It is always exciting living in Los Angeles the hub of activity for the west coast of the United States. But things have been more exciting than usual with a struggle at the Port of Los Angeles; impacting businesses worldwide.
This month's newsletter gives you additional insight into the slowdown that is tricking down into all sectors of the economy as port workers and truckers battle management for pay and work status.
As always when you have a fulfillment or logistics need, Medallion Fulfillment & Logistics is here to provide custom solutions for your needs, just ask us!
President, Medallion Fulfillment & Logistics
The intricate supply chain infrastructure in the United States requires a coordinated effort among a number of different services. Products move in, out of, and around the country via ports, trucks, rail and air. The last few months have been a sobering lesson in how a disruption in one element causes a ripple effect that sends shock waves through the rest of the industries.
West Coast ports, primarily Los Angeles and Long Beach, have been entangled in labor disputes resulting in massive slowdowns. With approximately 40 percent of imported goods passing through these portals, it was inevitable that there would be a trickle-down effect essentially paralyzing both shippers and manufacturers.
One hurdle appears to be nearing a conclusion. Members of the International Longshore and Warehouse Union, which represents 42,000 West Coast port workers, had been operating without a contract since July 1, 2014. They have been unable to reach an agreement with the Pacific Maritime Association, which negotiates for the dock employers, but as of late January it appeared that a final contract was near resolution.
The two sides have differed on a number of issues including work rules, wages and pensions. A major point of controversy has been the shipping companies' sale of trailer chassis used for moving containers at the ports. The leasing companies who purchased them have been largely unable to deploy them to the needed areas.
A Teamsters strike in November dealt another blow to the already reeling ports. Truck drivers were protesting a change in policy that resulted in shipping companies treating them as independent contractors rather than employees. The move was made to reduce costs, but it came on the backs of the truckers who were now forced to bear expenses for truck leasing costs, insurance, fuel and repairs. Many of them ended up earning less than minimum wage, especially with the clean-energy regulations increasing the costs.
While the truckers went back to work, a recent court ruling indicates that the disputes may not be over. On January 29 a California Superior Court judge ruled against trucking company Pacer Cartage, declaring that the truckers were indeed employees and were entitled to hundreds of thousands of dollars in damages. XPO Logistics Inc., Pacer's parent company, has already declared its intention to appeal.
So what has been the effect of all this labor unrest? The ports are in virtual gridlock, with containers stacking up six high in the Port of Los Angeles. Companies have been scrambling to find other solutions, but the demand for alternatives has made that an equally difficult route.
On a single day in January 19 ships sat idle, anchored outside both ports. Adding to the congestion, global shipping companies are trying to improve their economies of scale by using larger ships and even sharing them, which causes further delays.
Consider the example of Memphis-based Mallory Alexander International Logistics. They had 170 import containers and 850 export containers total between Los Angeles and Long Beach. The company has tried to get the cargo moved by rail, but the railroads are reducing service to the West Coast until the congestion clears. In the meantime the containers continue to sit, costing them time and money.
It's estimated that the slowdowns and congestion have cost as much as $1 billion in lost productivity and opportunities. Another unsettling development is that some companies are looking outside the country to Canada and Mexico in order to get their shipments moved in a timely manner.
Even though the labor disputes may be nearing resolution, the result will not be a magic wand instantly restoring order. Gene Seroka, executive director of the Port of Los Angeles, said that it could take eight weeks before operations were back to normal.
How has your business been impacted by the slowdown? Our fulfillment and logistics company is located just outside the Port of Los Angeles, allowing us to receive your overseas containers and process your shipping needs regardless of the labor situation. Contact us to learn more about our full range of services.
About the Writer Jan Stewart
Jan Stewart is a professional writer for Medallion Fulfillment & Logistics, a family owned Los Angeles based fulfillment firm. She writes exclusively for Strategies for Success on topics of business tips, how to promote your business online, and establishing your brand in the marketplace.