US: Potential port strike may have "devastating" consequences
A potential strike by longshoremen along the US East and Gulf Coasts at the end of the year could have devastating economic consequences as inventory depletion, rerouting, hoarding and price speculation ripple through supply chains of global companies, risk management company March has warned.
Those not prepared for such disruption could face adverse operational and economic impacts including increased expenses, decreased revenues, loss of market share and reputational damage.
The longshoremen's labour contract with port operators along the East and Gulf Coasts is set to expire 29 December 2012, if a compromise cannot be reached, ports from Maine to Texas could see work stoppages.
This follows an eight day strike at the nation's largest port facility at Los Angeles and Long Beach ports which ended two days ago (5 December).
A previous strike at the Los Angeles and Long Beach ports in 2002, led to lingering supply chain disruptions and cost the US economy US1bn for each day of the lockout.
The Marsh report said that in the event of an additional strike, retail, agriculture, food and beverage companies would be hit particularly hard, due to their profit-driven strategy of keeping inventories low.
For each day of backlog accumulated during a port closure, affected organisations would typically need about eight days to stabilise inventory levels within their supply chains, the report said.
"The ability to move goods freely is an essential component of the global economy," said Marsh Consulting global leader of risk intelligence and supply chain resiliency solutions Gary Lynch.
"As we saw with the West Coast port strike, such events have broad consequences, such as destabilizing trade flows, business, and economic conditions. That strike and a potential East and Gulf Coasts one come at an inopportune time given low growth in key markets like the US, Europe and China.
"This potential crisis on the East and Gulf Coasts and the substantial economic losses that occurred on the West Coast demonstrate why global businesses must be prepared for powerful and possibly crippling disruptions that can happen without warning."
"Those companies with the right portfolio of risk strategies can more effectively protect themselves from potentially severe losses, while simultaneously gaining market share from less-prepared competitors."
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