Industry groups ask White House to intervene in West Coast port labor dispute
Slowdowns spread from Pacific Northwest to Southern California ports, exacerbating cargo backlog in Los Angeles and Long Beach; holiday merchandise not at risk, but impact on U.S. economy could be huge, groups warn.
Contributing Editor Toby Gooley is a writer and editor specializing in supply chain, logistics, and material handling, and a lecturer at MIT's Center for Transportation & Logistics. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
For the first time in 12 years, the White House has been asked to intervene in a labor-management dispute that threatens to cripple
every West Coast seaport from Seattle to San Diego.
A coalition of more than 100 industry
associations sent a letter yesterday to President Obama urging the federal government to step
into contract negotiations between the International Longshore and Warehouse Union (ILWU), which represents dockworkers at 29 U.S. West Coast
ports, and the Pacific Maritime Association, which represents employers such as ocean carriers and terminal operators. Even a five-day port shutdown
would cost the U.S. economy approximately $2 billion a day, the groups said in the letter. They urged the president to encourage both parties to
begin working with a federal mediator, and to exercise his authority to intervene under the Taft-Hartley Act should there be a strike or
lockout.
The last such labor action at West Coast ports, a 10-day lock-out in October 2002, cost the economy an estimated $1 billion a day. That crisis
was considered more serious for holiday deliveries because it occurred earlier in the cycle than the current situation.
ILWU members have been working without a contract since July 1 while negotiations continued. Through the summer and most of fall, it had been
business at usual at the ports. But last week trouble emerged at the ports of Seattle and Tacoma, when the union refused to dispatch skilled
labor such as yard crane operators, and slowed down the pace of other operations. Productivity, measured in container moves per hour, dropped by
about half at both ports; cargo backlogs ballooned, and Tacoma sent longshore gangs home yesterday morning, said Sue Coffey, a Port of Tacoma
representative attending the Nov. 6 Coalition of New England Companies for Trade (CONECT) Northeast Cargo Conference in Foxboro, Mass.
The ILWU yesterday took similar actions at Los Angeles and Long Beach, which together handle some 40 percent of the nation's containerized
imports. Philip Sanfield, a spokesman at the Port of Los Angeles, said port congestion has remained essentially the same at the San Pedro port
complex, the country's busiest. As of mid-day Friday, there were 12 vessels sitting at anchor at the Ports of Los Angeles and adjacent Long
Beach, according to Sanfield.
At yesterday's CONECT conference, speaker Michael DiBernardo, director of business development at the Port of Los Angeles, did say that in
addition to the union's failure to dispatch the necessary number of skilled workers, dockworkers there have been slowing their pace by "working
to rule." He cited examples such as driving below speed limits and conducting more thorough and time-consuming chassis inspections than the
contract specified—"since they don't have a contract, they say they don't have to follow those provisions," he said. DiBernardo told
attendees that the labor problems "are not going to be fixed today or next week." When pressed by an audience member for something more specific,
he responded, "We are hoping to see something by Thanksgiving."
There's no mystery about the timing of the ILWU's alleged slowdowns, according to some observers. CONECT's Washington counsel, Peter
Friedmann, who also leads the Agriculture Ocean Transportation Coalition, noted that the Los Angeles/Long Beach development occurred almost
immediately after the mid-term elections. The union is taking advantage of the opportunity to worsen the already huge backlog at those ports,
caused by a surge of import cargo and a shortage of drayage drivers and container chassis, that has been building for months, he said.
"The problems in the Pacific Northwest are due solely to ILWU's negotiating tactics. Southern California's problems are due to a combination
of ILWU's actions and too much cargo," he said.
Friedmann said in a subsequent phone call that it's hard to predict whether Obama, now a lame duck whose party took a drubbing in the mid-term elections, will use the Taft-Hartley Act to intervene in the dispute. "You have to be willing to take on people ... I don't know that he has an appetite to take on labor," he said. If the president does do anything, Friedmann suggested, it could be something informal,
such as bringing both sides together to talk.
THE BEST-LAID PLANS ...
There has been some concern about the potential impact of the labor slowdown on the holiday shopping season, a major driver of U.S. economic
activity. But National Retail Federation Vice President, Supply Chain and Customs Policy Jonathan Gold said in an e-mail to DC Velocity
that most holiday merchandise is already in retailers' hands. The slowdown is affecting normal replenishment deliveries and deliveries of early
spring merchandise, Gold said.
"The industry started deploying their contingency plans earlier this year, even before the negotiations began. ... This was especially true
when we saw the heavy congestion at the Canadian ports, which impacted rail service," Gold said. Retailers are looking at all options to ensure
they get their cargo and merchandise to the store shelves, Gold said, adding that "congestion issues aren't limited to LA/Long Beach, as a lot of
other ports are also facing issues."
That fact is making it harder for importers to carry out alternative plans in either the U.S. or Canada. At the CONECT conference, a logistics
manager for a mid-size importer with a warehouse near Seattle and another in Illinois said she tried bringing Chicago-bound containers through
the Port of Prince Rupert in British Columbia, but chassis shortages and intermodal service backlogs there had made that alternative untenable.
To mitigate risk, she split cargo between Pacific Northwest and Southern California ports. With Seattle, Tacoma, Los Angeles, and Long Beach
jammed, her company currently has 48 inbound containers either en route to or currently held up in those ports, she said.
Because her company's biggest customers, Wal-Mart Stores, Inc. and Target Corp., assess hefty fines for late deliveries, the logistics
manager said she's considering airfreighting critical orders. Another audience member, who works for a major international freight forwarder,
said that demand for trans-Pacific air cargo services had suddenly jumped within the last few weeks and that much of that additional demand was
coming from importers that usually bring in merchandise via ocean. Inbound airfreight rates on suddenly busier routes are climbing, making the
airfreight alternative even more costly than usual, he said.
The Port of Oakland is one of the few West Coast ports that says it has no congestion issues and can accommodate diverted vessels. However,
that advantage may disappear if the ILWU decides to take action there, too.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
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.