New Trade Routes after West Coast Disputes

Despite the U.S. West Coast labor disputes coming to an end, the disruption it caused has contributed to shippers opting to use alternative trade routes to ports on the East Coast, Gulf Coast, Western Mexico and Canada. Over the past year, supply-chain executives have chosen to avoid the West Coast ports in order to evade the ever-growing congestion due to the seven-month long labor disputes and the accompanying talks between the International Longshore and Warehouse Union and the Pacific Maritime Association.

In a recent survey, 65% of shippers reported that they have planned to send less cargo via the West Coast through 2016, and a similar percentage plan to avoid the West Coast ports all together. This is not good news for West Coast ports, truckers and railroads, who were already anticipating a loss of business with the Panama Canal expansion, which is due for completion in 2016.

Some of the largest shippers, including Home Depot, Target and Walmart, have for years used the ‘four-corner strategy’ which expands their networks to include company warehouses on both coasts and the Gulf of Mexico, ensuring that there is always an available port route. Since the recent setbacks brought on by the labor disputes at the West Coast ports, smaller companies are turning to options such as the four-corner strategy.

However, longer routes result in both added time and cost. From Shanghai to East Coast ports it is roughly 25 days in transit via the Panama Canal, and via the Indian/Atlantic Oceans it can take up to 32 days to reach the East Coast.

But not all is lost for the West Coast ports: supply-chain managers have been using the West Coast ports successfully for day-to-day price-cost pressures, and the West Coast ports are still the lowest-cost option for shippers.