How the ILA Strike Will Impact Your Business

You may think you’ve been keeping up with the rapidly changing supply chain, but have you really? The perfect storm for supply chain disruptions has been brewing, and it will impact more than just imported goods.

The Totally AI Port in China

Whether you agree with AI or not, the reality is that it is here. And China is leading the way when it comes to international shipping ports. And it’s use of AI is threatening America’s port workers.

The Qingdao Port, located in the Shandong Province of China, is the world’s first fully automated shipping port. It is incredibly cool and I highly recommend you check out the video below to learn about it. If you are in a hurry, or simply not interested, I highly recommend you watch at least 4:21 – 5:05 to understand the worldwide impact this model will have.

Let’s face it. We all invest A LOT in worker safety. Just think about the crane and silica certifications alone. Not to mention other rules such as the newly proposed heat rule.

As if meeting safety standards isn’t expensive enough, companies also cope with costly labor issues such as wasted company time, high turn over and more.

A Little About the Union

If you aren’t familiar with labor unions, it is important to note they are complicated to understand. But, broken down, here is how the ILA works.

Members Pay Dues

The International Longshoreman’s Association (ie the union that is striking at the East Coast Ports, ILA for short), collects dues from it’s members paychecks. This is a great article outlining how much ILA members currently make and what they are demanding to make. But, it is important for one to consider that the employee pays ILA initiation fees, dues, assessments, and more. (you can read that in the ILA Constitution, beginning on page 35). Based on my understanding of the dues in the ILA Constitution:

• Initiation dues may be higher but are not to be less than $50
• Quarterly dues may be higher but are not to be less than $20 ($80 per year)
• If the member is covered by a collective bargaining agreement, dues are 2% of their gross earnings.

Dues Pay the Bills

This part is simple. Because the dues are based on a percentage of the members’ gross wages, if the members make more….the ILA makes more.

The ILA’s Demands

The ILA is basically demanding higher wages and zero automation at the ports. And why wouldn’t they? When wages increase, their dues revenues increase. Not to mention that additional automation would reduce their membership base. Afterall, China has already proven we can run a port with very few employees, thus reducing a ton of expenses associated with simply having human employees.

Other Impacts

Everyone recalls the ship that ran into the bridge at the Port of Baltimore, right? Well we recovered from that disaster on May 23, 2024 when the Baltimore Harbor re-opened, alleviating pressure on surrounding ports.

Then we had the rail lockout over labor negotiations in Canada that has caused disruptions in the US supply chain since August.

Lastly, due to the East Coast strike, it has been speculated that the Port of LA will experience backlogs, as will the rails, with overwhelming re-routing to the West Coast.

How it Will Impact You

Of course, there is no way of knowing exactly how the strike will impact your business. But you should certainly expect delays in the supply chain, even if your cargo/supplies are coming in through the West Coast.

Yes, American Granites Will be Impacted

Before you discount me, let me be the first to tell you American granites will be impacted in this strike. Why? Because they will likely be in higher demand.

When demand rises, production times tend to increase. This means it may take longer for the quarries to cut and finish the products you order. As an industry, we saw that happen during the COVID-19 pandemic and may likely see it repeat throughout the strike.

Shipping delays may also occur as the supply chain becomes bottlenecked. I will touch more on this in the next section.

Shortages & Delays

Remember, there is more than just the port involved in the import process.

While shippers may reroute to the West Coast, one must remember that each port has a capacity limit. When a port reaches operational capacity, boats wait in the water until they can get to them. This results in shippers slowly reducing the release of cargo at the Port of Origin to avoid incurring costly fees while waiting at port, which in turn results in delays.

The rail will also experience increased demand with limited capacity. While BNSF says they can handle the increased demand, the shipping industry isn’t so certain. There is only so much rail capacity available to serve the West Coast and only so many trucks available to transport goods from dock to rail.

Trucking and air transport will be impacted as well.

Rising Freight Bills

That same analysis I posted previously regarding JB Hunt Transport also touches on increased freight rates.

Let’s face it, there is a lot of freight expense involved in moving monuments. And your company needs to prepare.

Many monument companies are extremely inefficient at estimating future freight expenses. Those with models that include the freight in the sell of a product that will take months to arrive may need to come up with strategies to mitigate soaring freight charges.

Want to know why you should expect these increases? This analysis of JB Hunt Transport’s stock requires a free account. I highly recommend grabbing the account and reading the analysis to understand it better.

Bottom line? Expect increased freight bills and keep a keen eye on them to ensure you will remain profitable.

Plan Ahead

To avoid embarrassing shortages that could potentially challenge your cash flow, now is the time to assess your business’ needs and communicate with suppliers. Forecast the best you can and hedge against the risk of rapidly rising costs by purchasing what you know you will need now.

Whether you stock up in advance or closely monitor your suppliers’ inventory levels against your own, keeping a keen eye on the current business landscape will be crucial should the strike continue to drag on.

Update Oct. 4, 2024

Please navigate to the next post for an important update.