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In October, ports across the U.S. shut down as the International Longshoremen's Association (ILA) went on strike for the first time since 1977. The port strike shut down 14 major ports and threatened to disrupt more than half of the U.S.'s global trade.
The ILA represents about 45,000 dockworkers, and the union went on strike to demand higher wages and a ban on automation. Fortunately, the shutdown only lasted for three days, and the ILA and the U.S. Maritime Alliance extended their contract until January 15, 2025.
However, if they can't reach an agreement in the new year, the dockworkers could go on strike again. It's a good idea for small businesses to start diversifying their supply chain and getting ahead of overseas orders now, just in case we find ourselves in a repeat situation.
Related: 5 Ways of Effectively Navigating Supply Chain Disruptions
The economic impacts of a port strike
How a port strike would affect the U.S. economy depends largely on how long it lasts, but shipping delays would likely be the first and most noticeable sign. Over $2 billion worth of goods flow through these ports daily, and a strike would affect everyday items like perishable food, different types of alcohol, durable goods and raw commodities.
Delays could hurt small businesses that rely on shipments from overseas suppliers, causing low inventory and lost revenue. If a shutdown lasted more than a month, it could cause the cost of imported goods to rise and contribute to inflation. Transportation costs could also rise due to the increased delays.
An extended port strike would hurt retail, agricultural and manufacturing businesses, and over time, this could force businesses to lay off workers to cut their expenses. A prolonged strike could also hurt the U.S.'s relationship with its global partners and cause other countries to look for alternative trade partners.
Related: 7 Strategies for Growing Your Business When Supply Chain Disruptions Are Everywhere
How businesses can mitigate future risk
A port strike poses numerous challenges, but businesses do have time to prepare so they aren't caught off-guard. January through March tends to be a slower period for retail sales, so businesses will have more capacity to keep their supply chain moving. Let's look at five ways small businesses can prepare for another port strike.
Stock up on inventory
Businesses have until January 15 to begin building up their inventory and preparing for another shutdown. Start reviewing your inventory levels to accurately forecast demand and determine what you'd need to get through a strike. Prioritize high-margin products and items that are essential to your business operations.
Diversify your supply chain
Another way small businesses can protect themselves is by diversifying across several different suppliers. Begin establishing relationships with suppliers in different locations or countries and look for opportunities to source these items locally. Domestic suppliers may be more expensive, but they'll reduce your dependence on international ports.
Use inventory management software
If you aren't already using inventory management software, now is a good time to start. This software gives you real-time visibility into your inventory levels, making it easier to forecast demand and make informed purchasing decisions.
Inventory management software uses AI to analyze historical data and external factors to predict future demand. It can also help you determine which items are the most popular and should be prioritized.
Communicate with your customers
Since an ongoing port strike can cause delays and inventory shortages, it's important to communicate with your customers. Let them know about potential delays and increased costs before these problems occur. Being upfront about these challenges will help you build trust with your customers and let them know you're doing everything you can to manage the situation.
Set clear expectations for how long delays could last and recommend alternative products that are available. Make sure your customer service team is prepared to handle customer questions and that it's easy for customers to get in touch with your business.
Prepare for additional costs
If another shutdown occurs, small businesses should expect inventory, storage and transportation costs to increase. Coming up with cash flow solutions now will ensure your business can absorb these costs without any major disruptions.
If you don't already have one, establishing a line of credit can help you cover the cost of extra inventory and additional storage space. You can also negotiate with your suppliers to extend your payment terms and free up your cash flow.
Related: How to Secure the Inventory You Need During a Supply Chain Nightmare
According to the Conference Board, a nonprofit think tank, a one-week shutdown could cost the U.S. economy $3.78 billion. Hopefully, the ILA and U.S. Maritime Alliance will reach an agreement before January, but business owners should be proactive and plan for the worst-case scenario.
Take the time to assess your supply chain now and look for ways you can strengthen it. Diversifying your supply chain and stockpiling inventory now will help you minimize the fallout if another strike happens. It'll also help you preserve your relationships with your customers.
