The U.S. dockworkers strike is the latest in a series of events that are affecting supply chains worldwide. Because supply chain managers can’t control labor disputes or the weather, they need to arm themselves with information and tools that help them minimize the impact of these disruptions.
UPDATE (Oct. 4, 2024): Dockworkers have called off the strike after both parties agreed to wage increases that will take place over six years. The existing contract has been extended until January 15, 2025, so negotiations can continue.
Supply chain crisis looms as dockworkers strike
A strike by dockworkers at 36 major ports along the East Coast and Gulf Coast of the United States is disrupting global supply chains and is poised to cause significant economic ripples. The labor action, which began at 12:01 a.m. ET on October 1, threatens to halt the flow of some goods and drive up prices for consumers in the U.S.
The dispute between the International Longshore and Warehouse Union (ILWU) and the U.S. Maritime Alliance centers around key issues such as wages, benefits and job security. The two sides have been engaged in negotiations for months, but have failed to reach a settlement. The strike could have a huge impact on the U.S. economy.
Financial and economic impacts of the dockworker strike
Depending on the duration of the strike, the toll on the U.S. economy could be massive: According to analysis by The Conference Board, even a one-week strike could cost the U.S. economy $3.78 billion. According to Mitre, a 30-day strike at the Port of New York/New Jersey alone could result in losses of up to $640 million per day. Additional consequences include job losses and inflationary pressure.
Prior to the strike, East Coast ports were expected to handle 2.3 million TEUs (twenty-foot equivalent units) in October, which adds up to 74,000 shipping containers per day, with a daily freight value close to $3.7 billion. The strike comes just as retailers are preparing for the holiday season.
Companies with the greatest exposure include Walmart, Ikea and Samsung. Walmart, for example, imported 47,700 TEUs at East Coast and Gulf Coast ports between September 2023 and September 2024.
As of October 3, at least 45 container vessels were anchored outside major ports, waiting to enter and unload goods, and according to CNBC, it takes one week resolve the backlog from just one day of port closure. Without a quick resolution, the backlog could double within days and take weeks or even months to clear.
Severe weather events
The strike follows severe flooding in Europe and Hurricane Helene – the deadliest storm to hit the U.S. since Hurricane Katrina in 2005.
September flooding in Europe caused factories to stop production lines and stores to close in central Europe. Even companies not affected by the floods had to halt production because of challenges in moving materials by rail.
Hurricane Helene hit mainland U.S. on September 26, but in parts of Georgia and North Carolina more than 90% of the population was still without power a week later. Two North Carolina facilities that mine the high-purity quartz needed for semiconductor production stopped operations on September 26 and they remain closed as we write this blog. The companies are located in Spruce Pine, North Carolina, which is “one of the world’s primary sources of high-purity quartz.” Global supply chains that depend on semiconductors could be affected.
Greater visibility and effective planning lead to better risk mitigation
Hurricane Helene and the dockworkers strike were recognized as potential risk events before their impacts were felt. The key for business continuity is timely and relevant warnings that allow procurement and supply chain managers to adjust their operations to avoid or limit disruption. With early knowledge of potential risk events, they can:
- Identify alternative shipping routes or suppliers.
- Plan risk mitigation activity internally and with suppliers so they can act quickly if / when the event materializes.
- Gain visibility into the layers of their supply chains to proactively deal with possible threats in their sub-tiers.
- Monitor commodity risk in order to optimize sourcing results.
- Assess a supplier’s criticality and detect vulnerabilities to understand the impact of the supplier’s potential failure.
These are capabilities that supply chain managers gain through Sphera’s Supply Chain Risk Management (SCRM) Solution (formerly riskmethods). SCRM modules such as the AI-powered Risk Radar, Action Planner and Sub-Tier Visibility vastly improve a company’s ability to detect and prepare for risk events before they snarl supply chain operations. With respect to the dockworkers strike, for example, SCRM’s Risk Radar has provided users with real-time updates, and it will track the production delays, force majeure declarations and port congestion that result from the strike.
The floods in Europe, Hurricane Helene and the U.S. dockworkers strike materialized in quick succession, giving supply chain managers little time to recover between events. But this is today’s reality. Companies that take a nimble, proactive approach to their supply chain operations are better able to manage risk events like these. Sphera’s SCRM Solution helps businesses reach that level of preparedness that allows them to minimize or even prevent disruption. Contact us for a demo to see how it can help your organization.
