Could We See Another Disruption Like the West Coast Shut Down?

Published : April 8, 2015

map-of-west-coastToday's successful business leaders haven't risen through the ranks by not knowing the power of a good contingency plan. The West Coast port shutdown in early 2015 underscored the need for these tactics to be applied not just within company walls, but down through the entire supply chain. While nearly every industry with significant ties to those ports are now scrambling to catch up with the backlog, those with an eye to the future are rightfully preoccupied with the possibilities of additional shutdowns.

The Contracts Won't Last Forever

According to Shirin Ghaffary of Elementum, the agreement that was finally reached after exhaustive negotiations and a five day shutdown is only slated to last 5 years. That isn't a long time at all in the production world—enough time to have several runs of a product or material, but ultimately short enough to keep jitters about reliability firmly in place.

By the time 2020 rolls around, the news could be saturated once again with coverage on a port shutdown. Now that the union knows the devastating effects a strike can have, they're more empowered to use the "nuclear option," not less. And we could easily have the same mess back on our hands

The Damage Has Been Done

Just because the strike has been resolved doesn't necessarily mean that it will be business as usual from here on out. Business owners—ranging from chain retailers to produce distributors—were all burned pretty badly, metaphorically speaking, by the port shutdown. And business has a long memory for bad deals.

In another article for Elementum, Ghaffary quotes a JOC poll which found that 65% of those surveyed stated they'd be routing less cargo through the embattled ports in the coming months and years. And they can't be blamed for their caution: Tales of oranges rotting in crates awaiting shipment and 3 week backlogs on cargo don't exactly inspire confidence. While some companies are just keeping a watchful eye on their multi- or omni-channel distribution paths, others are taking a more proactive route and diversifying their supply chain shipments ahead of the next looming West Coast disaster.

There Is Now a Precedent

This is the second shutdown for the West Coast ports in the last ten years, and with only a 5 year contract acting as insurance, the likelihood that another is on the horizon is fairly high.

Cost of living is climbing. At the same time, the demand for materials and goods is rising. And even with a hit to their credibility, the movement of goods through the ports will be pretty brisk. How long before union members start to ask for better working conditions, or higher pay?

They're entitled to negotiate a working environment that suits their needs, of course, but the tricky part is figuring that out while commerce keeps flowing smoothly in the background. This latest shutdown was so mired in disagreement that the White House had to physically step in with an ultimatum—and even that didn’t provide a quick resolution.

The solution on the business side isn't to yank all business out of West Coast ports—that will have a ripple effect that will damage the economy and potentially backfire—but to set up, maintain and frequently test alternative channel distribution scenarios. Writing out new routes on paper won't be enough. Trial runs of, for example, a month's worth of product or materials for cost analysis purposes alone would be prudent.

Flexibility and adaptability are some of the most valuable traits a business can develop, and with such "sticky" gates between your company and your shipments. It's a good idea to start scouting out other ways of bringing your products in now, even if they aren't pressed into full service immediately.

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Topics: Supply Chain Logistics

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