Subscribe to our free, weekly email newsletter!



Shippers may seek more insurance as possible port closures loom

Those not prepared for such disruption could face adverse operational and economic impacts including increased expenses, decreased revenues, loss of market share, and reputational damage.
By Patrick Burnson, Executive Editor
December 14, 2012

A potential labor strike by longshoremen along the US East and Gulf Coasts at the end of the year could have devastating economic consequences as inventory depletion, rerouting, hoarding, and price speculation ripple through supply chains of global companies, Marsh warned in a new report published this week. Those not prepared for such disruption could face adverse operational and economic impacts including increased expenses, decreased revenues, loss of market share, and reputational damage.

The longshoremen’s labor contract with port operators along the East and Gulf Coasts is set to expire December 29, 2012. If a compromise cannot be reached, ports from Maine to Texas could see work stoppages—similar to what was experienced the past eight days with the clerical workers’ strike at ports in Los Angeles and Long Beach, California.

In the event of an additional strike, retail, agriculture, food, and beverage companies would be hit especially hard due to their profit-driven strategy of keeping inventory levels low and the sudden and severe backlog and rerouting pressures caused by a work stoppage, Marsh said in its report: US Port Strikes—What’s at Stake and How to Manage Your Risk. For each day of backlog accumulated during a port closure, affected organizations would typically need about eight days to stabilize inventory levels within their supply chains, the report said.

“The ability to move goods freely is an essential component of the global economy,” said Gary S. Lynch, Global Leader of Risk Intelligence and Supply Chain Resiliency Solutions for Marsh Risk Consulting and lead author of the report. “As we saw with the West Coast port strike, such events have broad consequences, such as destabilizing trade flows, business, and economic conditions. That strike and a potential East and Gulf Coasts one come at an inopportune time given low growth in key markets like the US, Europe and China.

“This potential crisis on the East and Gulf Coasts and the substantial economic losses that occurred on the West Coast demonstrate why global businesses must be prepared for powerful and possibly crippling disruptions that can happen without warning,” he said. “Those companies with the right portfolio of risk strategies can more effectively protect themselves from potentially severe losses, while simultaneously gaining market share from less-prepared competitors.”

According to Marsh’s report, companies have many options when designing and implementing a risk management portfolio to respond to a port strike. In addition to port-of-entry diversification, companies also should consider various alternative sourcing and buying strategies, changes to their manufacturing process, and risk financing solutions, including voyage frustration and trade disruption insurance.

About the Author

image
Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

The trend of rising weekly diesel prices remains intact, with the Department of Energy’s Energy Information Administration (EIA) reporting this week that the average price per gallon of diesel gasoline increased 1 cent to $2.914 per gallon.

When the United States House of Representatives last week voted extend current law and authorizes surface transportation programs through the end of July by a steep margin, it was widely expected that the United States Senate and follow their lead. That is exactly what happened on Friday, May 22, with the measures headed to President Obama to be signed into law.

For the month of April, Cass and Avondale found that truckload rates in April, which measures truckload linehaul rates paid during the month, were up 3.8 percent annually, while intermodal dropped 1.9 percent annually during the same period.

Following the Pacific Maritime Association (PMA) signing off on ratifying a new five-year contract with the International Longshore & Warehouse Union (ILWU) on May 20, the ILWU followed suite on May 22, saying that 82 percent of its longshore worker members voted to ratify the tentative contract agreement between the parties that was reached on February 22.

Straying from its typical seasonal trajectory, United States-bound waterborne shipments dipped from March to April, according to data recently issued by Panjiva, an online search engine with detailed information on global suppliers and manufacturers.

Article Topics

Blogs · Ocean Freight · Ocean Cargo · Trade · All topics

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA