A tentative agreement may have been reached in the labor dispute that paralyzed 29 West Coast ports over two months ago, but that doesn't mean logistics planners can rest easy.

For one thing, shippers and carriers are still reeling from the 10-day work stoppage that backlogged over 300,000 containers, wreaked havoc on supply chains and caused dozens of U.S. companies to lay off workers, slow down or stop production completely.

Another thing is the tentative contract is not yet a done deal. The 10,500 members of the International Longshore and Warehouse Union (ILWU) must still vote on the agreement that their representatives signed in late November. The union caucus began last week with voting slated for January 2003.

The ILWU had butted heads with the Pacific Maritime Association (PMA), which represents ocean carriers and terminal operators, on the issue of technology—a conflict that led to management locking out the union for almost two weeks. The PMA had insisted on implementing technological tools—including bar code readers and global positioning satellites—that are already used in ports worldwide, while the labor union argued that such a move would eliminate jobs.

Under the six-year tentative agreement, the labor union will allow the deployment of such advanced cargo-tracking technology and accept the subsequent loss of roughly 400 jobs. In return, the package gives the union substantial wage and benefit boosts, pushing average full-time dockworker salaries from $80,000 to nearly $100,000 a year.

Winning the majority of labor union votes won't be easy. Debating will no doubt be vigorous. "I would be alarmed if there weren't people voicing objections, then I'd be concerned," says union spokesman Steve Stallone. "The only way for this to pass and work is that the members own it."

If most members choose to reject it—something that some say is extremely unlikely—then West Coast port operations may come to a grinding halt again. To end the management lockout and send longshoremen and clerks back to work in early October, President George W. Bush had invoked the Taft-Hartley Act, but this court-imposed 80-day cooling-off period ends on December 27th.

Instead of waiting for things to unfold, however, companies should prepare themselves for all eventualities. For starters, there are still shutdown aftereffects with which to contend. Importers and exporters must be ready to face a whole slew of extra costs. For example, they will be hit with extra charges, such as congestion and detention charges for containers stuck in terminals during the lockout. In addition, because of a force majeure clause that has been invoked by several carriers, shippers, not carriers, have to foot the extra expense of transporting cargo to alternative ports.

In addition, even though dock operations have resumed, work has proceeded at a slow pace with both sides putting the blame on the other. ILWU officials have said that the PMA has intentionally asked for inadequate labor while PMA representatives have said that union members are deliberately working too slowly.

To prepare for such work slowdowns and even a second shutdown, Gerald McNerney, an analyst at Boston-based AMR Research, advises logistics planners to take three precautions—rethink sourcing strategies, consider accelerating shipments and reconfigure the supply chain network.

The first step involves establishing alternate sourcing strategies so your supply lines don't get disrupted. For example, you can look at alternate local sources. Also, identify critical components that require more safety stock. Running out of these parts can cripple many production lines.

This is what happened to just-in-time manufacturer New United Motor Manufacturing Inc. (NUMMI) four days into the lockout. The manufacturer had prepared for six days of safety stock. However, on Oct. 2, a key part ran out, derailing the company's truck production line. The following morning, its Toyota Corolla, Pontiac Vibe and Pontiac Voltz assembly lines also came to a standstill.

"A simple interior door panel support beam shut down the line," says Michael Damer, manager of community relations for NUMMI, which is a joint venture between General Motors and Toyota. "It's something we could not retrofit. In just hours we ran out of transmissions, engines and things like that."

The second strategy that companies should consider is accelerating shipments. This will not be easy, however, because port operations are still suffering from the effects of the 10-day shutdown. "Backlog and container availability will be issues," says McNerney. "Expect longshoremen productivity to be down as discrete labor slowdown tactics (continue)."

Logistics planners should also think about revamping their supply chain network. "Events of (two months ago) provide a wake-up call that contingency plans must be in place to manage lean or JIT manufacturing," says McNerney. Such contingency plans can include using other transportation modes such as air or using ocean vessels that can traverse longer routes to reach Atlantic ports.

The key is to work with supply chain partners to create sound strategies that will allow you to weather work or shipping slowdowns, no matter where or when they might occur.

Sources: On the Waterfront
Ilya Garger
Time Magazine, Oct. 14, 2002
http://www.time.com/time/search/article/0,8599,364420,00.html

Shippers, Carriers Struggle with Port Shutdown's Aftermath
Logistics Management, Nov. 1, 2002
http://www.manufacturing.net/lm

Are You Ready for Round Two?
Daniel G. Jacobs
Transportation & Distribution, Nov. 2002
http://www.totalsupplychain.com

On the Waterfront: Technology Change
Eric Hellweg
Business 2.0, Oct. 9, 2002
http://www.business2.com/articles/web/0,1653,44247,FF.html

Tentative Port Labor Pact Approved
Logistics Management, Nov. 25, 2002
http://www.manufacturing.net/lm

Dockworkers to Mull Tentative Contract
The Associated Press
The New York Times, Dec. 9, 2002
http://www.nytimes.com/aponline/business/AP-Port-Labor.html