While the court-ordered reopening of the West Coast ports means that critical CE products and parts have begun to be delivered, the Consumer Electronics Association (CEA) is warning that the industry's problems are not over.
The situation was a topic of discussion by Steve Caldero, sales VP for Yamaha Electronics USA and CEA president/CEO Gary Shapiro during a briefing on the labor dispute, and by several other executives during the CEA Industry Forum & Fall Conference, held at the Fairmont Hotel, here.
Caldero, who has followed the issue closely for Yamaha and CEA, told the seminar audience, "This is far from over." While Caldero and others at the conference did not report any serious product shortages yet, the continuing impact on the CE industry during the critical fourth quarter is serious. He noted that there could be the following: declining orders and sales with "consumers just buying what is available"; fluctuating prices; refunds; and higher expenses to fly in critical products.
He reported problems all along the distribution chain. With union workers following strict safety guidelines, Caldero said estimates are that the ports are working at about a 70 percent efficiency rate. And there are a lack of trucks due to the massive amount of containers being moved. "Containers that are taken off ships are sent to warehouses, but the problem in most of Southern California is that because there is so much cargo coming off of ships there are not enough trucks to take the products from [manufacturer or distributor] warehouses to retailers," Caldero said.
And, ironically, the Yamaha executive noted that there is probably a shortage of dockworkers to move the massive amount of containers.
Caldero added that shippers are now no longer taking responsibility for getting containers back to the port they were originally headed for. "Some ships were diverted to other ports and the shipping companies are abdicating responsibility. If your containers were supposed to go to Long Beach, [Calif.,] but wind up in Oakland, Panama or Mexico, you have to track down the containers and get them back yourself, at extra cost." And the airlines have increased their shipping prices by 20 to 30 percent, he noted.
Even in a best-case scenario, if a contract is reached by the Dec. 27 deadline, it may take as many as four to 12 weeks to get things back to normal, Caldero said. An additional problem is, "If a ship from the Far East doesn't think it can get here, it won't leave port. It will tell manufacturers to fly product," he said.
He noted that manufacturers have moved up release dates on some products, to alleviate some short supply worries, but "since everyone operates under the 'just-in-time' inventory model, it makes everything tougher."
Shapiro said that CEA manufacturers, "Are honoring commitments [to retailers], but are taking a bath." And while CEA is not taking sides in the dispute, which began when employers locked out dockworkers, Shapiro said, "It is difficult to see how a small group of people can shut [U.S. trade] down, especially during a war situation. This situation has shown us that we must have contingency plans so we can avoid this in the future." Both Shapiro and Caldero said that in the future port shutdowns won't just be from work stoppages, but possible terrorist attacks.
Concerning the current situation Shapiro said "retailers are concerned, and some consumers have begun their holiday shopping early."
An early effect of the dispute was word from Matsushita, which reported during the conference that its plant in Vancouver, Wash., which produces Panasonic branded TV/VCR and TV/DVD combination units, was closed for the week of Oct. 7 due to a shortage of parts to assemble finished products. The company reports that the plant was reopened on Oct. 14 and is back on track with production plans and customer orders.
Attending the Fall Conference was Bob Lawrence, executive director of AVB/Brand Source, and Roger Heuberger, executive director of the PRO Group, whose members are concerned about the situation.
Heuberger said the PRO Group "has been meeting on this every day. We have been talking to key suppliers and categorized which products are imported, what is built here, which products should be airlifted, which shouldn't, which suppliers have to use Asian components."
He added that his group bought product earlier, in September and early October, "knowing this was coming. Some vendors say they will airlift certain categories, while others will bring product in by boat."
Lawrence said his group has felt no impact yet, but the problems are not just with CE products and parts. "I had dinner the other night with a white goods supplier who said motors are stuck on the West Coast for refrigerators being built here."
He added, "We're talking about October being O.K., but what about Christmas?" And Heuberger agreed when Lawrence said, "And let's not forget that January and February are the third and fourth best months for us every year."
Heuberger noted, "You must have a plan. If forced to airlift product, low value products would be hurt, but higher value items can be put in a plane, because there is more margin there."