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Dealing With Disruption

The widespread impact from the labor dispute at West Coast ports earlier this year is still rippling through the U.S. economy, with many companies having trouble securing much-needed supplies on time. Further complicating the delivery of goods, the Los Angeles Times recently reported hundreds of truck drivers operating at the Ports of Los Angeles and Long Beach went on strike to protest that four of the ports’ largest trucking companies misclassify them as independent contractors rather than full-time employees.

Bloomberg recently reported that West Coast dockworkers and their employers negotiated a new five-year contract, ending a nine-month standoff and averting the shutdown of 29 ports that serve as a lynchpin of global trade. At the height of the impasse, cargo ships arriving from Asia anchored offshore for days, and containers that made it to shore were stacked to the sky as trucks queued up outside.

The crisis was particularly hard on middle-market companies without extensive supply networks.  Many simply suffered through it. Others, like Craig Electronics, took decisive action. Craig, which imports 100 percent of its DVD players, clock radios and personal entertainment devices through the West Coast ports, took a series of operational steps to soften the blow. The slowdown quadrupled typical container processing times to more than 20 days at the height of the slowdown last fall, and retail customers were left without products to sell.

Vice President Jerry Simons said Craig made a concerted effort to provide customers with a daily update on the status of port traffic, complete with before and after images of the backup of ships in Long Beach harbor. The daily updates helped assuage Craig’s customers and let them know the company was doing everything in its power to deliver product. The company also decided to move forward with a plan enacted before the dispute to move its warehousing operation closer to the port.

Craig and many other companies also worked to advance orders last year when the labor dispute looked like it would intensify. Cindy Herman of furniture maker Man Wah (USA), says her company worked to get ahead of the problem last year by building inventory earlier than usual. She managed to bring in new product lines two weeks before a major furniture industry event in Las Vegas in January, giving the company a distinct advantage as some of its top competitors were left empty-handed with furniture stuck at sea.

While it’s impossible to plan for any and all disruptions, the port dispute illustrates the value to middle market companies of getting ahead of supply chain problems before they amount to lost business. As these examples show, operational changes and consistent communication can help quicken delivery times or earn customers’ trust and sympathy. In the future, companies that are able to expand their lists of go-to suppliers, diversify its shipping routes and use technology to enhance their logistics planning can significantly improve their readiness for such tests.

For more on this topic, read the full article Lessons from the West Coast Port Slowdown in CIT View from the Middle.

Jon Lucas is president of CIT Commercial Services, a leading provider of financing, working capital, and accounts receivable management solutions to the consumer electronics industry. He earned a bachelor’s degree in economics from Muhlenberg College and an MBA in finance and accounting from the University of Pittsburgh.