Automation Fight Could Trigger Next Supply Chain Disruption

Port Labor Negotiations at Impasse on U.S. East, Gulf Coasts

Are you ready for some more supply chain disruption? How about a U.S. port shutdown on the East and Gulf Coasts?

Earlier this month, the International Longshoremen’s Association (ILA) suspended labor talks with the United States Maritime Alliance (USMX). ILA represents 14,500 U.S. East and Gulf Coast port workers. Their current deal expires in four months.

Automation is the issue. The ILA claims that APM Terminals and Maersk Line are using automated systems that violate the current agreement. U.S. unions, fearing job losses, have fought automation at every opportunity.

However, increased automation could boost efficiency, trade and economic growth – all good things. And U.S. ports rank as some of the most abysmally efficient on the globe. Only six of the dozens of U.S. and Gulf Coast ports rank in the top 100, according to the World Bank.

Supply chain pros could drastically improve those rankings. Unfortunately, supply chain experts seem to be in short supply when it comes to decision-making power.

Supply Chain Pros Could Come to the Rescue

Supply chain professionals have the wisdom and leadership to vet, implement and integrate automated solutions. Competence, skill, aptitude and expertise are there.

Unfortunately, we do not have the authority, the position or the mandate to make this happen. We do not even have a seat at the table with the ILA and the USMX. And the National Labor Relations Board (NLRB), the supposed arbitrator between unions and management, isn’t seeking supply chain expertise.

Contract Negotiations Hit Traditional Labor/Management Standoff

Of course, the ILA has only one objective: Protect and enhance the quality of life for ILA members.

The USMX, on the other hand, represents East and Gulf Coast container carriers, terminal operators and port associations. It claims its responsibilities are:

Negotiating fair labor agreements with the ILA that promote efficient port operation.
Managing labor relations between maritime employers and their workforce, resolving disputes to minimize port operation disruptions.
Promoting efficient operations for the smooth functioning of the global supply chain.
Ensuring safety of port operations and cargo integrity.

Theoretically, the USMX “promotes efficiency,” “ensures safety” and negotiates “fair” labor contracts.

But “fair” to whom? Does the USMX want to be “fair” to ILA members? To U.S. consumers? To U.S. businesses affected by globalization, deglobalization and efficient – or inefficient – port operations?

No, I think the USMX has a different primary objective. It wants to be fair to container carriers, terminal operators and port associations.

In other words, what we have here is the traditional labor union vs. management standoff. When they reach solutions in the best interest of labor unions and management, this can work well.

Who’s Looking Out for Consumers? Nobody

But who is representing U.S. consumers and businesses? Again, in theory we have an answer: the NLRB.

The government created this independent federal agency in 1935. Its primary roles include safeguarding employees’ rights to:

Organize and seek better working conditions.
Choose whether to have a collective bargaining representative negotiate on their behalf with their employer.
Engage in collective bargaining.

Run with an even hand, the NLRB should protect labor union members, employers and U.S. consumers and businesses. The three prongs of the ILA-USMX-NLRB would work for everyone.

Unfortunately, many say current Chairman Lauren McFerran is not looking out for consumers or businesses.

Opponents, including the editorial board of The Wall Street Journal, claim McFerran might as well “work for the AFL-CIO.” They point to several NLRB decisions overturned by courts.

They criticize the NLRB’s decision to let unions gain recognition without winning elections via secret ballots. That cast aside more than half a century of Supreme Court precedent.

The NLRB has reimposed rules that permit behaviors during union activity that others view as harassment. This gives employers a difficult choice: Fight workplace harassment and discrimination or face accusations of anti-union activity.

This being the United States, it’s important to note that perspectives on McFerran’s advocacy can vary widely.

Supporters view her actions as a necessary defense of workers’ rights to organize and bargain collectively. They maintain that McFerran is simply upholding and protecting workers’ rights.

So, to paint McFerran as pro-union may not be a fair assessment. To paint her as pro-management is difficult to imagine.

The truth, however, is that hindering automation is not in the best interests of U.S. consumers or businesses.

U.S. Port Automation – and Efficiency – Is Lacking

As I pointed out in my latest book, inefficiency has plagued U.S. port capacity for decades.

Nothing has changed since then. Each year, The World Bank and S&P Global Market Intelligence combine to rank the world’s ports. According to The Container Port Performance Index 2023, only six U.S. and Gulf Coast ports rank in the top 100:

Charleston, 53
Philadelphia, 55
Miami, 74
Boston, 75
New York/New Jersey, 92
Jacksonville, Fla., 99

You might expect ports in China (Yangshan, No. 1) to outrank the U.S. And Oman’s oil riches probably help put the port of Salalah at No. 2.

But Cartegena, Colombia (ranked third), and Tangier in Morocco (ranked fourth) also outshine the best U.S. ports.

West Coast ports, luckily not threatened by the ILA-USMX standoff, are even worse. More than 40% of U.S. container shipping enters through the Ports of Los Angeles and Long Beach. Los Angeles ranks 375. Long Beach ranks 373.

The lowest ranked port in the aggregated scores? Cape Town at 405.

Numerous factors beyond the lack of automation contribute to such pitiful efficiency rankings. U.S. ports nave notoriously underinvested and underdeveloped infrastructure. And supply chain participants often fail to share data.

Supply chain experts, invited to the table, could help solve many of these issues.

Balance the Scale for a Better Future

I agree with the World Bank/S&P report that high-quality, efficient port infrastructure contributes to economic growth. Better ports encourage investment in production and distribution, raising income levels.

Efficient ports are also critical in making supply chains more resilient.

Shutdowns in global trade never end well. Sometimes wars happen. The dissolution of supply chains contributed to the fall of the Roman Empire and the collapse of Bronze Age civilizations.

So, with respect to this ILA-USMX-NLRB trifecta, the NLRB has not done its job. I believe the NLRB should pursue counsel from U.S. supply chain experts. We can balance the scale between the ILA-USMX and U.S. consumers and businesses.