New Insurance Policies May Mitigate Impact of Port Strike

The longshoremen’s labor contract with port operators along the East and Gulf Coasts is set to expire December 29, 2012.
By Patrick Burnson, Executive Editor
December 17, 2012 - SCMR Editorial

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 last 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 Institute for Supply Management’s (ISM) August edition of the Manufacturing Report on Business saw its PMI, the ISM’s index to measure growth, fall 1.6 percent to 51.1, following a 0.8 percent decline to 52.7 in July. Even with the relatively slow growth over the last two months, the PI has been at 50 or higher for 31 consecutive months.

Hackett observed in the new report that China’s economy has lost steam, with actual growth falling short of targeted rates, while the United States most recent second quarter GDP reading at 3.7 percent outpaced expected targets, even though it was negatively impacted by gains in manufacturing and retail inventories.

The proposed merger of Cosco and CSCL could spark further container consolidation

The average price dropped 4.7 cents to $2.514 per gallon, which now stands at the lowest weekly average price for diesel since July 2009, when it was at $2.542 the week of July 27, 2009, according to EIA data.

The Department of Transportation’s Bureau of Transportation Statistics (BTS) reported this week that U.S. trade with its North America Free Trade Agreement partners Canada and Mexico in June dropped 3.8 percent annually to $99.0 billion. This followed a 10.8 percent decline in May to $92.7 billion.

Article Topics

News · Global · Supply Chain · Management · All topics

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers 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. Contact Patrick Burnson

Comments

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