Ports Shutdown Averted, But Huge Backlog

Labor Secretary Thomas Perez, forged a compromise between the West Coast dockworkers and their employers.

Handshake

Handshake
Photo by Aidan Jones

From Bloomberg:

“This is now in the rear-view mirror,” Labor Secretary Tom Perez told reporters late Friday outside the San Francisco headquarters of the Pacific Maritime Association, which had been locked in the contract battle with the International Longshore and Warehouse Union. “A significant potential headwind for this economic recovery has been removed.”

Perez arrived in San Francisco on Tuesday, February 17. By Friday 6 PM, Perez managed to bring nine months of negotiations to a close.

We are pleased to have reached an agreement that is good for workers and for the industry,” said maritime association President James McKenna and McEllrath, the union president, in a joint statement released late Friday. “We are also pleased that our ports can now resume full operations.”

The West Coast ports have been operating at reduced capacity for the last four months. A huge backlog of ships waiting to be unloaded has built up. Indeed, the labor standoff reduced productivity by as much as 50% during that time.

California citrus fruit bound for Asia spoiled on the docks, while Mardi Gras beads destined for New Orleans instead languished on cargo ships off the Southern California coast. Carmakers flew in vital components at more than 10 times the cost of shipping them, while Japanese McDonald’s restaurants rationed french fries because of a shortage of Idaho potatoes.

Busiest Port

The Port of Los Angeles, the nation’s busiest, handled 29 percent less cargo in January 2015 compared with January 2014, and volumes were down 19 percent in neighboring Long Beach, the second-busiest port, according to statements from both ports.

The contract agreement won’t end cargo bottlenecks right away, even after port operations return to normal by Saturday night, Perez said.

“The parties have agreed to ensure that there are fully operational ports up and down the West Coast beginning tomorrow evening,” Perez said on a conference call with reporters. “I am confident that they understand the urgency of the task of eliminating the backlog.”

Backlogs Are Hard To Clear

In my experience, backlogs take a lot longer than you expect to clear. I once took over the general management of the company that had built up a huge production backlog over a four-month period.

I set up a 15 minute meeting each morning with key production and sales personnel to ensure we tackled the most urgent jobs first. It took us six long weary months before we could give customers their deliveries on time. We were very fortunate not to lose any major customer during this time. Because, when a customer switches to another competitor, it is very hard to get them back.

Oakland Mayor Libby Schaaf stated:

“We know from experience that often when shippers go to another port — even once the conflict is resolved — they do not come back,” Schaaf said. “The Port of Oakland supports 73,000 jobs just in this region. It’s not just important to the national economy, it is very important to our local economy.”

Shortly after the deal was announced, Thomas Perez told reporters how critical it was to settle the dispute.

“The impact on the economy was such that the president asked me to come here, and we needed to raise the temperature in addition to the work of the mediator,” Perez said. “My presence was designed to send a very clear signal that there was incredible collateral damage.”<Source> and  <Source>

Conclusions

The dispute is over. But there’s a lot of work to do to catch up with the backlog and to clear the docks. There are bound to be spoiled goods and parts/machinery that is delayed. Hopefully the ramifications to the US economy will not be too severe.

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