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West-Coast Port Fiasco Does ‘Permanent, Irrevocable Damage’
The labor dispute that wreaked havoc on West Coast ports and on shippers for months was tentatively settled on February 20. By then, it was too late.
Cargo had been delayed for weeks. Perishable goods with sell-by dates were stuck in refrigerated containers somewhere. Companies around the country spent endless working hours to keep the supply chain from collapsing. Cargo was shipped by air at a big additional cost. Demurrage charges and other costs piled up. Manufacturers, like Honda, ran out of parts and had to cut production…. It was a fiasco shippers won’t forget.
Growers in the Central Valley of California, when they want to export their produce to Asia, don’t have a choice. Shipping these goods across the country to ports on the East Coast or the Gulf or to Canada is too costly and takes too long. Other companies have the same problem. They’re captive customers of the West Coast ports. But not every company has that problem.
There is the near-term impact.
“Damage to the first quarter is done, and there’s nothing we can do about it,” Journal of Commerce economist Mario Moreno told the annual TPM Conference in Long Beach.
In January, the volume of US containerized imports was down 10% from a year ago. West Coast ports, which handled about 54% of the imports last year, weighed heavily. For instance, at the Port of Los Angeles, volume plunged 28%, at the Port of Oakland 32%!
And February, Moreno said, doesn’t look a lot better. It will drag down the whole year, with total US containerized imports inching up a crummy 1.7% in 2015, rather than the 6% he’d projected earlier.
Exports look even crummier. It’s not just the West-Coast port problems, but also the strong dollar and, worse, lackluster demand in Asia and Europe that are expected to drag down total US containerized exports by 4.4%, Moreno said. It would be the second year in a row of declines.
Exports add to GDP. Goosing exports is how everyone in the world wants to fix their economies, in a zero-sum game. But it’ll be tough for the US.
Industry analysts and port executives project it might take another two to three months to clear out the backlog. According to the JOC, “The congestion is so severe that it will tax the ability of marine terminals, longshore labor, truck drivers, and equipment providers to clear out the backlogs while attempting to handle new vessel arrivals each week.”
Then there is the long-term damage.
“Completely unnecessary and completely man-made” congestion has caused “permanent and irrevocable damage,” explained Adam Hall, senior director international logistics at Dollar General, which ranked 33rd on the 2013 JOC Top 100 Importers list. “The reason I say that is that we have figured out better ways to move our cargo that don’t involve the West Coast.”
Dollar General will shift more of its Asian imports from its centers in Southern California to its centers near Savannah, Georgia. “We have a bicoastal strategy that enables us to move back and forth,” he said. Shipping from Asia via the West Coast is faster and cheaper than the southern route via the Panama Canal, but reliability is more important than speed for some cargo, Hall said. “We will not be married to any one port.”
The biggest shippers – importers in the import-dependent US – such as Wal-Mart, Home Depot, and Target, use the so-called four-corner strategy with facilities at the northern and southern ports on the West Coast, the East Coast, and the Gulf. They’re not married to one port either.
And the fiasco has taught even smaller companies to look for alternatives to West-Coast ports.
In a JOC survey of 138 shippers, 65.4% said they would reroute cargo to avoid West Coast ports this year and in 2016. Of those, 22.7% said they’d reroute 10-30% of their cargo, 11% said they’d reroute 31-50%, and 9.5% said they’d reroute over 50%. In other words, over 20% of the shippers said they’d reroute over 31% of their cargo to avoid West Coast ports!
That’s a lot of business that will be lost.
And shippers will source some of their merchandise closer to the US, or even in the US, to avoid the eternal “cycle” of labor disputes, said Steve Wolfe, VP of global supply chain and logistics at Stanley Furniture.
“Not only is it getting old, it’s more and more disruptive and raising costs to the point that bringing manufacturing back may end up being break-even, though it’s probably commodity specific,” he said in his survey response. “Our company is certainly beginning to look for alternatives as well as many of my peers in various commodity segments.”
This is good news for parts of the US, including ports on the East Coast and the Gulf Coast, and for ports in Canada, and it may be good news for manufacturing if it pans out. But its bad news for West-Coast ports and the industries that have sprung up around them, and for warehouse facilities, truckers, railroads, etc. that are focused on the West Coast.
It comes on top of the expansion of the Panama Canal – to be completed no later than next year – that will allow even larger vessels to squeeze through, which would bring down shipping costs of the southern route and make it more competitive with truckers and railroads in the US.
This is what happens when the two sides in a dispute hold the already struggling economy of an entire nation hostage to further their own goals. They played a sordid blame game in the media here for months. Every time an article on the port congestion appeared, it seemed to contain propaganda from one side that the propagandists at the other side fiercely denied by issuing their own propaganda. The idea was to eke out an advantage by holding a big gun to the nation’s head.
But the gun backfired. It caused permanent damage to all involved, for the benefit of the same sectors in other parts of the country, in Canada, and even in Panama. And now the whole world marvels how such a convoluted, spread-out, French-like disruption of commerce by a small number of actors could happen in the US.
