? Why might a strike take place? – P. Dombrowski, Chicago, IL.

Hi P., thanks for stopping by! The main disagreement is the one we see in virtually every labor dispute: money. The ILA has made it known that it is looking to at least duplicate if not surpass what the west coast dock workers secured last year, which included an 8% pay bump in year one, and a 32% jump over the six-year life of the contract. Right now, based on a local ILA negotiation it looks like they might be able to surpass that agreement because the Great Lakes District of the ILA have already agreed to a contract with a 40% increase in their pay over the life of a six-year deal.

In addition to pay, there are concerns about automation, similar to what we saw during the actors and writers’ strikes last year. People see all of the incredible things you can do with technology and, no matter how impressive it is, they’re bound to worry about that technology taking their job someday. In turn, the union is going to want some assurance that jobs won’t be lost to tech.

Dear Ahab, what will these labor negotiations mean for me and shippers like me? – H. Marinovic, New York, NY.

Well, T., if we look at last year’s west coast negotiations as an example, we’ll see it’s likely to slow down operations. Work slowdowns in Los Angeles-Long Beach precipitated a 40% YoY drop in cargo processing in February of last year, and a strike in Canada caused a multi-month backlog of shipments coming through the port of Vancouver (the strike lasted 13 days). So, even if this situation doesn’t devolve into work stoppages across the eastern seaboard and gulf coast, it’s likely to result in delays. This means shippers need to anticipate these slowdowns now and plan their supply chains accordingly.

Dear Ahab, the ports of Charleston, Houston and Savannah have grown a lot in recent years. How will growth in those ports impact the negotiations that take place between ILA and employers? – S. Bacall, Conway, S.C.

Great question, S.! The argument that port workers across the East Coast and the Gulf Coast will make is essentially, we’ve been here, we’ve weathered the storms, we’ve kept things moving, this is where we get rewarded for not just our loyalty, but also helping spur regional growth.  The unique thing about those three ports is that over the past two, three years, when everyone was swamped, everyone was putting out fires, they took on more cargo, saw an opportunity and grew.

So, when the workers at those ports come to the negotiating table, the discussion won’t start from a place of “we’ve been good soldiers,” it’ll start from a place of, “we’ve made you money,” and that’s a much stronger negotiating position.

Dear Ahab, could I just re-route my shipments to the West Coast in the event of a strike? – P. Nguyen, Ho Chi Minh City, VNM.

Here’s the thing, P.: The short answer is yes, and I am sure the west coast dock workers would be happy to take on more cargo. However, that brings a few other familiar problems into focus, namely congestion at west coast ports will become an issue, as will the fragile U.S. infrastructure problems, which was not addressed in the way it should have been in the past four years. This will lead to familiar rail and trucking problems, and issues with container stacking. It will be pandemic era problems all over again, just on a slightly smaller scale. 

Dear Ahab, what can I do ahead of a potential strike to make sure it doesn’t disrupt my business? – J. Giroud, Nice, FR.

The first thing I would recommend, J., is getting products shipped early. The reason is the contract expires at the end of September, at the height of “Peak Season.” This means that if the ILA declares a strike or slowdown around that time, a shipper would risk not having their cargo in time for the holiday season.  We know from COVID that this would be catastrophic for businesses. Therefore, the only way to not be affected by a potential labor issue is to reach out to your logistics advisor, plan ahead, and get your cargo delivered well before the expiration of the labor contract.

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