Daily Archives: December 21, 2012

If You’re Depending on Taft, Then You Are Really Daft!

A recent article in the Supply Chain Management Review that stated the obvious fact that retailers’ supply chains [are] in jeopardy if [the] port strike is not averted noted that the NRF (National Retail Federation) and the RILA (Retail Industry Leaders Association) are calling upon President Obama to engage directly in contract negotiations between the ILA (International Longshoremen’s Association) and the USMA (United States Maritime Alliance) and invoke the Taft Hartley.

Why? The strike, which could take place on December 29, would impact all international trade and commerce at 14 of the nation’s East and Gulf Coast container ports that account for 95% of all containerized shipments offloaded on the Eastern Shipboard.

Should he? I don’t think so. It is Obama’s job to support legislation that opens the borders to free trade and to reach out and begin negotiations with leaders around the world – not to settle labour disputes. It’s not his problem that the West Coast work stoppage in 2002 caused an estimated $15 Billion in losses or that the 8 day work stoppage at the ports of LA and Long Beach last month caused shipping delays for hundreds of millions of dollars of cargo. That is an issue caused by the inability of two sides to reach an agreement, and, to be honest, by the unwillingness of the union to accept that it’s the twenty-first century and adapt appropriately.

As per this article in the LA Times earlier this month, the port strike was part of a bigger fight. The union is not happy with the fact that cargo companies want to cut costs and automate operations to compete with aggressive rival ports in South America and Canada and are fighting tooth and nail to prevent automation to preserve as many of the (extraordinarily) high-paying jobs for their middle-class members as they can. (And these are high paying jobs. An article in the Pittsburgh Post-Gazette back in 2006 noted that the 100,000 members of the two longshoremen unions had an average salary topping $120,000 a year, making them the highest paid blue-collar workers in the U.S. who earned 65% more than an average auto worker at a big three. Source)

While I’m sure the cargo companies and ports are being too aggressive in terms of target cost and job reduction (as transition takes time to be non-disruptive), at this point I’m sure the union is being, at the very least, equally unreasonable. The economy is still in the dumps, the unemployment rate is still close to 8%, and ports North and South of the border are adding enough capacity to take all their business if they don’t smarten up. They average worker is doing a job that could be done by a high school graduate and earning more than I was when I was a Chief Scientist / Chief Architect, that required a PhD. In fact, they earn considerably more than the average software developer or engineer who requires 4-5 years of advanced schooling and 5-10 years of experience to their jobs. I personally think something is wrong with this picture. I’m all about fair pay for fair work, but as they are already getting ridiculous pay for the work they’re doing, relatively speaking, I can’t sympathize with them.

However, while I certainly understand the position of the people calling for the invocation of Taft, I don’t think it’s the President’s job to intervene. If this means a strike is inevitable, then it has to happen. After both sides lose, they’ll come to their senses and strike a reasonable deal.

I know this will probably hurt a number of retailers, but it’s their own fault. Retail, in my view, has been too slow to adopt proactive Risk Management strategies just as they were too slow to adopt e-Sourcing and e-Procurement technology. If a retail chain was actively identifying and managing risk, it’d already be hedging its bets by sending a percentage of its shipments to the closest Canadian, Mexican, or even South American port and then trucking it into the nearest U.S. distribution center so that, should a stoppage (be likely to) occur along the east or west coast, it could just divert all shipments to the Canadian, Mexican, or South American port and not be impacted in the least. To be honest, it’s a shame this isn’t the case for most major Retailers. This is why the ILA and the LWU (International Longshore and Warehouse Union) have so much power. Retailers are not taking appropriate advantage of Northern and Southern FTZs and using foreign ports to mitigate risk. As such, they are depending on TAFT and, in doing so, being really daft. (Especially when, as I pointed out back in September in The Looming Strike Might Cost Billions – But You Don’t Have to Lose a Dime !, Canadian and Mexican east-coast ports are adding capacity hand over fist and ready to take your shipments.)