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THE TRANSCENDENCE OF MONITORING LOCAL RISKS TO PREVENT MILLIONAIR LOSSES. THE CASE OF THE PORT UNION OF THE WEST COAST OF THE USA

Never in history had there been an infrastructure network in communications and capital exchange as dense as it is today. This degree of interconnection implies that political alterations in a locality can generate disruptions with a global impact.

This means there are large economic interests managed from a small number of cities and points. Where economic interests are concentrated, political interests prevail. Therefore, a political alteration in one of these points is sufficient to interrupt operations and supply chains worldwide.

In 2014, the renegotiation of the collective contract between port workers on the West Coast of the United States and the Maritime Association of the Pacific, which brings together all the employers of the ports, began. Unhappy with the outcome of the negotiation, the port workers manifested themselves by deliberately reducing their productivity. Approximately 40% of US trade takes place in only two ports: Los Angeles and Long Beach, both on the West Coast.

Thus, the continuous brakes of loading and unloading of ships over several months caused a congestion in the ports. This congestion caused the increase of shipping, storage and delivery times for all those products that enter or leave these ports. The foregoing caused multi-million dollar losses:

  • 75 billion dollars a day for the agricultural sector. Food that was not discharged on time rotted in containers.
  • Seven billion dollars a year for the retail sector. Sales decreased due to inventory that was not completed due to import interruption.
  • 40 million dollars per week for the agricultural sector. The export of meat and chicken stopped, causing losses for companies that sell these goods.
  • Employment . Such was the case of Montevista Farming Co. , which had to lay off one third of its employees for the reduction of exports.
  • Productivity . The congestion forced companies to look for alternative routes, which caused a significant increase in transport costs and delays in delivery times.

This case shows that local risks have the capacity to slow down the global economy through the interruption of supply chains. In addition to generating millionaire losses in various industries.

Now, this event should not have taken anyone by surprise. The tensions between the port workers union and the Pacific Maritime Association were widely known. At the beginning of 2014 – six months before the end of the validity of the collective agreement – communications and reports had already been issued, such as that of the company Global Transportation Services Inc. , warning of the need for contingency plans and prior that employees could go on strike.

Thus, the companies and sectors affected by the intentional decrease in the productivity of port employees ignored the warnings that were coming up regarding the possible interruption of operations in the ports. They could have organized contingency plans many months in advance. This demonstrates the need to have risk monitoring mechanisms to mitigate crises.

 

At Riesgos Políticos, SC, we can help your company establish effective mechanisms for risk management and crisis management. Contact us at info@riesgospoliticos.com.mx . 

 

Photo by chuttersnap on Unsplash

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