John Denslinger asks whether America’s transportation links could undermine supply continuity just when the electronics industry needs it the most
There is an old adage describing resilience and persistence in the face of adversity: ‘bend, not break’. Unfortunately, when it comes to global supply lines, the opposite seems our destiny: ‘break, not bend’. US global supply chains once considered the ultimate in cost effectiveness, flexibility and reliability are procurement headaches. Today, nothing seems normal or consistent about everyday movement of raw materials, supplies and finished goods.
How robust are America’s transportation links? A supplier’s lifeline relies on transportation certainty whether it’s ports, rail or truck. One might ask if supply lines built on multi-mode transit are a liability. In hindsight, the west coast port congestion at the beginning of the Covid era might have been the first indicator given: massive queues at seas; off-loading delays measured in months not days; disruption to the efficient recycling of containers and cargo ships; and a system seemingly overwhelmed as consumer demand continuously escalated throughout the pandemic.
To their credit though, ports still handle record imports. Regulatory relief from both Federal and California governments eased the logjam. Now, two years later, the current West Coast Port labor contract has expired with no agreement in place. Each has agreed to forego sanctioned work stoppages (union authorised strikes and management induced lockouts), but that still doesn’t rule out slowdowns and shutdowns. Until negotiations are settled, this link is potentially disruptive.
Air transport aside, goods move about the continent by railroads and trucks to intermediate and last mile destinations completing the classic multi-mode transportation system. Question: is it likely rail and/or trucking will become the next weak link upsetting supply continuity?
Railroads: as West Coast port negotiations continue, the same is also true for railroads. Hopes of resolving contract differences between the railroad unions and a management consortium have failed over the past two years despite multiple mediation and arbitration attempts. In July, President Biden found it necessary to appoint a Presidential Emergency Board (PEB) under the Railway Labor Act facilitating contract settlement. A couple of 30-day cooling off periods mandated by law, as well as the ever-present Congressional intervention forcing binding arbitration almost assures there won’t be any organised disruption. Rail is probably not a weak link.
Trucking: the issue here is quite different and volatile. There are two issues. The first is specific to California law AB5, better known as California’s gig worker law. While the law intended to regulate gig economy platforms like Uber, Lyft and DoorDash, it also snared 70,000 truckers who work as independent contractors. Despite appeals for reconsideration, the State has not been inclined to make the exception. In protest, independent truckers shutdown the Port of Oakland, the eight largest in the US. Similar, smaller protests have taken place at ports in Long Beach and LA. The combination of trucker blockades and dockworkers electing not to enter terminals is crippling Oakland Port productivity. The second issue is also central to California: as of January 1, 2023 a ban on diesel trucks with engines made before 2010 goes into effect. The new law, CARB’s Truck and Bus Regulation, will make an estimated 80,000 trucks illegal in California. A prolonged truck shortage could make trucking the least reliable and weakest link of the three.
Are the transport issues described above solvable? Yes, but settlements across so many domains is never quick, never easy. Until there is complete resolution, America’s transportation links could undermine supply continuity just when we need it the most.