Contract Talks Meet Risk Mitigation

September 20, 2012

The International Longshoremen’s Association and U.S. Maritime Alliance are back at the table behind closed doors with a mediator trying to sort out their labor contract. Meanwhile, shippers responded to the potential for a port strike on the East and Gulf coasts by shipping early and shifting some cargo to other ports.

The fact that the two sides are sitting down with a mediator is a positive sign and may very well protect the peak consumer goods shipping season (and Christmas for many children) from disruption.

Even if talks stall, there is an option to move to binding arbitration to bring the contract discussions to a successful close.

Today’s transportation marketplace offers many more options for shippers. From the four-corners strategy many companies adopted after the 2002 West Coast port shutdown to mode shifting, shippers have alternatives. Congestion, delays and higher costs are likely, but not a complete disruption to a supply chain.

Supply chains continually demonstrate their resiliency in response to major events that are unpredictable. Unlike an earthquake, which may be likely but unpredictable, labor contracts have stated expiration dates. That makes a “just in case” response less painful because any ramp up in inventory or mode shift that may carry a higher price tag is temporary.

While the ILA and USMX work out their contract, there is another deadline for U.S. shippers to focus on – March 31, 2013. That’s when the National Master Freight Agreement expires. Teamsters President James Hoffa has already said pensions, benefits and wages are important. As Hoffa points out, when the troubled Central States pension fund was created, each retired Teamster was being supported by four working Teamsters. Today, each working Teamster is supporting five retired Teamsters.

To get the math to work, the Teamsters need more members and more employers who are paying into pension funds.

The cargo diverted from the ILA ports during current contract negotiations will return to those ports. But, based on past experience, a percentage of domestic freight diverted from union carriers doesn’t return to those carriers, even if contract talks do not result in any disruptions.
 

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