West Coast ports— the supply chain migraine

Picture of John Denslinger
John Denslinger is a former executive VP Murata, president SyChip Wireless, and president/CEO ECIA, the industry’s trade association. His career spans 40 years in electronics

With West Coast gateways processing 60 per cent of goods shipped from Asia,  John Denslinger explores contract negotiations and the importance of automation.

Just as global supply problems seem to be easing, maybe not. Negotiations seeking a new multiyear agreement between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) opened in early May. On 1 July, the current West Coast Port contract expired with no agreement in place. Undoubtably, wages, job security and automation will be the most contentious issues at the center of any deal. Talks are expected to linger. Fortunately, sanity reigns for now with both sides agreeing to forego sanctioned work stoppages (union authorised strikes and management induced lockouts). While this pledge seems honorable at first glance, it does not rule out the tactical use of slowdowns and shutdowns. 

From the historical perspective, every negotiation since 2000 has resulted in some level of interruption. In 2002, a dispute over manual to electronic shipping records led to a worker slowdown and eventually a 11-day shutdown of West Coast Ports. In 2008, terminal operators secured the right to automate and develop port automation projects at the expense of a three-week work stoppage that began in LA and Long Beach but ultimately spread to ports in the Pacific Northwest. 

In 2014, both sides mutually agreed to extend the contract agreement for six additional months. Lacking progress during that interval, workers then orchestrated a month-long slowdown nearly shutting down normal commerce. The issue in this case was not so much about automation, but wages, health benefits and a re-structure of the arbitration process. According to a US News report dated February 2016, the disruptive impact was still being felt a year later. Since West Coast gateways process 60 per cent of goods shipped from Asia, even modest slowdowns deeply affect downstream continuity in years, not months. 

That brings us to 2022. At issue, this year is another push for automation which post-pandemic America desperately needs. Sadly, our US ports rank as some of the least productive in the world. The World Bank Group and IHS Markit recently acknowledged the US failed to place any domestic port in the global top 50. In an age of high-volume global trading, that performance gap severely constrains commerce and is incredibly counter-productive to national interests. 

Automation is vital to America’s economic health. US ports need peak-load flexibility, as well as additional handling capacity to accommodate a growing international trade: robotic cranes and self-driving vehicles such as straddle carriers is mentioned most often. Without such automation, PMA projects Southern California ports will reach a cargo handling limit by 2028. As alarming as that sounds, a troubling execution record may be of greater concern. Previous Union concessions to automate as far back as 2008, have been slow walked for years resulting in fractional implementation. At the current adoption pace, automation cannot alleviate port congestion. Barring a complete collapse in demand, logjams will persist for the foreseeable future. 

That makes negotiations especially perilous this year as the economy exits a pandemic amid surging demand. Consumers already face skyrocketing transport costs and near double-digit inflation. Should talks stall, Federal intervention and possible Presidential action is not out of the question. Will Fed mediation press for timely automation over jobs? It’s doubtful at best, as outcomes commonly favor the International Longshore and Warehouse Union. Unless there is resolute effort to automate, our supply chain migraine will be with us for quite some time.