OM in the News: West Coast Port Disputes and Global Supply Chains
“Shipping companies say West Coast ports could shut down if a new contract isn’t reached with dock workers,” writes the Los Angeles Times (Feb. 14, 2015). A flotilla of ships — filled with cars, electronics and clothes from Asia — have anchored off the coast waiting for the docks to clear. Both sides blame each other for the severe traffic jam. A shutdown promises to delay numerous products from Asia including furniture, cars, toys, clothes and electronics. About 12.5% of U.S. gross domestic product is tied to goods that flow through the 29 West Coast ports. The ports of Los Angeles and Long Beach together handle 40% of the nation’s incoming container cargo. The dispute centers on a new contract for roughly 20,000 dock workers at the ports.
Businesses that rely on the ports for their goods are likely to face rising costs from delays and possibly lost sales. The last time the ports closed, in 2002, some manufacturing plants were idled because they relied on timely shipment of parts. Businesses can re-route some products by air or to East Coast ports. But that’s costly. If customers ordered Asian-made electronics or other goods, they probably won’t receive them as quickly if they have not already arrived in the country. If the products did arrive, however, but are stuck on the docks, customers may have to wait even longer.
The impact on supply chains is massive. Honda and Toyota are cutting back production at several North American plants. Honda reduced production at plants in Ohio, Indiana and Ontario as the labor tension has slowed delivery of critical parts to keep the production lines running smoothly and efficiently. Parts such as electronics and transmissions are in low supply. Honda has been working to maintain the flow of parts to North American plants utilizing alternative means of transportation.
Classroom discussion questions:
1. What are the impacts on supply chains?
2. Why are the shipping alternatives limited?