Port efficiency needs put US ports and workers on collision course
The growth at US container terminals is from China imports, but the efficiency with which the cargo is loaded at mainland ports is not matched by the US gateways that receive it. This has to change.
The ports of Rotterdam and Shanghai use five dockworkers to do the same job it takes 20 dockers in the US to do, according to a US academic.
That is a very hard to swallow statistic for customers shipping goods through US ports, and for the port authorities themselves.
Shippers’ profits levels are falling as the costs of production and transport rise and they are trying to squeeze every ounce of efficiency from their supply chains. For the US port authorities, competitive pressure between them is being ramped up by the looming opening of the expanded Panama Canal in a couple of years, so automation and cost cutting is high on their agendas.
This is placing the dockworkers and the US ports on a collision course that has severe ramifications for all parties involved in the supply chain, not to mention the US economy.
US ports are no strangers to industrial action. Just before New Year, the International Longshoremen’s Association (ILA) that represents 14,500 dockworkers on the East and Gulf coasts, agreed to put a strike on hold while talks continue with the US Maritime Alliance (USMX) of shippers, port authorities and terminal operators. February 6 is the new deadline.
More than 70 percent of all US containerized goods use the giant West Coast gateway port complex in San Pedro. In 2002, the ports of Los Angeles and Long Beach were shutdown by a crippling strike that drove risk management to the top of every US importer’s agenda. In December, as the East Coast ports were grappling with the unions, office workers at LA and Long Beach ports went on strike and dockworkers refused to cross their picket lines. It took eight days before the ports could reopen.
US dockworkers are among the highest paid blue-collar workers in the US, reportedly earning an average of US$115,000 a year, and they are anxious to preserve this income.
Whether the dockworkers are paid a fair wage is not for us to decide, but the optimization of global supply chains is as unstoppable as globalization itself. Producing goods in countries thousands of miles away from the end consumers and transporting those products to the store shelves involves a lengthy supply chain that would not be possible without complex IT solutions that ensure efficiency, end-to-end visibility, security and control.
Container terminals in China, and across Asia, are managed by the world’s top operators and are models of productivity. The moves per hour are often at record levels and efficiency takes precedence over all else. Small wonder, then, that ports small in area relative to their sprawling US counterparts can produce such high annual container throughput.
Yet at the other end of the supply chain, the US ports struggle to adapt to modern technologies. Cutting jobs to save on costs and improve efficiency will improve bottom lines and get containers in and out of ports faster, but of course it will come at the expense of dockworkers.
The docker unions feel their workers should be protected from new technological and productivity goals, but it is difficult to see how this is possible. Technology in ports applied in the right way leads to the efficient handling of cargo, which usually translates into limiting human involvement to that of oversight.
So any resolution on the US East Coast reached before February 6 will only be short term. The ports and dockworkers will ultimately remain at odds – unions want no job losses and the ports want more efficiency. Both mutually exclusive positions.