It’s a welcome relief to shippers hearing that the U.S. West Coast port negotiations are finally showing signs of a solution as the contract talks have stretched out month after month. While a final agreement isn’t coming up this week, reports that parties have settled on health benefits have been reached show a massive hurdle cleared.
The post-pandemic world looks different daily, making negotiations more complex than in previous years. This isn’t to say that the world of labor relations had been smooth until 2020. The West Coast ports are consistently problematic, as 40% of cargo coming into the U.S. utilizes the Ports of Los Angeles and Long Beach.
Until the pandemic congestion forced shippers to divert cargo to East Coast and Gulf ports, the deluge of çargo brought on by a spike in eCommerce as lockdown forced people to avoid social situations. Their entertainment budgets went to home improvement, hobbies and crafts, and decorating, which advanced the adaptation of online shopping by a decade in just three months.
That cargo level reconfigured the port’s workload and made union labor acutely aware of how much could be expected of them in the coming years. Conversely, management started to see how dependent they were on skilled labor until the congestion forced a diversion to other ports. Analysts started doomsday predictions that the market share had been permanently lost.
Despite the temporary drought (zero U.S. ports are even close to being equipped to handle the level of cargo that hits the west coast, including NY/NJ) and collapsing rates as demand falls, nobody denies the importance of the West Coast labor negotiations. As we’ve seen, rates won’t stay flat forever, as we can trace the drop in demand straight to the bullwhip of such massive import levels for the last three years.
It should have been obvious that demand would drop. For three years, shopping spiked and capacity diverted to PPE and medical equipment took precedence, making retailers desperate for inventory – a situation they rectified by, as some would say, over-ordering and stocking to be ahead of the next wave of demand. As the lockdowns would eventually finish, some were left holding on to so much they didn’t have to push for new inventory. That inventory doesn’t last forever and the cycle will reemerge.
Expertise is hard fought. After almost eight decades of operation, Coppersmith has a unique perspective on the logistics industry, and we share that so our clients can make the best plans for their coming logistics needs. If you’re ready to shape the future of a post-pandemic supply chain, contact your Coppersmith representative today.
