Port strike could disrupt supply chains

on Thursday, December 13, 2012

Port strike could disrupt supply chainsA potential labor strike could hit ports along the East and Gulf Coast starting December 30, a move that could have devastating impacts on the U.S. economy and supply chains that rely on the ports to transport raw materials and finished products.

On December 29, the longshoremen's labor contract with port operators along the coast is scheduled to expire. If the two parties cannot reach an agreement by that date, work in these ports will come to a halt, preventing cargo-carrying ships from unloading their products. A similar strike recently took place in California, closing several ports for more than a week.

Large impacts on industries and the economy
It is anticipated that such a strike along the East and Gulf Coast could impact a significant amount of companies in industries such as electronics, machinery, retail, pharmaceutical and automotive. According to CFO magazine, the pharmaceutical industry could face significant risks from such an event, as their products could face temperature and humidity changes sitting unhandled in a port, potentially ruining them. Food shipments would also face serious spoilage problems.

Risk management firm Marsh recently issued a report on the situation, advising businesses that rely on ports that could be impacted to be prepared for the worst. The report, US Port Strikes - What's at Stake and How to Manage Your Risk, revealed that a strike could cost the economy up to $1 billion per day, and for each day of port closures, impacted companies would need about eight additional days to stabilize inventory in their supply chains.

"The ability to move goods freely is an essential component of the global economy," said Gary Lynch, lead author of the report and the global leader of risk intelligence and supply chain resiliency solutions for Marsh Risk Consulting. "As we saw with the West Coast port strike, such events have broad consequences, such as destabilizing trade flows, businesses and economic conditions. That strike and a potential East and Gulf Coasts one come at an inopportune time given low growth in key markets like the U.S., Europe and China."

Preparing for a strike
Even though many organizations may hope for the best, Lynch, told CFO magazine that companies should prepare for port closures.

Businesses looking to ensure their operations are not heavily disrupted during a potential strike will need to take actions to prepare for such an event, starting as soon as possible. While they make these arrangements, they should keep an eye on developing stories regarding the impending closures.

Those who purchase raw materials and have it shipped out of ports along the East or Gulf Coast may want to consider implementing new strategic sourcing practices and purchasing their goods from a region not impacted by such closures. This will ensure production is not limited during a potential strike and a company is still able to manufacture its products without facing a raw material shortage.

Businesses that get their goods to market via ports that could close may want to increase their shipments before the end of December. This will ensure their goods are still readily available to consumers even if an agreement is not reached. Other companies may want to investigate alternate shipping strategies, such as air freight, to be certain their merchandise can make its way to store shelves.

Organizations large and small have the potential to be impacted by these possible port closures, and it is critical for companies of all sizes to determine how these will affect them, and how they can work around the problem to ensure their supply chains are running smoothly.

0 comments:

Post a Comment

Keep in Touch and Subscribe:

Keep up to date with your Procurement & Strategic Sourcing News.

Procurement News RSS Strategic SourcerorRSS Feed
Follow GetSavings on TwitterTwitter/GetSavings
Friend Source One on FacebookSource One on Facebook