Background
On Oct. 1, 2024, widespread port strikes disrupted major shipping hubs along the East and Gulf Coasts, stemming from labor disputes involving dockworkers demanding better wages and working conditions. By, October 3, the International Longshoreman’s Association (ILA) workers union and United States Maritime Alliance (USMX) reached a tentative agreement for a wage increase and agreed to extend the master contract until Jan. 15, 2025, so all other outstanding issues can be negotiated. Work resumed at most East and Gulf coast ports on October 4. Although the port strike was resolved quickly, Danish shipping company Maersk estimated that for every week the strike lingered it would take 4-6 weeks of recovery time to stabilize port operations and work through backlogs — meaning manufacturers will likely still feel the effects of the shutdown for the next several weeks.
Near-term inventory and supply management
To prepare for potential supply challenges while the ports are working through backlogs, we recommend taking the following actions:
- Review all in-transit shipments: Assess what materials and products are currently en route and awaiting offloading at ports. Work with your freight forwarder to understand specific details of these shipments.
- Assess current inventory levels: Complete an assessment to understand what inventory you have on hand and how long it’s expected to last for impacted materials and products.
- Communicate with suppliers: Contact suppliers for updates on availability for impacted materials and products. Discuss if any alternative options for sourcing materials exist. For example, do they have another facility in North America that can temporarily provide you with supply?
- Adjust production schedules: Prioritize production of items that can be completed with available materials, if necessary.
- Expedite critical products: Consider using air freight or other expedited shipping options for high priority materials or components, even at a higher cost, to minimize production downtime.
Building resilience for the future
Like other major disruptions such as the COVID-19 pandemic, 2021 Suez Canal blockage, and 2022 West Coast port congestion, the port strike has continued to highlight vulnerabilities that exist in North American supply chains. Although many manufacturers that rely on the East and Gulf Coast ports are breathing a sigh of relief, as we look beyond the immediate crisis, it’s essential for manufacturers and distributors to adopt a more resilient approach to supply chain management, including:
- Diversifying your supply base: Reducing dependency on single suppliers and single regions of the world minimizes the risk of supply chain disruptions due to supplier failures, geopolitical issues, natural disasters, and other disruptions. A strong supply base that includes multiple suppliers of critical materials and components allows for greater flexibility in responding to supply chain interruptions. Begin the process of supplier identification and qualification now to better prepare for future disruption.
- Enhancing inventory management processes: Develop a strong understanding of your current inventory positions and raw materials/components that are critical to your operations. Build your inventory management foundation by ensuring systematic inventory levels match your physical inventory, and employ a cycle counting program to help ensure these two numbers consistently match. Assess your current inventory positions against historic and forecasted demand to determine whether minimum inventory levels require adjustment.
- Investing in technology for real-time supply chain visibility: Create transparency in your supply chain to enhance operational efficiency and identify potential bottlenecks and disruptions. Providing insights and real-time visibility into on-hand inventory, inbound shipment, and future outbound customer orders will allow for more informed decision making.
- Strengthening logistics partnerships: Build strong, collaborative relationships with logistics partners to ensure better coordination and communication. Negotiate flexible contracts with logistics providers that allow for adjustments in response to changing market conditions or unexpected disruptions.
These recent port strikes serve as a stark reminder that supply chain vulnerabilities can derail operations overnight. We’ve seen this happen before, and this is just another wake-up call. By prioritizing short-term tactics to mitigate disruptions, manufacturers can protect their operations today while laying the groundwork for long-term resilience. Don’t let your business grind to a halt.
