The 2:00 Minute Warning

I have a quick question for you. How concerned are you about the likelihood that your company could experience a supply chain disruption or see a spike in your freight costs in the near term? If you are not concerned at all then you can skip this week’s Two Minute Warning.

But if you are even mildly concerned about a supply chain disruption then read on because there are some important things you need to be watching. First, there is an increasing likelihood that there will be a strike affecting the East and Gulf Coast ports when the contract between the USMX (the companies who operate at the ports) and the ILA (the union representing the workers at these ports) expires on September 30, 2024.

Right now, there’s a significant gap between these two parties. This Monday the Wall Street Journal noted that there aren’t any meetings on the calendar currently.

What will happen if there’s a strike?

A disruption of any length could have a major impact throughout U.S. and internationally based on the large number of ports and containers involved. Roughly 45,000 workers would be striking at once. 

Keep in mind that this would be happening in a year when many ports are dealing with historic volumes and may not be able to absorb capacity with ease.

In early August, Xenata reported, “Ocean container shipping demand from China to North America and North Europe continued to break records in June as importers rushed to protect supply chains amid the global disruption caused by conflict in the Red Sea.”
 
This makes planning for alternatives especially tough. Last week, the Journal of Commerce report, "Shippers and forwarders on the trans-Atlantic are testing alternatives to ports along the US East and Gulf coasts ahead of a potential dockworker strike beginning Oct. 1. But there is a resignation that there are few viable options if both seaboards are down."

And that brings us to what is happening in the truckload markets. As we witnessed when the Canadian railroads shut down for a couple of days due to labor unrest, we live in an interconnected freight market where what happens with one mode (e.g. rail or ocean) affects other modes such as trucking. So even if your company isn’t involved with the East Coast ports or any ocean shipping, there are still ramifications that could impact your supply chain.

When there is a disruption at a port, it impacts the capacity in the truckload market as shippers make decisions that cause carriers to reroute their trucks. We saw this last year at the West Coast ports, and we’re starting to see it this year as companies divert traffic away from those ports and direct it towards the West Coast. And that brings us to another very important issue.

What’s going on in the truckload market?

There are signs that this market is rebounding after an historic and very, very long freight recession. Numerous CEOs of truckload carriers are reporting that with the narrowing in the gap between the contract rates versus spot rates, their companies are asking for and getting higher rates.

That is why we have been recommending that if you’re going to market with a truckload bid, sooner is better than later. As truckload carriers fill up capacity, they will in essence, continue seeking to raise their rates. And they are justifying this movement in rates based on the fact that the cost to operate a truck has continued to rise. Let’s wrap things up with one last question.

Do you need help planning ahead?

We have a wealth of information we can share with you about how to manage through this East Coast port situation and how you can conduct great truckload or LTL bids. And as transportation sourcing experts, we have a wealth of experience and expertise that can help your company get the best possible results from your sourcing event. Our strategic approach to conducting sourcing events has produced superior results on getting the lowest possible total cost over time, while still maintaining service levels.

If you’re interested in learning more, give us a call, send me an email, or let’s schedule on a 1 on 1 chat via Calendly. 

BY MIKE REGAN, CO-FOUNDER OF TRANZACT

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