August 24, 2005
Port Disruption Impact: On Retailers and Their Confidence in the Port of Vancouver
On Monday, June 27, 2005, approximately 1,200 owner-operators who normally would be lining up to truck containers from the Vancouver-area's four port terminals parked their rigs in a dispute over the rate structure paid by the trucking companies that contract their services.
They effectively shut down movement of container traffic from the Port of Vancouver and Fraser Port for six weeks. Thousands of containers were stranded on the docks. Others were diverted to other ports until the dispute was resolved. Still others sat it out at their port of origin.
Watching anxiously were an untold number of retailers - large and small - whose merchandise was trapped behind the port gates.
The dollar magnitude of the impact on Canada's retail sector cannot be overstated and continues to be felt weeks after the dispute was "resolved."
Larger retailers with the resources to do so immediately set about establishing "work-arounds":
| > | Diverting in-bound container cargo to other ports (Seattle, Halifax, New York, New Jersey); |
| > | Shipping containers from Vancouver via rail to inland terminals for de-stuffing then shipping merchandise by train back into BC and elsewhere; |
| > | Instructing buyers to source whatever they could lay their hands on domestically. |
Members estimate that the incremental costs for larger retailers who were able to affect work-arounds could easily hit $100 million in transportation, demurrage and contingency expenses to divert containers to other inland points.
That is over and above the immeasurable cost of lost sales, significant markdowns to move out-of-season inventory, cancelled orders and diminished consumer spending in Western Canada due to the negative impact on the economy overall.
Small and medium-size retailers with fewer options were at the mercy of the dispute. A Retail Council of Canada membership survey suggested retailers in British Columbia and Alberta took the brunt of the impact. The following sample of responses from some of Retail Council's small and medium-sized members is illustrative:
| "Our container has been sitting in Vancouver for three weeks. We now have no product in the store and customers are cancelling orders. Please help!"
"We have now lost customers as we wait for merchandise. Everyone (including me) is entitled to make a living — not only those who think they're being deprived." "My two shipments sitting on the dock are seasonally sensitive special orders that are well past their promised delivery date. The sale is lost but I will have to pay taxes, duties and demurrage on stock I can no longer sell." "I have two containers sitting in Vancouver worth over $100,000 USD. I paid for it 3 months ago and cannot sell it. It will ruin my business for the entire summer." "My suppliers are not able to deliver. I can only imagine what this is doing to the importers." "I've got one container stuck in the port. Another I've been able to divert to the East Coast but my shipping costs are double. If this keeps up it's going to cost me 40% of my summer and fall sales." "Additional labour costs will total into the thousands of dollars, employing a minimum 1.5 extra persons to provide additional administration for the strike duration, not including overtime expense for the post-strike period to process the backlog of inventory in a condensed period of time." |
Many Retail Council members interviewed in the preparation of this submission expressed a degree of empathy for the owner-operators' situation although they did not support their job-action tactics. They stated that the Vancouver and Fraser Port Authorities, the terminal operators, and the trucking companies should have seen the warning signs and taken pre-emptive action before the dispute between trucking companies and owner-operators escalated into a six-week shutdown:
"Everyone took their eye off the ball on this one."
The legacy of the disruption on retailers' perception of the Port of Vancouver may take some time to shake:
| "Now that it's over, the fact they can't get enough truckers to reduce the backlog as fast as they'd like is very telling about the lack of predictability of the owner-operator trucker labour force."
"A smart person realizes this is still too volatile." "It's simply prudent risk management to be exploring and developing alternatives to the Port of Vancouver." "We've shown the world there is no stability in the Port of Vancouver." "We have to migrate to different strategies. Vancouver is not demonstrating that it can sustain the forecasted growth." |
Ironically, or sadly depending on your point of view, many of those same Retail Council members indicated that prior to the truckers' disruption, they were encouraged by certain developments at the Port of Vancouver. In particular, they noted:
| > | plans for capital investment in ambitious infrastructure expansion; |
| > | improved relay and transfer times for rail containers; |
| > | improved turn times for trucks once they are able to enter the facility; |
| > | and the provincial government's BC Ports Strategy. |
As a consequence of the owner-operator disruption, members anticipate a migration toward larger retailers conducting their own drayage possibly through leasing equipment and hiring employee drivers on an hourly basis.