Port lockouts cost billions in business

Signal of change / Port lockouts cost billions in business

By Futures Centre / 11 Mar 2015

A nine-month-long labour dispute between shipping companies and dockers froze activity at ports along the West Coast of the United States. In February, port operators locked dockers out, forcing dependent companies to find costly alternatives to meet the demands of their supply chain. For example, Fuji Heavy Industries told Marketplace it was paying $60 million a month to fly Subaru parts to U.S. plants to keep things running.

A deal was finally reached with the support of the US labor secretary, who brokered negotiations between the shippers and the International Longshore and Warehouse Union, but delays will persist as operations get back on track. 

An estimated $1 trillion worth of goods travels through the West Coast's ports each year. One group of exporters affected are California's citrus growers, who say they lost half a billion dollars in foreign business due to the blockage. 

Image: Neil Kremer / Flickr

So what?

The dispute has highlighted two areas of fragility in global supply chains. One is the degree of the dependence of both buyers and suppliers on smooth and timely shipping operations, and the other is the dependence of ship operators on dockers themselves and therefore on agreed labour conditions.

The cost of improvements to mitigate the risk of future disputes is likely to be less than the expense of last-minute contigencies. The question is, who pays? 

Dysfunctional supply chains may be seen to strengthen the case for the Circular Economy, but reused materials also require redistribution.

Sources

http://www.marketplace.org/topics/economy/port-lockouts-and-seas-importance-supply-chain

http://www.theguardian.com/us-news/2015/feb/21/dockers-and-shipping-companies-reach-deal-to-end-west-coast-port-dispute 

What might the implications of this be? What related signals of change have you seen?

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