While 20,000 dockworkers vote on a new five-year labor contract at ports up and down the West Coast, it’s a good time to review some of the issues and “lessons-learned,” both for contract negotiations and supply chain management.
The 10-month labor conflict between the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) ended with a tentative agreement in February. Final ratification of the tentative agreement is expected to occur on May 22, but the long, disruptive episode exposed fundamental flaws that need to be corrected before the next contract comes up for renewal five years from now.
The dispute lead to massive delays and cargo backlogs at West Coast ports, mainly the ports of Los Angeles and Long Beach, which only now are clearing up.
As I wrote in a Forbes article when the tentative contract was signed, the PMA and ILWU labor dispute revealed a broken negotiation process that cries out for a major change in the way the industry approaches contract negotiations. It was a classic example of how typical, old-school contract negotiation approaches and distrustful negotiation tactics fuel a cycle of distrust. That foundation of distrust led to a dueling war of words and blame-gaming for nine months. And the sad part is that foundation of distrust remains and likely will remain in place until the next negotiation.
The PMA and ILWU need to rethink how to lay the foundation for a strong, collaborative working relationship and create a fair negotiation process going forward. That’s the big question.
Another big question to address is how logistics operators and shippers assess and manage supply chain continuity planning. In a recent article for Logistics Viewpoints, Jeff Metersky, VP, Customer Success Strategy at LLamasoft Inc., recommended supply chain modeling as a way to identify contingency plans for disruptive events.
“Not only did the port strikes cripple the pace of moving goods and extend lead times, but the slowdown left the goods already in route in limbo,” Metersky wrote. “This is particularly concerning for perishable items. Food and beverage companies, grocery stores, pharmaceutical companies and more are seeing profits literally thrown away.”
Supply chain design technology can help organizations deal with such unfortunate events through the ability to “model, optimize and simulate their supply chain network operations, transportation routes and inventory levels,” he continued.
Businesses can prepare for potential supply chain disruptions by building end-to-end models of their existing supply chains and then creating contingency plans by running various “what-if” scenarios associated with future disruptive events, such as port closures, to determine the best response, Metersky says. “This scenario analysis can be used to prepare for other potential supply chain disruptions resulting from an over-concentration of activity or reliance on a limited or single provider.”
Modelling the supply chain, enables supply chain risk mitigation on three fronts, Metersky notes:
Visibility: “Network visualization can help businesses understand things like sourcing, product flow paths, revenue impact of disruptions and products that are single-sourced or have a high concentration or reliance on limited providers.”
Scenario analysis: “Once the digital model of the as-is supply chain is built, businesses can develop optimal strategies to redesign their supply chains to reduce or mitigate risk, increase their resiliency to recover from a risk event and develop contingency plans to respond to potential risk events depending on which present the biggest risks to the business at any given time.”
Rapid response: Businesses prepared with a continuously-maintained digital model of their supply chains “can react rapidly and intelligently when unplanned events occur, and test various alternatives responses rather than guessing or delaying their response.”
So the West Coast labor dispute has taught at least two things: the need for a different negotiations approach, and the importance of contingency modeling and planning. In other words: trust, identify and prepare.