The union representing dockworkers at U.S. ports walked away from the negotiating table with port employers this week over automation concerns as the two sides face a mid-January deadline to finalize a deal and prevent the resumption of a strike.

Kaitlin Wowak is the Robert and Sara Lumpkins Associate Professor of Business Analytics at the University of Notre Dame’s Mendoza College of Business. An award-winning researcher, Wowak focuses on strategic supply chain management and disruptions, including product shortages.

She answered some questions about the first large-scale strike in nearly 50 years from U.S. East Coast and Gulf Coast dockworkers in October, as well as what a second strike could mean for the U.S. supply chain.

Which ports are affected?

The dockworker strike affected about 36 ports in the U.S. It’s not just the number of ports affected that was concerning, it was their location that was particularly problematic. The strike affected ports from Maine to Texas, which means product flow into or out of any port along the East Coast and Gulf Coast was impacted.

How could this affect consumers?

While the dockworkers’ union walked away from negotiations with East Coast and Gulf Coast employers this week, they have until Jan. 15 to come to an agreement. If an agreement is not reached by then, the strike will resume. The good news for consumers is that this impending strike should not impact holiday shopping.

If an agreement cannot be reached by mid-January, consumers are likely to see the most immediate impact on perishable food items that are sourced outside the U.S., such as bananas, which are the most-consumed fruit in the U.S. Unfortunately, the ports that may be affected by the strike handle about 75 percent of the country’s banana imports, which means consumers could see higher prices for bananas and other perishable food products imported into the U.S. by late January, if an agreement is not reached. Given the global nature of supply chains — and the fact that over 90 percent of products entering the U.S. arrive by ship — there could be a cascading impact on numerous other consumer products from pharmaceutical drugs to apparel and toys if an agreement is not reached.

How will the strike affect retailers? Are they making contingency plans?

The good news is that retailers should not be affected too much over the holiday season. If a deal is not finalized by mid-January, the specific contingency plans for retailers depend on the products they sell. Retailers, for example, who sell shelf-stable items can place larger and more frequent orders in an effort to increase how much inventory they keep on hand and account for longer lead times. Retailers who sell perishable products have to consider other contingency plans such as moving products via air transportation rather than by cargo ship. This strategy reduces the lead time for products (thus the chance of products spoiling due to delays at ports) and enables consumers to buy perishable products in prime condition, but it significantly increases the transportation cost, which could be passed on to consumers.

Will some areas of the country be harder hit by a shortage of goods?

The entire country could be hit hard by another strike, but for different reasons. The East Coast and Gulf Coast would be hit hard as the flow of products into or out of ports along that entire coastline would cease again. The West Coast could also experience indirect effects as the strike could prompt companies to reroute their containers to ports on the West Coast, which means several things: (1) significantly higher transportation costs for companies; (2) considerably higher demand for truckers to move products needed on the East Coast, but delivered to the West Coast; and (3) a surge in demand for ports on the West Coast, resulting in long delays for cargo ships trying to unload inventory. Modern supply chains are extremely complex and interconnected, which means the cascading impact of the strike across the country could be massive.

Historically, has anything of this magnitude happened before and what effect did it have?

Two strikes in such close temporal proximity would make history — not in a good way, though. Given how critical ports are to the economy, we rarely see port strikes. The last time a strike impacted ports in the U.S. was almost 50 years ago in 1977. That strike lasted 44 days. Given that the volume of products imported and exported out of the U.S. has increased considerably since the 1970s, another strike that impacts ports in 2025 could cripple the U.S. supply chain.

How could the strike impact the economy?

If a deal is not finalized by mid-January, it is estimated that another strike could cost the economy about $4 billion per day.

Can the government intervene, and should it do so?

Everyone is hopeful that the parties involved can reach an agreement, but if the strike resumes, the government may have to intervene in order to keep the U.S. supply chain functioning.

Contact: Kaitlin Wowak, katie.wowak@nd.edu

Originally published by Shannon Roddel at news.nd.edu on November 14, 2024.