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How to prepare for the West Coast Port union contract renegotiation in July

Did you know the ports along the American West Coast are governed by the same union? It’s called the International Longshore and Warehouse Union (ILWU), and their current contract, which took effect in 2019, will expire on July 1st, 2022.

Not every contract renewal results in supply chain disruptions and ports being shut down. However, in 2014 and 2015, their contract with the Pacific Maritime Association (PMA), which would keep the ports fully operational with enough manpower, expired without a new agreement in place.

According to a report from Jennifer M. Porter entitled West Coast Longshoreman Strike Synopsis—The Bad, the Ugly, and the Uglier, some of the effects of this delay included the following:

  1. There were 33 cargo ships anchored outside of Los Angeles-Long Beach terminals.
  2. It took an estimated three months to clear the backlog.
  3. 20% of the U.S.’s fresh fruit and vegetable crop exports were delayed almost a month.
  4. Retailers faced an estimated $7 billion in costs and losses.
  5. The U.S. meat industry lost approximately $85 million per week during the delays.

Taking a look at point two above, the ports cleared out their backlog after about three months. However, their backlog of 33 ships in 2015 pales in comparison to the over 70 container ships waiting off the Port of Los Angeles in February 2022.

The bottom line is that if negotiations stall port labor and operations, that backlog could get worse before it gets better. Even if the delay only lasts three months from July to September, that leaves merchants with a meager few months before Black Friday and the holiday sale season begin.

So, what can eCommerce merchants do to prepare?

How to plan your logistics strategy in 2022

The past few years have shaken up the eCommerce industry, 2022 included. Port union renegotiations, rising CPC costs, and the uncertainty of the supply chain will bring interesting challenges this year — and opportunities for prepared merchants.

Keep reading for our advice on how to prepare your inventory in 2022.

Get ready for Q4

Prepare your supply chain and inventory for Q4 as early as today. In normal years, merchants usually had quiet summers (unless you sell in a sports or outdoor category) and Q3s where they could prepare for Q4 sales.

This year, it’s difficult to rely on the ports along the West Coast for summer imports. If negotiations stall, the backlog could flow into Q3, then compound on top of current supply chain issues.

Get as much inventory as you can into local warehouses and FBA so you’re well prepared in time for holiday sales.

Tip: We noticed a boom in 2020 and a slow-down in 2021. If you saw the same, look at your 2020 and 2021 sales trends, split the difference, and use that estimate for your 2022 Q4.

Balance supply and demand

If you sell out on Amazon, even during a hot sales event like Prime Day or Black Friday, your listing will take a hit.

Running out of stock is bad for marketplace business because it loses you sales. Worse, once you restock, your listings don’t pick up where they left off — you have to climb your way back to the top.

Maintaining a healthy listing is much easier than starting from the bottom, so it’s important to keep an eye on your supply and adjust demand accordingly.

What does this look like?

  • If you have low inventory for a marketplace listing, pause any campaigns driving traffic to it.
  • When selling on your own website, utilize upsells and cross-sells to help customers find alternatives instead of depleting your stock.
  • If you’ve overstocked an item, consider bundling it alongside your top sellers.

Utilize Section 321

Section 321 states that “De minimis provides admission of articles free of duty and of any tax imposed on or by reason of importation, but the aggregate fair retail value in the country of shipment of articles imported by one person on one day and exempted from the payment of duty shall not exceed $800.”

Essentially, this means that, with the exception of some countries, you can fulfill your DTC items from any international warehouse as long as the order is $800 or less.

This can alleviate supply chain issues to some extent, since you can fulfill a select order daily that meets all the parameters. Furthermore, this shipment is exempt from tariffs, making the sale even more lucrative.

Leverage alternative ports

A few other ports are open near the West Coast, including in Canada and Mexico. You can leverage storage, prep, and fulfillment centers near these ports when the ones along the West Coast are backed up.

The US also has ports in the Gulf Coast and East Coast where you can route orders in the meantime to preempt any delays on the West Coast.

Tip: Before you divert any shipments, check the capacities of your intended port to see if the backlog there is more favorable than on the West Coast.

Wrapping up — Prepare for more supply chain disruptions

No one can predict with 100% accuracy what will happen with the ILWU contract renegotiation. However, merchants should hope for the best and prepare for the worst.

To help you manage your inventory despite the many supply chain disruptions, follow our suggestions above, and be sure to work with reliable logistics partners with robust locations, services, and specialties.

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