Disney and Dollar General described their strategies to avoid West Coast port congestion mess at the TPM conference.
They couldn’t simply wave a magic wand to make the congestion at West Coast ports disappear over the past year, but two shippers speaking at the TPM transpacific maritime conference in Long Beach this week described the strategies they employed to reduce exposure to the congestion and labor-management turmoil that snarled many supply chains.
“Everything begins and ends with our guest and their experience,” said David Croft, manager of logistics projects at the Walt Disney Company, who noted that his company has a logistic network that supplies both its theme parks in Orlando, Fla. and Anaheim, Calif., as well as retail stores scattered around the country.
He said the company makes decisions about how to route cargo based on geography, its relationship with ports, services to and flow of cargo through the ports, and cost.
“Cost is fourth for us, the others are much more important to us. Again, everything begins and ends with our guests, so cost is not always the single factor we look at. We always talk about the right product, the right place,” he said.
Croft noted that he began his career in 2002, when West Coast ports were shut down for 10 days before the International Longshore and Warehouse Union and Pacific Maritime Association came to agreement on a new contract. He was working at a different company at the time, and said the dispute “left some pretty deep scars” and created chaos.
“When I knew this contract situation was coming, about three years ago I went to my leadership and said, ‘look, we have significant risk here with our supply chain. We need to get out ahead of this and really build some relationships outside the U.S. West Coast particularly for our IPI (interior point intermodal) cargo.'”
He said the company shifted all of its cargo bound for inland distribution centers for its retail stores in Chicago, Detroit and Memphis to the Canadian ports of Prince Rupert and Vancouver using the Canadian National Railroad.
The relationships that Disney was able to build with ocean carriers and the CN railroad over those three years meant that the West Coast port disruption did not impact the company.
The company prevented disruption to the flow of cargo at Disneyland by rerouting cargo away from the West Coast even though it was destined for Southern California.
Speaking about logistics in the Southeast, Croft noted that the major port for Disney is Jacksonville, Fla., but that it also uses ports in Savannah, Miami and Port Canaveral, from which it operates four cruise ships. He said the company will continue to build its relationship with Port Canaveral as it expands into container shipping.
“We need ports that remain fluid and allow for us to move products unimpeded,” said Adam Hall, senior director international logistics at Dollar General, the 12,000-store retailer based in the Nashville suburb of Goodlettsville, Tenn.
“I think everyone in the room would agree that we should never have had the type of situation we experienced,” said Hall. “It’s a lot of extra money, a lot of extra time, and lot of heartache that is completely unnecessary and does not live up to the promise our ports are there to deliver.”
With 12 distribution centers and three import centers, one in Southern California, one in Georgia, and one in Laredo, Tex., Hall said Dollar General has a bi-coastal strategy that assures it is not married to one particular port.
“We will move, we will be nimble,” he said. “We will make changes in our supply chain ahead of what we see in the market place.”
Like Disney, he said the decisions that Dollar General makes are driven by its customers, “store in-stock…having the product on the shelf when the customer comes in.”
“We will change our supply chain, we will make those decisions in advance of some sort of catastrophe in order to have that product on the shelf,” he added. “If it is not on the shelf, then the customer cannot buy it and if the customer cannot by it, they will lose trust in us and go somewhere else.”
Hall said the 2014-15 situation at West Coast ports was viewed by his company as a part of a continuing series of crises.
“Let’s not fool ourselves, two years ago we were talking about the ILA,” the International Longshoremen’s Association, the ILWU’s counterpart on the East and Gulf Coasts, he said.
Hall said his company has shifted cargo between the East and West Coast not just as a result of where it sources products, but also in anticipation of possible labor disruptions.
In 2009, Dollar General moved the predominant amount of its cargo through East Coast ports, and just 41 percent of containers through the West Coast. As the company continued to expand, that West Coast share went up to 78 percent in 2010, down to 74 percent in 2011 and then back up to 78 percent in 2012 as the ILA negotiated its contract, which was ratified by union members in 2013. In 2014, in anticipation of the ILWU negotiations, Dollar General dropped the amount of cargo it moved through West Coast ports to 57 percent from 69 percent the prior year.
“There has been permanent and irrevocable damage out here on the West Coast,” Hall said, adding that his company has figured out better ways to move its cargo that do not involve the West Coast ports. “There is a significant portion of this cargo that will not come back.”
Even though Dollar General’s stores are predominantly on the East Coast and in the Southeast, Hall said, “I’ve gotten our teams internally to be able to accept the fact that we will have longer transit time, but with higher confidence of on time delivery…We will trade a little bit of safety stock for little bit more reliability.”
He said the company has also made key investments over the past three years to build capacity in import centers and surge cargo facilities.
Hall predicted that Dollar General and other beneficial cargo owners will take more advantage of Canadian ports and will look at Mexico as they evaluate ports that “don’t come with the amount of pain we’ve experienced over the course of the last couple of years.”
Hall said companies like his need transparency and would like to have standard metrics on port performance, so they can make good decisions on where to route cargo and not have to rely on making “gut” decisions that could be susceptible to error.
Tinker Bell and the General
