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In October, ports across the United States were closed after the first International Longshoremen’s Association (ILA) strike since 1977. The port strike closed 14 major ports and threatened to disrupt greater than half of U.S. global trade.
The ILA represents about 45,000 longshore staff, and the union has gone on strike to demand higher wages and a ban on automation. Fortunately, the downtime lasted only three days, and ILA and the US Maritime Alliance prolonged the agreement until January 15, 2025.
However, if no agreement might be reached in the latest yr, dockers could go on strike again. It’s a good idea for small businesses to begin diversifying their supply chain now and get ahead of overseas orders in case this happens again.
Economic consequences of the port strike
How a port strike affects the U.S. economy depends largely on how long it lasts, but shipment delays will likely be the first and most noticeable signal. Over $2 billion A complete value of goods go through these ports every day, and a strike would affect on a regular basis items reminiscent of perishable food, various types of alcohol, durable goods and raw materials.
Delays can hurt small businesses that rely on supplies from overseas suppliers, causing low inventory levels and lost revenue. If the shutdown lasted longer than a month, it could increase the prices of imported goods and contribute to inflation. Transportation costs may additionally increase on account of increased delays.
A protracted strike at ports would hurt retail, agricultural and manufacturing businesses, and over time could force firms to put off staff to chop expenses. A protracted strike could also harm U.S. relationships with global partners and prompt other countries to hunt alternative trading partners.
How firms can reduce future risk
A port strike poses many challenges, but firms have time to arrange to avoid being caught by surprise. January-March is typically a slower period for retail sales, so businesses will have a greater ability to maintain their supply chain moving. Let’s look at five ways small businesses can do this prepare for one other port strike.
Stock up on supplies
Businesses have until January 15 to begin stockpiling and preparing for the next shutdown. Start reviewing inventory levels to accurately forecast demand and determine what you’ll have to get an alert. Prioritize high-margin products and items that are essential to your small business operations.
Diversify your supply chain
Another way small businesses can protect themselves is to diversify their supplies among several different suppliers. Start establishing relationships with suppliers in different locations or countries and look for opportunities to source these products locally. Domestic suppliers could also be dearer, but they’ll reduce your dependence on international ports.
Use inventory management software
If you are not already using inventory management software, now is a good time to begin. This software provides real-time visibility into inventory levels, helping you forecast demand and make informed purchasing decisions.
Inventory management software uses artificial intelligence to investigate historical data and external aspects to predict future demand. It may provide help to determine which items are hottest and must be prioritized.
Communicate with your customers
As the ongoing port strike may cause delays and stockouts, it is vital to speak with customers. Let them know about potential delays and increased costs before these problems occur. Facing these challenges truthfully will provide help to build trust with your customers and allow them to know you are doing every part you possibly can to handle the situation.
Set clear expectations for how long delays may last and recommend available alternative products. Make sure your customer support team is prepared to handle customer questions and that customers can easily contact your organization.
Be prepared for additional costs
In the event of one other shutdown, small businesses should expect inventory, storage and transportation costs to extend. By developing money flow solutions, your small business will have the ability to cover these costs without major disruption.
If you do not already have one, establishing a line of credit will help cover the costs of extra inventory and additional space for storing. You may negotiate with your suppliers to increase payment terms and unencumber money flow.
According to the Conference Board, a nonprofit think tank, weeks-long shutdowns could cost the U.S. economy $3.78 billion. Hopefully, the ILA and the US Maritime Alliance will reach an agreement before January, but business owners must be proactive and consider the worst-case scenario.
Take the time now to evaluate your supply chain and look for ways to strengthen it. Diversifying your supply chain and stockpiling now will provide help to minimize the impact if one other strike occurs. This may also provide help to maintain relationships with your customers.