by Cheryl Garcia, regional vice president, Global Transportation Relationship Management, U.S. Bank Freight Payment
Supply chain practitioners have a simple goal: to create as much certainty as possible out of situations rife with uncertainty. And there’s a great deal of uncertainty at the moment, with the ongoing contract negotiations between East and Gulf Coast dockworkers and their employers. No matter what side of the fence you’re on, it’s hard to ignore the uncertainty the negotiations have caused for shippers and ocean carriers. Uncertainty that’s sure to be compounded by the aftermath of Hurricane Sandy.
Supply chains falter when uncertainty reigns. That’s why we in the freight payment business are so focused on helping our customers manage their freight spend efficiently. Bringing certainty to the audit and payment process allows them to concentrate on areas where they have less control, like the potential port strike – which could be just weeks away.
Right now, we’re in the middle of the ILA/USMX contract negotiation extension period that expires on December 30th. When the contract’s original September 30th deadline was extended by three months, everyone was thankful for the respite. But the extension has had a downside – a longer period of uncertainty.
If the two sides are unable to come to an agreement by the new deadline, there will be plenty to manage, with port closures from Maine to Texas and increased congestion at other North American ports. Your business could be compromised, even if you don’t move your goods through the affected ports.
A strike would have downstream impacts as well, to things like drayage (the short-haul trucking of goods, typically to or from port terminals to nearby distribution or consolidation hubs) and the West Coast intermodal network. What’s more, ocean carriers said they would have imposed congestion surcharges on shippers if a strike had materialized at the end of September. Those surcharges are likely to be resurrected in January if the sides can’t agree. Will trucking companies do likewise?
I think about the time, effort and investment shippers have already put into contingency planning in preparation for the strike deadline earlier in October. From time-consuming “what if” scenarios to costly early shipment schedule changes, it all adds up. And now, the planning has been extended to year end.
Eliminating supply-chain uncertainty is impossible. There will always be unexpected events that don’t fit neatly into the plans of even the most sophisticated shippers or carriers. A devastating hurricane, a political uprising, or a strike – all can influence capacity or rates or fuel prices in ways that seem unimaginable at the beginning of any year.
So what can we do to minimize the impact of unexpected events on our business, our customers and our employees? Supply chain experts tell us the best way to plan for the unexpected is to build a flexible business model and to train staff to react quickly. Easier said than done, of course.
If all this has you thinking about how your organization deals with the unexpected, I offer this suggestion: stay connected with your industry network, be active in the industry, and keep up with what your constituents are doing. When push comes to shove, relationships are as valuable as hard currency; maybe more so. You’ll be positioned to make better decisions in times of crisis when you’re plugged into a network.
In the case of the port strike, this one wouldn’t be an entirely “unexpected” event. But knowing that it could come still leaves us wondering how and when it would end. Proving that even uncertainty is uncertain.
We’d love to hear how you’re handling the uncertainty of the port strike and myriad other factors that impact your supply chains. Drop me a line and let me know how we can help make your freight payment process more efficient.
Cheryl Garcia leads the U.S. Bank Freight Payment Global Relationship Management team, providing international payment solution expertise to both public and private sector customers. Cheryl combines more than 25 years of global transportation and supply chain optimization experience with MBA and BBA Finance degrees, and is a CPA and a Project Management Professional (PMP). Thoughts to share? Email cheryl.garcia@usbank.com.