How long will it last?
The duration of the strike is the question of the hour. With the ILA rejecting the offer of a 50% pay increase over six years, that remains unclear, but the bullets below are a few different perspectives to consider. They generally point to the strike lasting about one week, plus or minus.
- The Biden administration reportedly said U.S. supply chains are resilient enough to handle a one-week strike. The implication is that it might invoke Taft-Hartley to start a cooling-off period at that point. FreightWaves writer Stuart Chirls argued that the administration may have been playing semantics when it said it wouldn’t use Taft-Hartley to prevent a strike rather than stop it.
- Walmart’s “base case” is for the strike to last two weeks. According to Kelson Hardwick, director of transportation at Walmart, speaking at the CSCMP Edge conference, the retail giant has pulled all imports forward so they will have sufficient supply for two weeks. It heavily uses the Port of Houston, among others.
- The impact to U.S. auto production could begin to show as early as a week, according to Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. (See Marine Link article here.) Steve Hughes, CEO of HCS International, a shipping adviser to the auto sector, said, “if it turns into weeks, it’s going to be a tragedy.” My perception is that the administration would not want to continue to support one union (ILA) if it means hurting another (United Auto Workers).
- The National Retail Federation says strike impact grows exponentially with duration. The trade group cited the example of the 2002 International Longshore and Warehouse Union strike, which impacted the West Coast ports. Effects from that 11-day strike lasted six months. That is far longer than the linear estimate that some industry professionals have made, which assume that for every one day of the strike, disruption would last five to 10 days.
- My own anecdote from a trip to Costco is that an employee told me they have about one week before they get short on bananas and certain imported alcoholic beverages.
Auto parts to have more immediate impact than finished vehicles
Motor vehicle carloads reported by the Association of American Railroads (AAR) primarily consist of finished vehicles. Strong volumes in 2023 and 2024 have returned dealers’ inventories to targeted levels after being thin during the pandemic. (Chart: SONAR)
Reuters recently added context to the impact that the strike may have on automotive supply chains. According to John Bonzzella, CEO of the Alliance for Automotive Innovation, the ports affected by the strike handled 34% of all U.S. motor vehicle and parts trade, worth $135.7 billion last year. Meanwhile, Barclays analyst Dan Levy has a higher estimate of 70%.
While one week might be the point at which the domestic automotive assemblers get short of certain parts, dealers have additional leeway. According to Cox Automotive, the auto industry had an average 70 days of inventory as of the start of August. News outlets highlighted Toyota’s effort to stock auto parts in anticipation of the strike, which exceeded most other auto OEMs. The Cox Automotive inventory sales data shows they were also most pressed to do that because of its days of finished vehicles in inventory of just 29 days.
Produce supply chains among the most vulnerable
Consider the following from the Farm Bureau (details here):
- 73% of waterborne agriculture is imported via containers – that is the portion that is being impacted by the strike.
- The East Coast handles 72% of those containerized agricultural imports.
- The ILA-handled ports supply more than 75% of the nation’s bananas.
- The ports that use ILA labor also handle large percentages of the imports of the following products: imported cherries (90%), canned foodstuffs (85%), hot peppers (82%), chocolate (80%) and imported beer/wine/spirits (80%).
Your cargo insurance probably doesn’t cover strikes and delays
According to Jeffery Kaumann, executive vice president and head of marine business for insurer MSIG USA, cargo insurance typically excludes damage due to temperature and humidity that might occur as a result of sitting at the ports. Most East Coast ports stayed open for longer hours in the days leading up to the strike to give shippers additional time to remove perishable items, but any containers left at the port have to sit for the duration of the strike.
In addition to shippers incurring losses for perishable cargo, the 2002 West Coast port strikes can be looked at for an indication of what other issues may arise. At that time, significant delays were caused by a shortage of chassis, which caused containers to sit longer in truck yards, and shippers had to rely more heavily on truck brokers.
See Stuart Chirls’ article here.
The Stockshow show featuring Netstock
(Image: FWTV)
On Monday’s The Stockout show, Grace Sharkey and I discussed the topic of the hour, the situation with the ILA, and interviewed Ara Ohanian, CEO of Netstock, a company that offers predictive planning software. Netstock’s software is designed to enhance small and midsize shippers’ logistics capabilities to bring them closer to parity with large enterprise shippers. Many small shippers are still running their supply chain on spreadsheets compared to enterprise shippers that have the backing of internal teams of data scientists and logisticians. That makes small shippers more vulnerable to disruptive events, such as hurricanes and strikes. Netstock aims to help small shippers make the most efficient use of their inventory by placing inventory in optimal locations, including holding items in locations that can serve as substitutes for those most likely to stock-out.
See the show here and the full The Stockout playlist here.
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