Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
The strike that few thought would happen is now less than three days from actually happening.
Barring a last-minute contract agreement or extension of the existing pact, 14,500 workers represented by the International Longshoremen's Association (ILA) will strike Dec. 30 at 14 ports from Maine to Texas. As of late afternoon on Dec. 27, talks between the ILA and the U.S. Maritime Alliance (USMX), representing ship management, continued under a federal mediator's supervision. But as the days leading up to a Dec. 29 contract deadline turn into hours, those involved in the multibillion dollar seagoing supply chain have concluded that shipping on the East and Gulf coasts will grind to a halt by Sunday night.
Talks broke off Dec. 18 after the ILA refused a mediator's proposal to extend the contract deadline to Feb. 1. The union said it would stand by its strike threat unless management agreed to preserve language providing each worker with annual royalties pegged to the revenue from containerized traffic. Established in 1960 to compensate the union for lost jobs and wages from containerization and automation practices, the program last year provided workers with $211 million in royalty payments—about $15,500 per worker—an amount roughly equal to 10 percent of container revenue, according to management figures.
USMX, which has called the program outdated, wants to freeze payments at 2011 levels and not allow new hires to participate. The ILA believes the issue is part of the basic contract and should be taken off the table entirely.
Dozens of trade groups representing thousands of businesses have urged President Obama to invoke the Taft-Hartley Act, a law that would keep workers on the job and the ports open while labor and management begin an 80-day cooling-off period to hash out their differences. However, with the White House consumed by the federal budget impasse and reluctant to anger its many supporters in organized labor by implementing what is considered an antiunion measure, few expect the president to act before the strike date, if he does so at all.
DUSTING OFF PLAN B
As the two sides fiddle, importers and exporters who thought that workers would refrain from striking because of a sluggish economy and competition from non-ILA ports are now scrambling to keep the supply chain from burning.
"Until Dec. 18, everyone was pretty hopeful that a contract or an extension would be reached," said Ann Bruno, vice president of global trade for TBB Supply Chain Guardian, a New Freedom, Pa.-based global supply chain consultancy that has been helping clients develop strike-related contingency plans.
Once the negotiations collapsed, companies believed a strike was inevitable, and those who hadn't already made alternate arrangements went into panic mode, she said.
TBB began formulating contingency programs last fall, when the two sides hit their first contract deadline only to agree to a 90-day extension on Sept. 20 to keep goods moving through the preholiday shipping season. Should a strike occur, TBB has arranged to move shipments to and from Europe out of the Port of Chester, Pa., located about 15 miles southwest of Philadelphia along the Delaware River. The port is not staffed by ILA labor.
In addition, TBB has instructed its trucker partners to remove every shipment from the affected ports prior to the strike date, a sign the firm and its customers feel a work stoppage is a foregone conclusion.
The firm has also negotiated "bullet mini-landbridge" rates with several ocean carriers for customers who ship from Asia to the East and Gulf coasts only through the Panama Canal. The agreements allow containers from Asia to be transloaded to intermodal service at West Coast ports for the eastbound move.
So-called bullet rates, which must be added to carrier tariffs, are applied to specific commodities. They are usually priced at a discount to rates for "freight all kinds" moves. However, Bruno said her company began negotiating the rates months ago to keep its customers from paying exorbitant prices should intermodal capacity become scarce in the days leading up to a strike.
Many importers had considered diverting deliveries to West Coast ports prior to the original contract expiration date of Sept. 30. The first extension, agreed to Sept. 20, put those plans on hold. However, the events of the past 10 days have forced businesses to dust off their playbooks. The problem, experts said, will be finding viable capacity on such short notice.
LINGERING EFFECTS
A strike, if one occurs, would impact import shipments that are set to reach stores by the end of January or early February. However, U.S. exporters need to get their goods moved now because they are shipping to customers not affected by the walkout and who expect their shippers to honor their commitments.
A top supply chain executive for a major industrial manufacturer, who asked not to be identified, said the firm is forecasting a strike that will last about two weeks. The firm's products that would otherwise move through the affected ports will instead be put in storage for the duration of any work stoppage, according to the executive.
Tim Feemster, senior managing director at New York-based industrial property and logistics firm Newmark Grubb Knight Frank, said he doesn't expect the conflict to be settled by year's end. Feemster said that because retailers are now in a slow replenishment period right after the holidays, delivery diversions to West Coast ports should be the exception rather than the rule. However, another contract extension would trigger diversions, since retailers don't want to find themselves in the same position two to three months down the road, he said.
Another issue facing the supply chain is whether a strike or another extension would coincide with the Lunar New Year, which is Feb. 10 but is marked by at least a week of prior celebrations that result in the closing of many Chinese businesses during that time.
According to Bruno, the dual effects of the Chinese celebrations and potential labor-driven supply chain disruptions have forced companies to order much farther ahead than normal or, in some cases, delay their purchases until the commemorations end.
"Exporters and importers aren't necessarily changing their behavior as much as they are readjusting it," she said.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.