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Advisories ::
Port Shutdown Backing Up Supply Chain
Extracted from JoC On-Line

LOS ANGELES — The shutdown of West Coast ports that began Sunday is creating a ripple effect throughout the nation's supply chain that threatens the delivery of merchandise to retailers in time for the holiday shopping season.

"This week is a critical week in that regard," said Dick Metzler, chief executive of APL Logistics.

If dock workers remain locked out of the ports all week, the snowballing effect of the shutdown on intermodal transportation will mean sparse pickings for consumers when the traditional Christmas shopping season begins the day after Thanksgiving, Metzler said.

Waterfront employers shut down West Coast ports Sunday after a series of job actions the previous week had slowed down cargo handling by as much as 90 percent at most container terminals.

The work slowdowns, which began at terminals operated by Stevedoring Services of America and then spread to terminal operators at all West Coast ports, had a devastating impact on shipping lines, terminal operators and rail and truck carriers.

Ray Keene, chief operating officer at MOL (America), said cargo handling at West Coast ports was already four to five days behind schedule by the time the employer lockout was called. If cargo operations do not return to normal soon, vessels that are on the West Coast today will not be back in Asia by mid-October to pick up their next scheduled loads of U.S. imports.

If that happens, vessel rotations in the eastbound Pacific, the world's busiest trade lane, will be thrown off schedule for weeks, he said.

The impact of the International Longshore and Warehouse Union slowdowns the past two weeks has already been felt in Asia. Empty containers are in critically short supply. Without empty containers, factories in Asia can not load their merchandise for export to the U.S. Since they have little storage space in their facilities, Asian manufacturers will have to start storing their goods outdoors.

Approximately 100 vessels of all types were tied up Monday at West Coast ports, with dozens more scheduled to arrive this week. Phillip Wright, West Coast vice president at Zim-American Israeli Shipping Line, said that if the terminals can not unload the vessels and move the containers off their piers, the trans-continental intermodal network will quickly become gridlocked.

Railroads, fearing a situation similar to the meltdown they experienced in the busy 1997-98 shipping season, are holding back their westbound international trains so as not to overload the rail system on the West Coast. "As of 8 p.m. Saturday, we stopped accepting all containers headed for the West Coast," said John Bromley, spokesman for Union Pacific. Intermodal westbound trains that were already in route to the West Coast were "parked" in the Midwest, Bromley said.

Burlington Northern Santa Fe stopped accepting loaded and empty international containers at noon Sunday, said spokesman Pat Hiatte. The BNSF is continuing to operate its westbound domestic intermodal trains, although it is only sending them to hubs outside of the port areas, he said.

The situation could get worse before it gets better. The current container backlog means that each day the port shutdown continues adds a delay of four or five days before a container reaches its destination. "It's more than a one-to-one relationship," Metzler said.

QSL Corp, a Boston-area importer of ceramic goods, began feeling the impact of ILWU work slowdowns two weeks ago. Sean Quinn, chief executive, said he had three containers that took four to five days to leave the West Coast. Normally, the containers would have been on their way in two days.

The shipments normally reach QSL's warehouse in seven to eight days, and they are shipped the following day to retail customers. Retailers require two to three weeks to move the shipments through their distribution centers and on to the individual stores, so they demand that QSL release the goods on the day that was promised. "If we miss the deadline, we're at the mercy of the customer," Quinn said.

Retailers can cancel their orders, and for an importer of ceramic snowmen and other holiday items, that means QSL would be out of luck for the current Christmas shopping season, Quinn said.

Jon Monroe, a transportation consultant based in San Francisco, said the most intense impact of a lengthy port shutdown would be the devastation caused to the intermodal transportation system. "We will end up with transportation bottlenecks. That's the more pressing concern," he said.

The immediate impact on large retailers will be blunted somewhat because they can draw from their distribution centers, which are stocked full of merchandise as retailers shipped some imports early this year. But a shutdown of more than one week could cripple the intermodal rail and harbor trucking industries, Monroe said.

Bill Mongelluzzo

Global Network Locator