Getting West Coast ports back to full capacity will require patience and time

With the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU) recently agreeing to a tentative agreement on a new five-year contract last weekend covering about 20,000 port employees at 29 West Coast ports following roughly nine months of stops and starts and acrimonious negotiations, the focus for all port and supply chain stakeholders is firmly on the future.

Details of the labor agreement were not made public, and it still needs to be ratified by members of both parties.

Getting to a point, though, where port operations are fluid and less cumbersome than they currently are looks as if it will come with some challenges.

The general consensus is that the huge backlog of cargo on the ports’ docks, warehouses, and vessels still at anchorage will take up to six months, coupled with the logistics and supply chain challenges associated with getting port operations back to something resembling normal.

The harm to shipper’s supply chains the labor difficulties over the past nine months has caused has been severe in many cases.

A Wall Street Journal report noted that port problems have been causing widespread pain for shippers, retailers, meat and poultry companies and manufacturers throughout the U.S. It explained that farmers experienced difficulties getting produce to Asia, with fruit rotting in containers, and auto manufacturers were forced to fly in parts to keep plants running. 

When it became clear that negotiations were stalling out or not happening altogether at various parts, many shippers were forced to come up with contingency plans to get their goods into the U.S in a timely and efficient manner and not be held up for an indeterminable period at West Coast ports.

These contingency plans included things like shipping earlier than usual to ensure there is enough inventory on hand, and shifting cargo to East and Gulf coast ports as well as Canada and Mexico, with air cargo as option for last minute orders, which is far more expensive.

Other options experts told LM included increasing the use of non-U.S. West Coast liner service with carriers in an attempt to assure space availability in the event of a disruption by having a preferred existing customer status and exploring source-supply shifting, in those limited instances where that is plausible in the short run, to suppliers where the supply chains that don’t depend on U.S. West Coast ports.

Ben Hackett, founder of maritime consultancy Hackett Associates, said in an interview that it will take six-to-eight weeks at a minimum to get things sorted out at West Coast ports.
“Carriers chartered a lot of extra ships to keep their schedules while ships were stuck in LA/LB waiting to dock,” he said. “They need to be worked through and then the next problem is to get all the equipment back into the right place and back to Asia.”

The next step, he said, will be to convince shippers that things will be back to normal and that they can safely ship via West Coast ports.  That should not be too difficult, though, as it costs a lot more to ship via Panama on the all-water route, and myriad logistics distribution facilities are on the West Coast, he added.

“The final problem are the railroads,” said Hackett. “They have not exactly been providing the best of intermodal services, focusing instead more attention on car loads of sand for the shale oil/gas exploration.  A lot of mea culpa’s around. In the meantime inventories reached a peak suggesting that we may see a few weak months of import volumes until they are worked off.”

Mike Regan, chief relationship officer for TranzAct Technologies, said that it will take 30 days for the new contract between PMA and ILWU to be ratified and 90-to-120 days before the ports can clear out the backlog and resume normal operations. 

“It’s estimated that there are over half-a-million containers waiting to be unloaded and that is going to have an impact on supply chains throughout the second quarter,” he said. “This could lead to significant capacity issues, especially in the second quarter, coupled with a risk mitigation plan needed for alternatives and options for freight diversion.”

The subsequent backlog resulting from this situation remains somewhat unclear at this point, but Regan said that one thing supply chain stakeholders are having difficulty assessing and responding to is that excess capacity, or a buffer, is gone, or is significantly less robust than it once was.

And this creates a situation in which these types of disruptions lack the ability to bring networks back to normal, he explained.