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Taken alone, this would seem a serious, unfortunate confluence of events leading to a "Shipping Strike."
In conjuction with all other daily events.....the insanely lying MSM stoking class and racial animosity, telling people how great the economy is and how well off they are, a fatuous, child sitting in the oval office, the fed destroying the dollar etc.,
It's obvious that this is about the internal destruction of America as a sovereign nation state.
It's about globalism and transnatlonal serfdom.
California- a festuring pus filled sore on the anus of america
California?? That sounds like a description of pretty much EVERY state in the country.
The only pus in AK is coveniently located in Anchorage and Juneau, making it easy to avoid.
crime...we (well most) see the crimes in high places - across the economy - .gov ( legal system)..hard for me to get too exercised by little people using what the can to get some of the pie.
understand..when fiat and inter banks became one with Central banks - the crimes of bail in's and CE and Hank Paulson's ..give me the money and no one gets to know where it goes..but most get the deal.
so this bleeds down to everyman, and the crimes of selling cigs result in death, while corzine lolls in staad or ski's the french alps..just can't get too excited about strong arm unions or guys robbing gold trucks..
"I can't breathe"
I'm not buying this one so much. The four corner strategy has been in place for quite some time, importers will look for the best possible combination of price and service, there will be a new fiasco somewhere to focus on by next tuesday, memories are short ................... yada yada, ad infinitum.
The end result? No permanent nuthin'.
https://www.youtube.com/watch?v=8Gw5pyjBYmQ
Mother
Tell your children not to walk my way
Tell your children not to hear my words
What they mean
What they say
Mother
the labor beef at the port of LA has been simmering for years. (the fact that there is national move to pay burger flippers more, but not longshoremen is a bit of slap on american labor) there are plans to build a west coast port (bigger than the port of LA) about 100 miles south of the US border, union accords and the base pay of the labor required i leave to your imagination. but in the final outcome the global trade bubble will pop.
I admit I have Bicoastal tendencies, but nothing ever happened, honest.
“Not only is it getting old, it’s more and more disruptive and raising costs to the point that bringing manufacturing back may end up being break-even, though it’s probably commodity specific,” he said in his survey response. “Our company is certainly beginning to look for alternatives as well as many of my peers in various commodity segments.”
So the Ivy League's Lean Supply Geniuses have finally rubbed shoulders with the system theory that says you increase dynamic range (lean principles for high speed, JIT response) at the expense of stability margin: oh I don't know, but examples of shortages, starvation, and general chaos (e.g., the UK's Winter of Discontent) come to mind. And the best conclusion they can come up with is the quote above. Fault tolerance and robustness should always be the primary goal of supply, and i'm sure they'll eventually figure it out after a few more disasters. While we wait for the inevitable, I seem to recall something from T.S. Eliot's Little Gidding:
"We shall not cease from exploration
And the end of all our exploring
Will be to arrive where we started
And know the place for the first time."
Or, as the PA Dutch simply say, "too soon old, and too late schmart".
I like the way you used dynamic range as a way that the UCL and LCL from Deming have been perverted to the extreme.
Everyone in the supply chain is playing "hide the pea". Somebody has to carry the inventory and/or raw materials. The pea has been pushed to China but lead time variability has a price.
Yep. As a guy who spent 40 years in supply chain management I always laughed at the "huge reductions" in inventory promoted by manufacturers like the big auto guys. They just pushed the inventory back down the supply chain, increased transport costs and fined suppliers for not meeting their zero inventory schedules. If it's been such a dramatic shift, why have prices gone up every year? Where have these cost efficiencies gone? As Jim Grant say, if we are to believe all the hype put out about technology shouldn't we expect declining prices?
I wonder if those people that built pyramids in Mesoamerica disappeared due to complicated supply chains.
All except for the ones with the Monkey Gods. I guess Cortez took 2-3 Thousand natives around the whole region and kicked ass for years.
https://en.wikipedia.org/wiki/Howler_Monkey_Gods
https://en.wikipedia.org/wiki/Popol_Vuh
https://en.wikipedia.org/wiki/El_Mirador#Today
http://www.dailymail.co.uk/news/article-2976834/Incredible-photos-untouc...
A team of archaeologists led by Christopher Fisher, an expert on Mesoamerica from Colorado State University, has just completed a ground survey of the site identified by aerial scanning and has announced the exciting news that they have found an extensive complex made up of earthworks, plazas, pyramids, irrigation canals, reservoirs, mounds, and stone sculptures that have lain untouched since the city was abandoned centuries, perhaps even millennia, ago.
“In contrast to the nearby Maya, this vanished culture has been scarcely studied and it remains virtually unknown,” writes National Geographic. “Archaeologists don't even have a name for it.”
- See more at: http://www.ancient-origins.net/news-history-archaeology/untouched-ruins-...
