Furniture retailers and manufacturers began preparing for supply chain disruptions last week after contract talks between East Coast port operators and unionized dockworkers suddenly collapsed.
The negotiations breakdown, which was ongoing as of this morning, means a strike by dockworkers at 14 U.S. ports is a distinct possibility once the current contract expires on Sept. 30. However, the three- to four-week transit time for goods shipped from the Pacific Rim means importers must decide almost immediately if they need to redirect their containers to West Coast ports.
“The situation seems to have just blown up,” said Robert Buford, logistics manager for Home Meridian. “Our hope is that they will find a way to resolve things quickly.”
Buford and other logistics executives said containers leaving Asia within the next two weeks may have to be redirected to West Coast ports, whose dockworkers belong to a different union and aren’t covered by the same contract as those on the East Coast and Gulf Coast.
Containers landing on the West Coast would have to be moved by rail if their final destination is in the eastern United States, a process that can add $1,500 to $2,500 to the cost of every container.
“Then, there’s the possibility that West Coast ports will become gridlocked,” said Scott Prillaman, director of transportation and logistics at Hooker Furniture. “We’re continuing to follow this real closely.”
Prillaman said his company has been planning for a possible work stoppage since spring by slowly building up its inventory. He said Hooker has no current plans to redirect containers to West Coast ports because of the high costs of rail transport, but might have to reevaluate that stance if a strike were to last more than a couple of weeks.
“Even a work stoppage of one or two days can cause weeks of disruption,” he said.
Barry Bailey, director of transportation at Bernhardt Furniture, agreed, noting that furniture logistics executives are in a classic “no-win” situation.
“You have a choice between more transit time, if there is a work stoppage, or more transportation costs, if you use the West Coast,” Bailey said. “And if the West Coast ports become congested, you could face more transit time and higher costs.”
If a strike occurs, Bailey and other executives said there’s a good chance the Obama administration would order longshoremen back to work under provisions of the Taft-Hartley Act, which gives the president the authority to end strikes and lockouts by declaring a national emergency.
President George W. Bush invoked Taft-Hartley in 2002 to end a lockout of West Coast dockworkers.