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

Earlier today, the United States Senate signed off on a six-year surface transportation authorization, according to various media reports. The bill, entitled the Developing a Reliable and Innovative Vision for the Economy (DRIVE) Act, passed by a 65-34 margin and comes at a time, when the most recent extension for surface transportation funding expires tomorrow, July 31.

Demand for the $500 million in available funding for the United States Department of Transportation’s TIGER (Transportation Investment Generating Economic Recovery) competitive grant program was easily trumped, with applications for the seventh round of TIGER grants coming in at $9.8 billion, or nearly twenty times the available amount, DOT said this week.

Global logistics managers will be tracking the progress of the controversial Trans-Pacific Partnership (TPP) talks in Maui, Hawaii this week, as negotiating parties hope to finalize the agreement.

As has been noted in recent coverage on this site in regards to Peak Season, one underlying theme has been, and remains, how Peak Season is not what it used to be. That is not to say there will not be any Peak Season-related activity. Make no mistake, there will be and things driving it from the seasonal nature of business activity and cargo flows to higher demand and increased e-commerce activity, among others.

UPS Access Point locations serve as a replacement delivery address when consumers are not at home to receive a package or when consumers want a delivery to go somewhere other than their residence.

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