TS Eliot is always good. Always.
imo the west coast is way overdue of falling into the ocean
Funny how the ports that had the slowdowns were all inside of 'Chinese Enterprise Zoned' port facilty properties. Seems the Chinese may have made good on their threats to begin to hamper the US Economy after all!
You ever post over at SilverDoc's anymore? Aloha brah...
Bring in Dear Leader Obama's illegal alien worker/voter force. $150,000 per year manual labor "jobs Americans won't do..."
I vote for the Port Neutrality act
the baja ports are cheaper and faster, (less corrruption) truckers bout the same
Umm - I've been to the LA ports and Savannah Ga. I'm not in that business but it sure doesn't look like GA could take a major portion of LA based on unloading capacity. Just saying
Jacksonville-
I gotta feel for those mistreated dockworkers. I mean who can live on $147,000 a year w/ $25k in annual medical (the stress of that union job must be mind-boggling) and an $80k pension. (who pays that pension BTW?)
Sarcasm
Dock workers aren't paid by the taxpayer, so what do you care? I thought the whole meme was that the private sector was better at pricing things like labor...so, this is the price that industry pays. Their union isn't a 'public sector' union, so again, what's it to you, or anyone else? Their pensions are their business.
Now, if you'd like to have an active say, that's fine. But then, apply that to ALL sectors, at both top and bottom.
If the private sector can pay a banker 100 million a year, 147,000 dollar dockworkers are practically freebies. (And they actually DO something useful for a living...imagine that.)
I notice a lot of anti-union folks do not restrict their scorn to the public sector. They start there, but soon extend to ALL unions. And it seems to me that, for them, public sector unions are simply an excuse to attack ANY attempts by labor to organize in its own interests.
Yes, public sector unions are inappropriate, and too powerful. Public employees should be covered under general federal labor laws, with no special protections or benefits. And our private unions have forgotten their original purpose, and become an impediment to labor in the privare sector. But unions are a necessity, and give labor the voice they need and deserve. Instead of mindlessly attacking them, we ought to be focused on FIXING them so the work properly.
They currently have geographic leverage. It can and will change due to greed. Make a decent wage for a long time or a lot of money for a short time. Since americans are only short term thinkers, eventually all will be lost
I'm with ya snatch, I say fuck-it! Send it to the Gulf Of Mexico, The last bastion of Non-Union, yet we make far more money...
Peanuts compared to Wall Street and Washington money-grubbers.
This is a symptom of the collapsing wage and employment of most of the population and the vise that they are in with A.C.A. and every other nickle and dime charge and tax that is bleeding them out.
The dockworkers have leverage that a majority lack; can't blame them for asking for their piece of the pie.
"Right to Work" is a euphemism for "Right to Screw" for the Kleptoligarchy.
Without production, sound money, and the rule-of-law - it's all a shit show.
Snatchngrab: Where do you get your data from? Faux news or breitbart or drudge?
The only people who make the big money are crane operators. You try unloading 30 boxes an hour full of TV sets without damaging any. Lift it out of a hold 150 feet and swing it out 300 ft to perfectly land on a truck chassis without damage is a pretty nifty feat and it should pay well!!!
The salary and benefits was first reported here. So F.O.
The crane operators are at the top but all of the unionized freight handlers are making very good money -- it's a great gig if you can get hired there. (all on-site employees that handle freight at the docks are unionized.) (LA/Long Beach)
Easily automated, the whole port.
Yup. I think it is Hong Kong that has a port 3-times bigger than anything in the US. It is entirely automated. The whole port is run by something like 6 people. And at any given time, they can tell you exactly where a container islocated at the port.
duh---http://www.cnn.com/2013/04/03/world/asia/hong-kong-dock-strike/
more bullshit from a big talker----
Yeah, how dare there be one remaining blue collar stooge earning a decent wage for a day's pay.
I notice the word "work" was left out of your statement...
Well if the're not working why would it matter if they strike.
#41
So what's with the story that the Chinese own the ports and provoked the dispute?
Dubai
Greed hath consequences.
Well, at least California has Obama’s tsunami of unscreened and criminal immigrants to improve the job security and opportunities for law enforcement, disease research, corrections facilities, psychiatrists and social workers to fall back on.
I think the port strike is great, drag all the sacred cow's out into the open for all to see. Of course the unions neither realize or care what it might do to the economy because that would interfere with their greed.
The same argument is true about the owner's greed. The entire interuption will force suppliers to be prepared and not neglect their other sources of shipping services.
and likely: cannon fodder.
and likely: cannon fodder...
Only if they can't afford the 2350.frn to renounce the US citizenship our beloved leader is so anxiously willing to bestow on them. After all, we do need more serfs to shoulder the burden of an additional 1B frn debt repayment per 8 hour shift for the last 6+ years to the backs of the ~330M souls already chosen by fate to dwell in this geographic location.
https://www.youtube.com/watch?feature=player_detailpage&v=L92rESdzhjU