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Port Delays Starting to Damage Businesses
Backups hurt retailers and take a heavy toll on small companies as labor dispute drags on
As employers at the ports along the West Coast on Monday refused to unload ships for the sixth day out of the past 10, their nine-month contract dispute with port workers is becoming a significant business problem.
Ocean carrier Maersk Line has canceled some sailings, while China Ocean Shipping (Group) Co. said it will skip at least one port. Truckers that normally haul an average of five containers a day away from the Port of Oakland, Calif., are lucky to haul one. A West Coast customs broker said that her customers are being assessed as much as $300 a day for containers that sit too long on the docks, though the containers are trapped there.
The delays are causing acute distress to small-business owners with limited inventory to cover sales.
The delays are causing acute distress to small-business owners with limited inventory to cover sales. Retailers, who had been largely unscathed, are feeling the impact. Levi Strauss & Co. said it was concerned it wouldn’t receive some products in time for spring deliveries.
The port delays also are causing problems for auto makers. As of Monday, Honda Motor Co. was experiencing parts shortages at plants in Ohio, Indiana and Canada that will affect its production on multiple days over the next week.
Negotiations between the Pacific Maritime Association, which represents port employers, and the International Longshore and Warehouse Union have come to a standstill in recent days. While major sticking points—including health care and maintenance of the chassis used to transport containers—have been resolved, an arbitration issue has the two sides at an impasse. The employers are refusing to pay workers premium wages for weekends and holidays amid what they allege is a work slowdown by the union.
On Saturday, the White House said it would send the secretary of labor to take part in negotiations and urge both sides to come to an agreement. A federal mediator already had been engaged for the talks.
The Agriculture Transportation Coalition estimates that port delays and congestion have reduced U.S. agricultural exports by $1.75 billion a month, while the North American Meat Institute put losses to U.S. meat and poultry producers at more than $85 million a week, including hides and skins.
The delays could cost retailers alone as much as $3.8 billion this year, according to an analysis by consulting firm Kurt Salmon. Adding in rerouting and carrying costs and other expenses could bring retailers’ total costs to $7 billion this year, the firm said.
For Levi Strauss & Co., “the situation has gone from manageable to bad,” said Chief Executive Chip Bergh.
Levi Strauss imports a third of its merchandise via the West Coast. Mr. Bergh said four-day delays are stretching to two weeks. That could shorten the sales window for spring goods in transit that are due to be delivered in March and April. Mr. Bergh said he is considering airfreighting some goods and diverting others to the East Coast. But those alternatives are expensive.
Macquarie Research estimates that the cost of shipping from China to the East Coast of the U.S. has increased 25% in the past 13 months as more goods flood East Coast ports.
Softline Home Fashions, a major importer of fabric for curtains and other home decorations, has about $800,000 of goods waiting to be unloaded for retailers including Wal-Mart Stores Inc., J.C. Penney Co. and Bed Bath & Beyond Inc.
“We’re in trouble right now with some of our customers,” said Softline President Jason Carr. “It’s a major headache.” Softline is worried about a shipment of drapes bound for Wal-Mart that is stuck in a ship idling along with 35 others outside the port at Long Beach, Calif.
Mr. Carr said he would have to decide in the next day or so whether to start flying in some product from China. In that case, he would have the merchandise in three days, but the extra cost of the airfreight would eat up all his profit.
Wal-Mart declined to comment on its relationship with Softline. “Our supply chain and import network are highly diversified. While we are able to reduce the impact of the port delays and flow product to stores for our customers, some of our suppliers are being affected,” the retailer said.
The delays and extra costs are especially critical to small businesses. Last month, Bert von Roemer, owner of Serengeti Trading Co., a Dripping Springs, Texas, coffee importer began rerouting coffee beans he intended to ship to the West Coast to Houston, Norfolk, Virginia and New York. “I’m railing the coffee across” to roasters in California, he said. “It’s costing me about $2,000 extra per container,” he said. In addition, there is a delay of up to 20 days in how quickly the beans arrive by train, he said.
Lalit Kalani, co-founder of San Francisco-based Bandar Foods, which imports Indian-inspired sauces and condiments from Mumbai, said he received a shipment of about 36,000 bottles from the Port of Oakland Friday—four weeks late. Mr. Kalani’s concern is that grocers will quickly replace his products with competitors’ brands.
Maersk, a unit of AP Moeller-Maersk A/S, said Monday that it had experienced disruption due to the congestion and had canceled some sailings. Shipping line CMA CGM Group said it has “adapted its schedule and has been modifying its ports call order.” China Ocean Shipping said it has canceled some port stops.
At the Port of Oakland, truck drivers can spend up to three days waiting in line before hauling one container out of the yard, says Henry Osaki, an employee at an Oakland-based trucking company. Before the slowdowns, a truck driver might be able to average hauling as many as five containers a day.
“A vessel that used to be unloaded in a 24-hour period is sitting now for sometimes a week and a half, sometimes two weeks,” Mr. Osaki said. “It’s not near gridlock; it is gridlock. The movement of cargo has fallen so low it’s close to not moving.”
New deadlines have compounded the difficulties, says Evey Hwang, a customs broker who works with shippers to get their cargo. Shippers used to have about five days to pick up cargo before terminal operators charged them storage fees—typically about $200 to $300 a day. Now the pickup window has narrowed in some cases to between 24 and 48 hours.
That is why some auto makers are using airfreight, despite its high costs. While large Japanese auto makers are producing more vehicles in North America, key parts for many vehicles sold in the U.S. market still come from Asia.
“At this time, we do not have a sufficient supply of several critical parts to keep the production lines running smoothly and efficiently,” said Honda. “These parts include a small number of critical parts, such as electronics, and some larger assemblies such as transmissions.”
Toyota Motor Corp. said Monday it has reduced overtime at some North American plants, but has yet to see a “significant impact” on operations.
Subaru, Japan’s smallest auto maker and a unit of Fuji Heavy Industries Ltd. , ships ready-made auto components to the U.S. so that workers at its Indiana plant can assemble them into vehicles.
“If things go as is, it could hinder production at our U.S. plant,” said Fuji Chief Financial Officer Mitsuru Takahashi.
It cost Fuji Heavy around ¥7 billion ($60 million) in just a month to ship components by air, he said.
Source: http://www.wsj.com/articles/port-delays-starting-to-damage-businesses-1424136797
Funny no one mentioning this on the news. Thanks for the update.
