Impacts of the East/Gulf Coast Port Workers Strike on Promotional Products Supply Lines
"For every week that the ports are closed, it will take at least one month for them to normalize and clear any backlogs."
~source: PPAI Media
Unionized East and Gulf Coast port workers walked off the job at midnight Oct. 1, launching a strike that by one estimate will cost the United States’ economy $540 million a day and disrupt the supply chains of a spectrum of industries, including food, pharmaceuticals, apparel, automotive and promotional products. The stoppage reportedly affects 14 ports from New England to Texas, including Boston, New York/New Jersey, Philadelphia, Wilmington, North Carolina, Baltimore, Norfolk, Charleston, Savannah, Jacksonville, Tampa, Miami, New Orleans, Mobile and Houston.
This massive strike by nearly 50,000 members of the International Longshoremen’s Association (ILA), caused ports along the East and Gulf coasts to shut down and disrupt the nation’s supply chain ahead of the holiday shopping season. Workers at ports from Maine to Texas, which handle about half of all goods shipped to the United States in containers, walked off the job as part of the union’s first strike in nearly 50 years.
The labor contract between the ILA and the United States Maritime Alliance (USMX), which represents the ports, expired late Monday after the parties couldn’t reach an agreement over pay and a cap on the ports’ use of automation, The Associated Press reported. Businesses across nearly all industries, including the promotional products market, have been scrambling to figure out how to handle such a large work stoppage – which is causing the U.S. economy to lose between $3.8 billion and $4.5 billion each day that the ports are closed, according to analysts at J.P. Morgan.
The ramifications of a prolonged strike won’t be limited to the East and Gulf coasts because delays in offloading mean delays in a return trip, which will have a ripple effect. Suppliers that use mainly the West Coast port will also start experiencing congestion and price increases as vessels are diverted to the limited ‘open’ ports. Conservative estimates posit that for every week that the ports are closed, it will take at least one month for them to normalize and clear backlogs.
Last year, on the other side of the country, the International Longshore and Warehouse Union (ILWU) managed to ratify a six-year contract, narrowly avoiding a similarly costly work stoppage. As a result, West Coast ports are open and operating at full strength, but it’s too late for any company thinking about shifting their plans for imports.
Ports in Long Beach and Los Angeles are currently handling a volume of containers that rivals the shipping influx in 2021. As suppliers re-route containers to West Coast ports, congestion there will increase, creating delays and almost guaranteeing higher unloading and transit costs. Additionally, there's a possibility of limited availability of train and truck trailer carriers.
Like their counterparts in retail, savvy promo sourcing leaders have been preparing for the strike for months, importing more heavily farther in advance than normal to beef up stock to robust levels – an effort made to bulwark against impacts from a work stoppage at the ports.
However, should the massive port shutdown drag on, it could cause delays in getting products made overseas landed and stocked stateside, while sending importing/shipping costs soaring. Such ills, if protracted enough, could lead to stock gaps in promo and higher pricing on products.
Beyond direct and immediate impact, it’s possible that the entire promo industry would be affected by the ramifications of a prolonged strike. Sea Intelligence suggests even just one day of work stoppage would cause 5-7 days of slowdowns, and a strike lasting one week would result in a slowdown that wouldn’t be cleared up until nearly Thanksgiving. The domino effect of this would have consequences for the supply chain and, ultimately, the economy, quite possibly affecting the budgets of promo clients.