As negotiations resume between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA), it is important to note that the situation remains tense, with disruption still in progress at some terminals across the West Coast. The negotiations, which have been ongoing amidst a backdrop of varying degrees of terminal disruption, concern a key issue—wages.
The Evolving Situation
ILWU workers have reportedly been slowing cargo handling at several locations, including Seattle-Tacoma and Oakland, as well as Southern California. This tactic, which was employed earlier in April as well, is seen as a method to gain leverage on local issues. With the talks resuming this week, the extent of disruption may be expected to fluctuate on a day-to-day basis.
The scale of the demands by ILWU in this negotiation is substantial. The union is reportedly asking for a nearly 100% increase in straight-time hourly wages. To put this into perspective, the current hourly wage is just above $47, and the ILWU is pushing for a $7.50 per hour increase for each year of a new six-year contract, amounting to a wage hike of $45 per hour. This far exceeds the annual wage increases of the past two decades, which have typically ranged from $.50 cents to $1.50 per hour for each year of a contract.
What You Need to Know
What does this mean for you? While it’s promising that negotiations have resumed, the extent of the demands from the ILWU could potentially prolong the situation and related disruptions.
We are advising customers to be prepared for potential delays or disruptions in their supply chains.
However, our customers don’t have to go it alone. We’re here to help. We recognize the importance of proactive contingency planning and risk management in times like these. Drawing on our experience and expertise, we remain committed to developing and deploying dynamic strategy tailored to our customers’ unique requirements. By conducting thorough risk assessments and identifying potential bottlenecks for each of our customers, we’ll work with you to anticipate and mitigate potential disruptions. This proactive approach will minimize the impact on your supply chains.
Mitigation is an expense, however. Staying the course keeps cost low now, but creates a risk of far greater expense if a full blown port shutdown occurs and persists for an extended period.
There are 3 approaches:
- Stay the course and react if a complete shutdown occurs – If a deal is reached with minimal disruptions along the way, this will pay off. If a significant labor disruption does occur, new shipments can still be rerouted, however the existing pipeline could suffer extensive delays. Clients choosing this strategy should have adequate safety stock to weather any storms.
- Completely reroute all cargo touching the west coast – Depending on final location, this strategy carries significant increased transportation cost for an unknown duration that could last many months (ILWU contract actually expired July 1—2022!). Of course, in event of a significant disruption, the entire supply chain is safe.
- Some balance of 1 and 2 – minimize air risk by keeping a percentage of supply chain away from the West Coast, while maintaining primary flow via the West Coast.
By keeping you informed, supported, and equipped with flexible solutions, we’ll help guide you through the challenges of the current shipping environment and maintain the smooth flow of goods in this turbulent time. We will continue to update you as more information becomes available, and we urge you to reach out to your TOC Logistics representative with any questions or concerns.