Supply Chain Disruptions Are About to Get Even More Interesting!

As the annual Lunar New Year celebrations in China began today, it would seem that the weeks-long celebration and expected factory slowdowns would be cheered around the industry because it is the perfect time to clear all of the backlogs in the U.S.

However, many experts are only viewing this reprieve as the calm before a perfect storm. There are many reasons why industry leaders believe the post-Lunar New Year landscape is set to be very difficult. While factory shutdowns around this time of year are expected, many in the industry believe that massive amounts of travel could also lead to more Covid-19 related pauses and slowdowns.

“What many people in the industry fear is a scenario similar to the beginning of the pandemic, where factory shutdowns were extended and then manufacturing operations were ramped-up to make up for lost time and meet consumer demand,” said Peter Hsieh, OEC Group Regional Vice President of Sales and Marketing. “This likely scenario will create more backlogs at U.S. ports and make delays even longer than those currently being experienced – especially at West coast ports.”

In addition, the ILWU contract negotiations which are looming in late spring are compounding experts’ fear. This year, negotiations could become contentious, even shut down operations, and dramatically add to the long line of vessels waiting to berth and unload goods at West Coast ports already reeling. While it may seem that potential labor issues will only affect West Coast ports, importers must realize that a potential work stoppage may be supported by sympathetic East Coast port workers and other groups of longshoremen around the country.  This is nothing new and has been done many times in past decades.

This could mean ports on the West Coast that currently handle nearly two-thirds of all imports into the U.S. could be, at best, slowing down operations and making the import of goods into the U.S. even more difficult. While there are other ports in the U.S. that may not have the same bottlenecks, shippers need to remember that they also do not have the capacity to handle the same amount of volume as L.A. and Long Beach and competition for space of these vessels will be fierce further stressing the East and Gulf Coast ports.

“The ILWU is in a very strong position and right now they do not seem to be budging on any of their demands,” said Frank Costa, Vice President of Sales for OEC Group’s Northeast Region. “As a result of their current standing and the fact that no known conversations are taking place, it is possible that these complex negotiations will be drawn out, meaning that operations at L.A.-Long Beach could be severely interrupted for the foreseeable future. Therefore, it is critical for all importers to begin thinking about ways to bypass West Coast Ports and move their deliveries to either East Coast or Gulf Coast ports.  In the end, this could be the impetus for these East Coast and Gulf Ports to increase their ability to handle additional cargo for the foreseeable future.  And, one other critical point….Is it FINALLY time for US Importers to SERIOUSLY consider Near-Shoring and Re-Shoring capabilities so as to finally have options available to them they have not really considered in the past.  We’d love to hear your thoughts on this.