Suppliers and importers of promotional products from all industries are keeping a nervous eye on contract negotiations that have just begun involving unionized workers at West Coast ports.
There are fears in the branded goods market that potential controversy in the talks, which focus on a new contract for stevedores and warehouse workers, could intensify an already problematic supply chain disruption that has resulted in stock-outs and an increase in the prices of products on sale.
Negotiations began this week between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). The ILWU represents 22,000 dockworkers who work in 29 ports on the west coast. These include the ports of Los Angeles and Long Beach, through which approximately 40% of cargo containers imported into the United States pass. PMA represents 70 employers – shipping lines and marine terminal operators, including heavyweights like Maersk.
Potential effect on promotion
Importers on promotion and beyond fear adversarial negotiations could cause outright slowdowns or work stoppages at ports, which have already been plagued by backups in the endemic import rush that has occurred during the economic rebound from COVID-19.
If they occur, further delays due to contractual disputes could have serious consequences for the promotional products industry, potentially making it much more difficult for suppliers to replenish stocks of imported products. The vast majority of promotional products sold in North America are manufactured overseas, particularly in China.
“Any significant slowdown or shutdown would have a very significant impact on our ability to import product and maintain inventory,” said Jeremy Lott, CEO of Issaquah, WA-based SanMar (asi/84863), the largest supplier of promo and member of Counselor’s. Power 50 list of the most influential people in the industry.
“While we use ports on the West Coast, Gulf and East Coast,” Lott continued, “West Coast ports are extremely important to trans-Pacific trade and would have a significant impact on our business and the industry. in general.”
“Any significant slowdown or shutdown would have a very significant impact on our ability to import product and maintain inventory.” Jeremy Lott, SanMar
Picking up on a similar theme, Teresa Fang told ASI Media that in the event of a slowdown or shutdown, importers would scramble to reroute shipments to other ports, such as those on the East Coast. This comes with potential challenges and complications.
“East coast port congestion will then be something to watch as everyone takes steps to mitigate risk on the west coast,” said Fang, vice president of supply chain at Trevose, alphabroder. (asi/34063), the second-biggest promo provider.
Operations at east coast ports could also start to drag if stevedores there “slow down work in solidarity” with port workers on the west coast, Fang said. “Contract negotiations have been on our radar for some time at this point, and we are watching them closely,” she said.
Koozie Group (asi/40480), a Florida-based company that is the seventh-largest promo provider by revenue, believes it is possible that West Coast dockworker contract talks will lengthen the time needed to some of its import containers carrying products to reach the port and be processed for delivery.
Nonetheless, Koozie Group said it had extended its transit times from Asia to account for delays and found alternative ports through which to move goods. “This diversification gives us options in the event of labor disruptions,” said Pierre Montaubin, senior vice president of product management and supply for Koozie Group.
Some promotion officials believe that an impasse in port negotiations (which leads to operational disruptions) could accelerate demand for American-made products within the industry, at least for a while.
“We’ve seen this movie before,” said David Miller, Counselor’s Power 50 member and president of New York’s Top 40 Suppliers NC Custom (asi/44900). “I hope distributors have partnered with suppliers whose product line is rich in domestically made items and where decorated items are well stocked.”
Perspectives on contract negotiation
As port contract talks move forward, Montaubin suspects that mutual interest can help move forward without significantly disrupting port operations. “Container lines and terminals have done very well financially over the past 24 months,” he said. “Even though labor demands are high, there is incentive for both parties to strike a deal and keep the containers moving.”
The current contract expires on July 1. ILWU and PMA are committed to talking every day until a new contract is concluded. Even if July 1 passes without a new contract in place, which is certainly a possibility given how past negotiations have unfolded, talks can still continue and that doesn’t mean any slowdowns or halts will necessarily occur. .
ILWU and PMA played down fears of port disruption. Both parties said they expected the freight to continue moving until a deal is reached.
— Supply Chain Dive (@SupplyChainDive) May 9, 2022
Even so, it remains to be seen how things will pan out. There has been acrimony affecting productivity in previous contract negotiations. As reported by Supply Chain Dive, talks lasted three months past the July 1, 2002 deadline and there were port closures before an agreement was finally signed. In 2014, the most recent previous negotiations, talks dragged on for eight months after the contract was concluded and led to work slowdowns.
Importers are likely hoping the 2022 talks mirror or improve upon negotiations in 2008, when talks passed the deadline by a few weeks but were reportedly resolved with what PMA CEO Jim McKenna described as “little or no disturbance”.
“Every contract is different,” McKenna told Supply Chain Dive. “[You can’t] decide them on the front-end. Again, I think everyone is optimistic going into this one that we’re going to get where we need to.
Escalating COVID lockdowns in China cause supply chain imbroglios for North America #promotional products suppliers and are about to delay the replenishment of inventory levels of domestic industry enterprises. https://t.co/bOL3KwrXTO @asicentral @ASI_MBell
— Chris Ruvo (@ChrisR_ASI) April 25, 2022
Potential flashpoints include issues such as automation. PMA wants to improve the use of automation at ports to speed up efficiency, but unionized workers see at least some of this technology push as a threat to jobs.
The port concerns come as global supply chains for promotional products and other industries come under increasing pressure from issues such as China’s COVID-related societal shutdowns. Labor issues were also taken into account.