Threat of Supply Chain Interruption Due to Potential Freight Rail Strike
Supply Chain Interruption Threat Due to Freight Rail Strike
U.S. Government officials are currently working to avoid freight railroad workers going on strike this Friday, September 16th, due to the failure of rail companies and unions to reach an agreement.
About 125,000 workers could walk off the job if a deal isn’t reached by Friday’s deadline, which could cause massive interruption to the supply chain that is already strained and impact the commodities market.
- On July 17, just as the cooling-off period ended, President Biden established a Presidential Emergency Board (PEB) to help the parties settle their dispute. The PEB conducted hearings in late July and issued its report and recommendations on August 16. The parties are now in a final cooling off period, during which strikes and work stoppages continue to be prohibited, until 12:01 a.m. on September 16, 2022. The railroads have reached tentative agreements with 9 of the 12 unions in national bargaining.
- Commodities account for half of all freight rail traffic. This would be the first U.S. Railroad strike in more than 30 years.
- The Association of American Railroads, a freight rail industry group, said a disruption to service would cost more than $2 billion per dayin economic output, idle thousands of trains and result in widespread product shortages and job losses. Rail accounts for about 28 percent of U.S. freight movement, second only to trucking’s nearly 40 percent, according to federal data.
- More than 460,000 additional trucks would be needed each day to carry the goods otherwise delivered by rail, the American Trucking Associations, another industry group, said in a letter last week asking lawmakers to be prepared to intervene. The trucking industry faces a shortage of 80,000 drivers, so a rail disruption would “create havoc in the supply chain and fuel inflationary pressures across the board.”
HOW WILL THIS IMPACT WBFI MEMBERS?
“Our freight forwarder who handles imports has also been sharing articles as they are expecting it to initially cause delays for items we are importing through the west coast and LA ports especially. We have seen delays already on numerous shipments due to rail issues that are currently in place. For instance, we have had several containers sitting at port for almost two months now with no real ETA on when they may arrive here.
There does seem to be optimism that it will be resolved rather quickly and the administration will step in as they fear it could be perceived as a negative with the election on the horizon.
Overall, our inventory #s are pretty solid across the board though and have heard the same across lines we distribute so I am not sure how great an affect it will have in the short-term. I also think our customer base is use to supply chain issues we have encountered so it won’t be all that surprising to them if there are some items that have delayed arrivals.”
"This is going to be a big problem for our industry. A lot of our members use the rail to ship ingredients on – both to sell and to buy. The bigger the packer, the more likely they are to leaning on rail for inbound ingredients. Trucks are harder to get and if the rail goes out, it will be even more difficult, bordering on impossible, as bulk grain trucks are not as plentiful as regular dry vans.
Prolonged strike will have very negative consequences on the entire economy of North America, including our industry directly."
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