Labor issues at Long Beach and Los Angeles ports are causing major headaches for supply chain managers. Again.
A volatile labor environment, record-setting volumes, and ever-larger containerships are delaying ocean freight, especially at our already strained West Coast ports. Shippers may have sighed in relief when the February 2015 ILW slowdown/lockout issue was resolved, but who thought we would be facing the same issue again just two months later?
Last Friday, April 24th, a Teamsters-affiliated group, Justice for Port Truck Drivers, called for a strike vote over the weekend, with results to be announced on the following Monday, April 27th. Drivers ratified the strike, launching a job action that may restrict flows at the nation's two largest ports for the second time in 2015.
Port of Oakland. Photo credit: Jonathan Gilbert
How did we get here? And why do we keep coming back?
Concentration of demand
All this trouble comes back to one fundamental issue, and that is the concept of specialization. We have chosen to concentrate our shipping through Long Beach and Los Angeles because LA provides some of the very best, lowest-cost, and most convenient alternatives for shippers importing cargo from the Far East. Today, LA-area ports handle 60% of US West Coast container volume and over 33% of all US container volume.
Vessels calling at these two ports disgorge over 15 million TEU (twenty-foot equivalent unit) a year into the greater LA area, filling trains, and trucks with hundreds of billions of dollars in cargo. These loads move eastward through the U.S. logistics network, serving DCs (distribution centers) across the country feeding major markets. We have invested heavily in public infrastructure to serve these movements, at the port, on the railroads, and on the surrounding highways.
Complementing these investments are thousands of container freight stations, West Coast DCs, 3rd-party Logistics providers (3PLs), customs brokers, freight forwarders, and other freight-focused businesses that form a vibrant and highly capable private ecosystem for the management of freight.
So when people ask, "Why not just ship through another port?" the answer is quite simple. There is not another option that affords the connectivity, capacity, and capability of LA.
While the broader environment is shifting, LA is still deeply advantaged
As the Panama Canal expansion nears completion, major US ports are embarking on dredging and construction campaigns to handle these new, enormous ships. The longer-term trend will bring more volume to East Coast ports on massive Panamax and Post-Panamax ocean liners. The result of this shift will eventually be more volume from the Far East moving to US East Coast and Midwest destinations through Savannah, GA; Miami, FL; New York, NY; Norfolk, VA; Baltimore, MD; Jacksonville, FL; and Houston, TX.
Even when these new alternative ports are in place, LA is still likely to be the best option for some shippers. If the commodities demand short transportation lead times, or if distribution patterns demand breaking down containers for distribution to the entire US, West Coast ports are still the fastest and most flexible choice. For this reason, I don't see LA losing its long-term advantage.
Addressing the risk
The first step in addressing a problem is recognition. For shippers that are highly or completely dependent on Los Angeles and Long Beach, it's critical to be looking at alternative options. Do you know what your exposure is on West Coast freight? How much of your company revenue can be traced to shipments that arrive through LA? Even if LA is the best choice overall, it's risky to run all of your cargo through it.