February 18, 2018
The following is an update to another article, "Is Your Supply Chain Prepared for a West Coast Port Shutdown?"
As you read this, as many as 30 or more container ships are anchored outside the Port of Los Angeles waiting their turn to be unloaded. Massive quantities of every type of commercial good and product imaginable are just sitting out there as countless companies suffer for want of their needed freight. Orders are arriving late or being cancelled altogether, and customers and retailers are furious. At best, margins are shrinking, and at worst, operating cash flow is dwindling. And cash flow is like oxygen in a company's blood stream—without it, the company asphyxiates.
When you're one of the largest automakers in the world, you have substantial power and clout among your shippers and vendors. They'll generally do what you need them to do, if for no other reason than the fear that you'll take your business elsewhere. But even a $119 billion dollar enterprise like Honda is inevitably affected by slowdowns and shutdowns at West Coast ports. Plants as far as Canada and Ohio, where models like the Civic and the Accord are built, have slowed production as a result of delayed shipments of critical components sourced in Asia.
If even Honda has had to slow production, imagine the impact of the port shutdown on a smaller company without the global reach of an automaker.
A small company such as Asian Art Imports can't divert shipments as easily, nor can it afford air freight the way an automaker can. And, if a significant quantity of your product is already sitting in containers on a ship outside a West Coast port, even a medium-size business will suffer. An AP report quotes a furniture importer:
"Among the importers with goods on the water is AICO Furniture, whose manufacturers are in Asia. In total, 70 containers are either stuck or on their way with no obvious way to get unloaded," said Martin Ploy, the company's president.
"When Mrs. Jones calls the furniture store and says, 'I've been waiting for months now. When am I going to get this?' they don't have a good answer," Ploy said. "It challenges everybody's credibility. The consumer gets angry with the retailer, the retailer gets angry with us. And of course, we're angry with this whole situation here."
While the impact on the economy of the slowdowns and partial shutdowns at West Coast ports is impossible to estimate, it was enough for President Obama to send Labor Secretary Tom Perez to San Francisco, the site of the PMA and ILWU negotiations, to urge both parties to reach an agreement quickly. But as long as the contention, acrimony, and finger-pointing continue, there's no reason to expect a positive outcome any time soon.