Retailers’ anxiety levels are rising as gridlock grinds on with contract negotiations between West Coast dockworkers and port terminal operators.
It has been a long nine months for those dealing directly, or indirectly, with the lack of a West Coast port contract, and after a temporary shutdown over the weekend, retail lobby groups and consultants are assigning potential costs to the issue.
According to a Kurt Salmon analysis, congestion at West Coast ports could cost retailers as much as $7 billion this year. That congestion cost comes from a combination of the higher price of carrying goods and missed sales due to below optimal inventory levels.
A prolonged shutdown of course would be worse—and it would hit more than just the retail community. The National Retail Federation and National Association of Manufacturers estimate a 10-day shutdown could levy a $2.1 billion per day hit to the overall economy as about half of the nation’s international imports come into the country via the West Coast ports.
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Without naming names, Kurt Salmon retail supply chain strategist Frank Layo said a number of retailers have begun to shift shipments to East Coast ports, or are buying extra inventory in advance to mitigate inventory disruption, though those measures are only temporary Band-Aids for a potentially large wound.
The cost to retail could get exponentially worse going forward. Layo said congestion coupled with rate increases from import growth, and retailers could be facing $36.9 billion more in 2016 than 2014’s baseline costs.