Port closures mean tech companies miss the boat
Published: 01 Oct 2002 11:23 BST
Many West Coast tech companies are waiting for their ships to come in -- literally.
A contract dispute between the International Longshore and Warehouse Union and Pacific Maritime Association largely shuttered major seaports from Washington state to the southern tip of California over the weekend and on Monday.
As a result, hundreds of millions of tons of cargo from Asia and other regions has been trapped in cargo containers stacked on freighters outside the ports -- and that has companies such as Hewlett-Packard and Gateway considering alternative routes to keep their supply chains moving.
In an age where companies pride themselves with the efficient use of a just-in-time manufacturing and delivery process, the slightest hitch can have a ripple effect. In addition to the port closures, tech companies in the past have had to contend with disruptions caused by fires and earthquakes.
"Companies that rely on just-in-time are the ones most vulnerable to the ports closure," said Jin Whang, a Stanford University professor and co-director of the university's Global Supply Chain Forum. "To make just-in-time work, you need to make several assumptions, such as, all your supply line will move smoothly."
Representatives from Hewlett-Packard and Gateway say their logistics teams had been monitoring the problem for months and have launched contingency plans to offset the lockout.
The longshoremen's union, the International Longshore and Warehouse Union and the Pacific Maritime Association, which represents the shipping companies and port operators, have been in cantankerous contract negotiations since their contract expired on 1 July. The talks further deteriorated on Friday when the Pacific Maritime Association called for a lockout, which was lifted the following day. But the association reimposed the lockout again on Sunday, and the groups were back at the negotiating table on Monday afternoon.
"We want to keep the freight moving and see this thing resolved. We support the on-going negotiations and want to see the parties get things back to normal," HP spokesman Marty Nott said.
On the West Coast, the Port of Long Beach is HP's most active point of entry for shipments of desktops, monitors and components from Asia. From the port, these products and components go directly to HP facilities, resellers and other destinations, Nott said.
"Basically, we have two ways to get the products here (without use of the West Coast ports). There's air and other water routes," Nott said. HP declined to discuss the details of its contingency plans.
San Diego-based Gateway, meanwhile, receives monitors from Asia through the Pacific coast seaports, company spokeswoman Ashley Wood said.
"The majority of our products come through the Port of Long Beach, but we have other sources for monitors from within the United States," she said. Wood declined to outline the contingency plans, noting that the company is currently in a quiet period because of its pending earnings announcement.
Other companies, including Intel, however, rely on air freight to get their products to the West Coast.
"With just-in-time manufacturing and the size of the things we ship, we find its quicker to use air freight to move quickly," Intel spokesman Chuck Mulloy said.
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