We can't use events like this to draw the conclusion that current practices are somehow flawed.
Driving the news: The three-day strike at East and Gulf Coast ports concluded with a tentative wage agreement between the International Longshoremen's Association (ILA) and the United States Maritime Alliance (USMX). The dispute over wage scales had disrupted containerized imports and exports, posing a threat to supply chains.
- The strike, the first since 1977 for the ILA, involved 50,000 members and caused temporary halts in American exports. Despite its short duration, it highlighted vulnerabilities in supply chains.
- Many shippers preemptively moved goods ahead of the strike deadline, lessening potential damage.
- Ports from Maine to Texas were affected, with closures announced in New York, New Jersey, and Virginia to reorganize container positions.
The big picture: The agreement provides a $4-per-hour raise each year for six years, starting with a 10% increase on the current top pay of $39 an hour, resulting in a 62% wage increase over the contract's duration, the CNN reported, citing sources familiar with negotiations. The union initially sought a $5-per-hour increase for each of the six years of a new ILA-USMX contract.
Between the lines: The final contract must be ratified by union members, leaving open the possibility of another strike if rejected. About 50,000 of the ILA's 85,000 members participated in the strike.
- Thousands of containers were misplaced at incorrect ports, and billions of dollars in goods were anchored offshore due to non-operational ports.
- A one-week strike could cost the U.S. economy $2.1 billion, including $1.5 billion in undelivered goods, $400 million in transportation losses, and $200 million in lost wages.
'Just-in-time' model: The strike raised questions about the "just-in-time" supply chain model, but Jason Miller, Eli Broad professor of supply chain management at Michigan State University, cautions against overhauling the system. "We can't use events like this to draw the conclusion that current practices are somehow flawed," Miller said, noting that certain goods, like perishable items or specific imports, are challenging to stockpile or reroute through alternative ports. "For example, you can't keep large quantities of perishable products such as bananas in inventory. Likewise, it only makes economic sense to import items like European wines through East and Gulf Coast ports."
The aftermath: Albert White, a logistics coordinator at Canary Yellow Logistics, warned that the aftermath of the strike would bring sudden, widespread price hikes due to temporary supply shortages with a ripple effect on the price of various services as well. "First of all, there will be a sudden price hike on almost every product due to the supply shortages," White said via LinkedIn. “Trucking, warehousing, and distribution service providers won’t have work for the short term. But all of a sudden, when the strike is over, they will face a huge workload, and this will automatically cause hikes in the transportation costs for every product from the eastern coast.”
Looking ahead: The ILA and USMX have agreed to extend their Master Contract until January 15, 2025, to continue negotiations on other outstanding issues. Union members will return to work while final details are being worked out.
