Plan Early, and then Adapt

Five key takeaways from the West Coast port challenges

Indicators of long and drawn-out West Coast port challenges began showing up in February 2014. While many in the industry focused on East Coast and Midwest delays because of a harsh 2013-2014 winter season, West Coast terminals were congested as a result of strong volumes pre-Chinese New Year 2014.

Chassis shortages contributed to the two- to three-day delay. Then the chassis shortages were magnified by not enough drivers and by additional complications such as larger vessels and schedule changes.

In July, the expired Pacific Maritime Association-International Longshore and Warehouse Union contract added another level of disarray.

Some businesses proactively worked with their service providers to make alternative plans until a contract resolution could be reached. These businesses shipped early to increase inventory levels, for example. But then there were some who reacted with a wait-and-see approach. And they were left waiting, and waiting.

Whatever the course of action — or inaction — companies have learned a lot during this long, frustrating and costly ordeal. Here are five key takeaways:

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Your shipping company should be your supply chain expert and consultant.

Relationships are key. There are thousands of companies capable of moving a product from point A to point B. But that’s not enough.

Your shipping company should be your supply chain expert and consultant. They should tell you what to expect and when to expect it. Listen. Act. Don’t put your business at risk with inactivity. Let them be your expert and consultant so you can focus on what you do — growing your business.

Plan early, adapt often.  This is obvious, but disruptions are unpredictable. While many experts feared a total strike or lockout, nobody knew just what to expect or how long it could drag on. Delays soared from a few days in the beginning to more than five weeks at its worst.

Those who planned for delays and built up inventory were hurt the least. Those who didn’t were forced into contingencies, such as a costly upgrade to air freight.

If that wasn’t viable, they were left out of stock for periods of time. The bottom line is to be ready with a risk mitigation and contingency plan.

Diversify before disruptions. Yes, there are alternative routings to reach your business via ports on the Gulf Coast, East Coast and Canada. But these are not secret. When disruptions occur, everyone reacts the same way and stampedes to the next lowest cost alternative. But have you secured your place in line? Establish your business as a regular user of more than one port before disruptions occur. Justify the added costs as part of your (newly updated) risk mitigation plan.

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The disruption taught customers to keep an open mind regarding mode options.

Know your transportation options. Does your company normally ship only ocean freight? The disruption taught customers to keep an open mind regarding mode options. Your risk mitigation plans need to appropriately account for delays at each leg/milestone in your supply chain.

For in-transit ocean shipments, there aren’t FAA-approved drones that can pluck your container off of a vessel anchored outside of San Pedro Bay. Traditionally, transloading and cross-docking were successful contingencies for cutting transit time from inland moves; but if you’re waiting days for your container to be available from the terminal, what have you saved versus allowing on-dock rail to do the job? Your risk mitigation plan needs to factor the number of days that can be saved by bypassing distribution centers and delivering to stores and to customers directly.

For critical shipments at origin, hybrid transportation modes and breaking out critical product for small air freight moves made sense. With ocean to air creating an increase in air charters Asia-U.S., opportunities arose for U.S. exporters to upgrade headed the opposite direction.

Look at near-sourcing options. The money being saved by importing goods from Asia might be lost in the time in transit. Are there viable sourcing options in the U.S., Mexico or Canada? These locations could improve customer service, lower shipping costs and get goods to market faster. Do your homework and see what is out there. Are there enough raw materials? Are labor costs manageable? You might be pleasantly surprised.

Remembering these five takeaways will help your business minimize future headaches related to port disruptions. Your business will be in the right position to plan for and handle delays and avoid costly overcharges that will cut into profits. goldbrown2

This article was first featured on JOC and was republished with permission.

Eric Souza is UPS director of global forwarding marketing.

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