Labor strife at 29 Pacific Coast sites stretching from California to Washington State, the collapse of Interstate 95 in Philadelphia and other issues translate into a host of possible problems nationwide, including shipping delays, supply chain disruptions, higher prices and more, said Gregory D. DeYong, associate professor of operations management at Southern Illinois University Carbondale.
“Ports on the West Coast, which handle the majority of U.S. imports from Asia, have been negotiating for over a year without coming to an agreement, and as the July 1 one-year anniversary of the contract expiration approaches, there is a new urgency to the talks,” said DeYong, who specializes in supply chain issues and costs.
“Even the threat of a port disruption has led other supply chain companies to start to act. Last week, Union Pacific railroad stopped delivering perishable cargoes such as agricultural products and food to the West Coast ports. This forces shippers to find alternate routes for their products.”
Call for action
“The twin ports of Long Beach-Los Angeles have a long history of labor-management acrimony,” said DeYong, who previously worked as an import/export manager responsible for about $100 million in products annually. “I am very familiar with delays and labor disputes at that port. Last week’s work slow-downs and finger-pointing are just the latest examples.”
Since becoming an SIU professor, his research and teaching are heavily focused on supply chain management and logistics.
Negotiations began in May 2022 between the Pacific Maritime Association and the International Longshore and Warehouse Union. Traditionally, those ports handle about 40% of the nation’s imports. Dock workers remain on the job at this time, but on June 9, the U.S. Chamber of Commerce, the largest trade organization representing the country’s businesses, sent a letter to President Joe Biden asking him to intervene and appoint an independent mediator to help resolve the contract dispute.
When negotiations broke down in 2015, work stopped for eight days, resulting in product shortages across the country and siphoning an estimated $8 billion from the Southern California economy alone. President Barack Obama intervened by sending his labor secretary to help establish a new pact in 2016. Both sides agreed to a three-year extension of the contract in 2019, and new contract talks have been underway for the first time since.
Some shippers began rerouting cargo away from that region early in the contract disputes, and more are doing so now, DeYong said. These actions don’t come without a price, though, as they drive up costs and creating backups at ports elsewhere.
Supply chain hits continue
Other issues continue to affect the nation’s already fragile supply chain:
- A section of I-95, which carries an average of 160,000 vehicles daily, collapsed Sunday in Philadelphia after a fuel tanker overturned and burned. Officials say it will likely take months to repair the major roadway running along the East Coast from Miami to the Canadian border.
- Low water levels on the Mississippi River have had a dramatic effect on waterway transportation in recent years, and already well-below-average rainfall totals are resulting in low water levels. According to the Bureau of Transportation Statistics, the Mississippi carries 93% of the cereal grain between Illinois and Louisiana and 82% of other agricultural products. It also carries more than half of the freight in the 12 states touching the Upper Mississippi System and Louisiana. Some officials have predicted flash droughts, which occur when already dry conditions in soil and waterways rapidly intensify.
- Global political unrest continues to be a major factor in supply chain issues. The war in Ukraine is impacting prices and supplies of corn, as well as oil, fertilizers and more. In addition, OPEC had already reduced oil production ,and earlier this month, Saudi Arabia announced additional oil production cuts, driving up prices for gas, fuel and fertilizer.
- In some instances, the shortages brought on by the pandemic continue. In other cases, there is an excess supply, and goods have ended up stuck in ports with no place to go, resulting in warehouse capacity shortages that will in turn affect the supply chain.
- Weather affects numerous crops as well:
- Much of Georgia’s peach crop was destroyed by warm winters and late frosts.
- Experts say 2023 isn’t looking good for lettuce, avocados and various other produce.
In addition, DeYong notes that farmers are now working their fields and planting, and the summer travel season is here, which traditionally results in rising gasoline demands.
“Refineries switch to summer fuel blends, which impacts the supply and in general the prices for gasoline, and often diesel fuel as well,” DeYong said.
DeYong said the decrease in supplies and resulting upsurges in fuel prices have numerous implications as that affects trucking, barge traffic and farm equipment as well as all forms of transportation and more.