Retailers on edge over new supply-chain woes amid port labor talks
Negotiations start Tuesday between longshore union & port employers over new agreement covering 29 West Coast ports
The start of contract talks this week between terminal operators at West Coast ports and the powerful longshore union has retailers fretting that a standoff at the negotiation table will lead to new disruptions in getting merchandise on the shelves.
The ports of Long Beach and Los Angeles, the biggest container port complex in the nation, have already seen a record number of imports from Asia arriving through the first three months of the year. Retailers have been bringing in as much goods as they can to, among other reasons, build up inventory ahead of any possible slowdowns or shutdowns at the ports.
“Retailers are preparing for any potential disruptions because of the West Coast port labor negotiations,” Jonathan Gold, vice president for supply chain and customs with the National Retail Federation, said in a statement last week. “NRF has previously encouraged the parties to remain at the table and not engage in disruptions if a new contract is not reached by the time the current agreement expires July 1.”
The negotiations between the Pacific Maritime Association, representing terminal operators and ocean carriers, and the International Longshore and Warehouse Union, representing 15,500 registered dockworkers, started Tuesday in San Francisco. The talks come as West Coast ports are under close national scrutiny because of the meltdown of the U.S. supply chain in 2021 that left dozens of ships idling offshore, unable to unload cargo.
The causes of the disruptions were numerous, ranging from an unprecedented volume of imports driven by U.S. consumer spending on household goods because the Covid pandemic prevented people from traveling and going out, to labor and equipment shortages across the trucking, railroad, and warehousing industries. The pileup of containers at the ports, however, also prompted fresh talk of automating the terminals.
The PMA fired a shot across the union’s bow earlier this month when it released a study urging the need for automation for the West Coast ports to remain competitive, facilitate cargo and job growth, and reduce greenhouse gas emissions. That release so close to the start of the contract talks didn’t go unnoticed and the union responded quickly.
“It’s obvious that the PMA is issuing its report as posturing as we go into negotiations,” ILWU Coast Committeeman Frank Ponce De Leon said in a statement last week. “However, much of what their report claims is counter to numerous previous reports on automated terminals that cite job loss and weakened efficiencies. The bottom line is that automation has killed jobs at the ports.”
Jim McKenna, the chief executive of the Pacific Maritime Association, said in a media briefing with the Port of LA last week that there was no special meaning behind the timing of the study’s release and that the only reason it was released this month was that it was finished.
The conflict between the terminal operators and the union over implementing new technology at the ports goes back decades. In 2002, the PMA locked the union out for 11 days, costing the U.S. economy billions of dollars, to win concessions over the use of scanners instead of clipboards and chalk at the container terminals, among other changes. In return, the dockworkers have received the best pay and benefits among blue-collar workers, making up to $195,000 a year on average, according to the PMA.
Automation is necessary particularly at the Southern California ports because they are located in urban areas and there’s no room for the facilities to expand, McKenna said last week. The only solution to accommodate the increasing number of containers is to better use the available space by packing containers more densely, according to McKenna.
“The ‘dense-pack’ that you achieve with an automated facility is really quite amazing,” McKenna said last week. “You can push these things from 50% to 75% more cargo inside them.”
Four of the 13 marine terminals in LA and Long Beach have implemented or plan to implement automation either fully or in part. Other major ports in Asia and Europe are already fully automated.
At automated terminals, remotely controlled, software-assisted cranes unload ships around the clock and autonomous vehicles move containers around the terminal, where automated mobile cranes stack them and organize the container yard overnight for loading onto on trucks and trains the next morning, according to the study released by the PMA.
It takes an investment of billions or dollars and many years to get to that point, however, and although the ILWU had conceded to automation in 2008, the union has scuffed at implementation. Last year, when Total Terminals International announced plans to automate Pier T in the Port of Long Beach, ILWU’s Ponce De Leon said in a statement that “the ports exist for the benefit of the U.S. and local economies, not the destruction of jobs and maximum extraction of foreign profit.”
The contract talks are likely to go beyond the June 30 deadline because that’s what tends to happen each time, McKenna said. He said he was hopeful that the positive experience of the past year, when the PMA and ILWU worked closely together to resolve the bottlenecks at the ports, will carry through at the talks and that there won’t any disruptions at the ports.
That will be music to the ears of retailers and other importers who have few alternatives to the West Coast ports for bringing their merchandise from Asia to the U.S. market. Although some retailers are diverting their cargo to East Coast ports, the results have been mixed because ports like Savannah and Charleston also have problems handling the large volume of imports, according to Nate Herman, senior vice president of policy with the American Apparel and Footwear Association.
The labor talks on the West Coast are a “significant worry” for the apparel industry, Herman said in an interview.
“The longshore workers deserve a lot of credit because they saved our industry,” Herman said. “They deserve a pay increase.”