Strikes at the docks are something often not on the national conscience, but for retailers, any rumbling at the ports is significant enough to send shockwaves through stocking plans.
For the Minneapolis based discount giant Target (NYSE: TGT), the looming dockworkers strike on the East Coast is forcing the firm to devise backup plans for transporting goods into the country and their stores. The majority of global trade continues to be conducted by container ship – the cost of air freight is simply too high in most cases, so most store shelves are stocked with goods that spent weeks on the ocean aboard a vessel. When the vessel comes in to board, the dockworkers play a critical role in unloading the goods en route to their final destination. With most stores adopting some degree of just in time inventory management, any hiccup in that flow can have disastrous consequences.
Curtis Foltz, executive director of the Georgia Ports Authority, tells BusinessWeek that goods for Target and other retailers wouldn’t be taken off ships or moved from facilities if 15,000 dockworkers go on strike. While shipping and dock work isn’t prominent in business school discussions for a service economy, it remains an important part of the consumer economy. Target has commented that it has a ‘well-defined’ contingency plan, but failed to elaborate further. While the strike would hurt all retailers, market observers speculate it could hurt home improvement stores Home Depot (NYSE: HD) and Lowe’s (NYSE: LOW) the most, as the spring gardening season is an important time for their stores to generate the majority of their in store profits. Any US based retailer sourcing goods from abroad runs the risk of stock out conditions and difficulty getting product to their east coast stores. Bringing goods in through the West Coast could create timing issues as the goods would need to be squeezed into already bustling terminals, and trucked across the country in a shipping system already operating near capacity. Flying goods in from abroad would prove cost prohibitive, and not an option for the majority of trade.
Whether the strike will be averted is yet to be seen, but count on retailers to step up their contingency planning efforts in the coming weeks. With 8 week lead times common in international shipping, once goods are loaded on the boats, they could very well remain idle off the US Atlantic coast until this is ultimately resolved.
