Looming railroad strike threatens supply chains

Professionals from across the supply chain say more delays and disruptions are on the way if rail industry leaders fail to come to a labor agreement by Friday, the deadline that opens the door to a worker strike.

Port congestion, trucking delays, and freight rate increases are some of the greatest threats. Logistics software provider project44 said a strike will disrupt domestic intermodal activity and port operations, exacerbating ongoing problems. Intermodal container dwell times at the Port of Los Angeles are rising, for instance, with containers now waiting 154% longer compared to January 2020, a project44 spokesperson said this week.

“This strike will only exacerbate freight rail’s existing challenges,” the company said.

Spencer Shute, a senior consultant with procurement and supply chain consulting firm Proxima, agreed, adding that a possible strike will have immediate negative effects on the supply chain, especially threatening peak season freight demands.

“This will have a significant impact on the U.S. supply chain and fairly quickly. This means trucking rates are likely to increase and delays could become quite extensive as a backlog begins to build,” Shute said in written comments this week. “We’ve already seen embargos announced to prevent freight from getting stuck in the intermodal network. This could be catastrophic for the U.S. economy, which is why the government is working to prevent any type of shutdown.”

Shute said he expects rates to increase quickly and capacity to drop “significantly” in the event of a freight worker strike, adding that automotive, fertilizer, and food companies move a considerable portion of their volume via rail, all of which would have to be stored or re-routed.

“Any strike could result in shutting down [approximately 30%] of the U.S. freight movement,” he said.

Leaders at the American Trucking Associations (ATA) agree, saying that the trucking industry won’t be able to close the gap if a shutdown occurs. In a letter to federal government leaders last week, ATA emphasized that trucking is the rail industry’s largest customer and warned of “dire consequences” for the U.S. supply chain if a strike occurs.

“Idling all 7,000 long distance daily freight trains in the U.S. would require more than 460,000 additional long-haul trucks every day, which is not possible based on equipment availability and an existing shortage of 80,000 drivers,” ATA President and CEO Chris Spear wrote in the letter. “As such, any rail service disruption will create havoc in the supply chain and fuel inflationary pressures across the board.”

The Association of American Railroads has estimated that a rail shutdown could reduce the country’s economic output by more than $2 billion a day.

The Biden Administration established a Presidential Emergency Board in July to mediate the dispute and has been working with railway companies and labor unions to come to an agreement. Midnight this Thursday marks the end of a “cooling off” period for those negotiations, at which point workers can strike.

U.S. Labor Secretary Marty Walsh was scheduled to meet with railroad and union officials Wednesday to continue talks.