With global supply chains once again under pressure, Jen Pollard, Data Analyst at Visualsoft, breaks down what this means in the run up the peak shopping period.
You may have seen in the news that the USA dock workers (longshoremen) who are a part of the International Longshoremen’s Association (ILA) union (representing port workers across the East and Gulf Coasts) have recently been on strike, with an agreement made that no further strike action will take place until January 15th (should more be needed). The ILA is demanding sizeable wage increases for its members as well as protection from loss of jobs through automation. The strikes currently affect 36 ports on the US East Coast and the Gulf of Mexico.
To give an indication of impact, a single day of strikes can cause a backlog that can take roughly six days to clear. This has likely led to two to three weeks of backlog to clear, as well as more ships coming in every day. As it stands, there are at least 50 container vessels stuck outside eastern ports, up from just 3 ships prior to the strikes happening. Other industries feared they could be impacted by the strikes, due to lack of work. When the dockworkers were on strike, other workers, such as truckers, rail employees and warehouse workers, were concerned about being affected, as well as all the businesses that rely on them, such as restaurants.
Shipping tied to the holiday season typically runs from July through early November, so these strikes have likely had an impact already, despite how short they were. Members of the National Retail Federation, the largest U.S. retail trade group, have already been dealing with significant supply disruptions due to Houthi attacks in the Red Sea and Suez Canal. The attacks have forced shipping companies to take longer routes, delaying cargo delivery and increasing costs due to the need for more fuel and labor.
The real problems arise when it comes to items that are imported from America. With ships now being unloaded again, there is some hope, however the backlog could mean that imports are likely still going to become a problem. Ships already on the water are completely unaffected by this, so any products already ordered and en-route are fine (taking into account any delays in UK ports). If retailers are relying on US items for the Peak Period leading up to the festive season, they may stumble into problems, as backlogs are going to make catching up tougher.
Is shipping from the West Coast a way around the issue? Well yes and no. Transporting things from one port to another in the current situation will require transport, meaning overland transport. In ideal conditions this can take 4-6 days. Then boats have to be loaded, however with increased pressure from extra ships diverting to the West Coast and extra exports trying to leave, there could be even further delays as the ports try to keep up. Add to that the extra travel time, and it’s highly likely items arriving are going to miss the Peak Trading Period now.
Retailers account for about half of the container ship volumes coming into and leaving the US, and hopefully most have already stockpiled, or ordered extra volume prior to the strike to see them through the Peak Period.
If this isn’t the case, then alternatives will have to be sourced. Boats from China are also hit by delays due to the lack of access to the Red Sea and the Suez Canal, and are travelling instead around Africa. These delays are shorter than the delays seen in the difference between East and West Coast (10 days delay from China vs 15 days from the West Coast), but is still slower than waiting on a West Coast Ship (32 days from the West Coast, 100 from China).
Should items start running low, especially if the strikes extend beyond a few days, Retailers will have to get creative with creating demand for items they can still source easily. This could be in the form of sales and discounts on items they have good inventory of (check out our piece ‘Sales Psychology’ for some pointers) or sourcing items elsewhere, even if this incurs extra costs, and price increases. If demand is there, people will likely still purchase as long as increases aren’t perceived to be more than the item is worth.
Jen Pollard is CRM Data Executive at Visualsoft.
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