To say the past year has been interesting and unique in regard to the overall North American supply chain is an understatement. Unprecedented labour unrest had a massive effect on both ocean shipping as well as rail service. The question that remains is how well informed are key players such as government, both federal/provincial and federal/state, as well as the media who deliver the updates on such occurrences. While shippers, importers, customs brokers, freight forwarders and business organizations who are directly and immediately impacted by such unrest, are painfully aware of the repercussions, based on what transpired in 2024 there seems to be a need for more education/awareness for those who can effect change (government) and those whose role it is to report on such instances (media).
What we are seeing over and over again is that there truly seems to be a lack of insight into how important supply chains are to fueling our economies and how even a short disruption can lead to massive repercussions. The following will highlight some of the key impacts of these “short term” labour disputes and why it is so important to realize the severe and immediate impact on overall economies in general.
Port and Rail Overview
US Ports
- The 2024 US East Coast port strike that lasted three days (October 1 to October 3) was the largest shutdown of its kind in almost 50 years.
- Given that more than 40% of total containerized goods enter the U.S. via ports on the East and Gulf Coast, the stakes could not be higher.
- The impact of the strike was significant, costing the US economy up to $5 billion per day and causing delays in essential goods.
Canadian Ports
- The Montreal and British Columbia port strikes resulted in 70% of Canadian container traffic on full stop, according to the Canadian Chamber of Commerce.
- The combined work stoppages in British Columbia and Montreal impacted the flow of $1.2 billion dollars worth of goods daily.
Rail
- The CN And CPKC Rail Strike – from lockout to ordering trains to resume operations – lasted only a day, however, the impact extended widely across the supply chain (imports and exports), had US trade implications and affected commuter train functionality for tens of thousands of people, creating a myriad of ripple effects.
- More than 900,000 metric tons of goods move daily on Canada’s railways, according to the Railway Association of Canada, with the work stoppage impacting the movement of $1 billion in goods daily.
Overall Effects Not Typically Highlighted
- Regional Impact: There is a misconception that such labour action has limited regional effect, which cannot be further from the truth. Ports act as hubs to facilitate the disbursement of goods across North America, as do railway networks and, if compromised, will have broad implications.
- Delays: While there is a focus on inbound product, typically related to key retail yearly events such as Christmas, supply delays have far reaching implications. Producers will not get the needed parts and materials on time and, as such, customers have to wait for finished goods.
- Shortages: Inventory supply or lack thereof is always mentioned, but just-in-time production materials are also crucial. Lack of parts, materials or components could lead to productions stops and enterprises or entire industries could be forced to shut down.
- Loss in revenue and job cuts: If manufacturers cannot deliver goods, less revenue is generated. Loss of profitability can, thus, lead to layoffs
- Contract fines and damage to reputation: Enterprises could face penalties for late delivery or non-fulfilment of contract. Business partners or consumers may lose trust.
A key point highlighted above that never seems to get mentioned in media reports related to these labour issues, is the role supply chains, especially international supply chains, play in providing critical parts needed to keep Canadian and US factories (and plant jobs) running. There tends to be a lot of discussion on supply shortages and the effect on consumers, namely related to retail inventory/supply and, while this is very true, there is definitely a lack of awareness of how crucial these shipments are to fueling manufacturing and how quickly such manufacturing can be compromised as a result of such delays. Factory shutdowns are very common during such labour unrests, which is rarely mentioned prior to predicted strikes or lockouts, despite the vast economic impact they can have at a local as well as a nation wide level.
Another important point is that it is not just the big players who will feel the heat. Small and medium-sized businesses are likely to be hit hardest due to lack of flexibility in contracts comparing to larger companies, making them more vulnerable to increased costs and delays when shipment plans change. For example, for distributors serving multiple large retailers, even a small delay can mean they can’t meet their contractual obligations, which could lead to large penalties.
As we head into 2025, the hope is that overall increased supply chain vulnerability awareness has increased and when we encounter such disruptions, which is inevitable, we will all be better informed and understand the overall ramifications. While solutions to such occurrences can be a challenge, having a clear understanding of the overall effect is key and as history has shown, we would be naive to assume such matters are behind us.
For more information, contact David Lychek, Director – Ocean & Air Services.
