Navigating Retail Supply Chain Challenges

This year retail supply chains were under tremendous strain due to enormous demand, soaring costs to ship freight, constrained capacity and equipment shortages, systemic challenges of exiting transportation networks, and bottlenecks at ports.

Retailers have worked year-round to overcome these challenges, but unfortunately a new challenge is on the horizon.

RAIL STRIKE

The United States is facing the rising likelihood of a crippling national freight rail strike on December 9. The nation's freight rail companies and certain unions have not ratified a new contract after three years of negotiations. Roughly 40 percent of freight moves by rail in the U.S.(AAR facts & figures). The Association of American Railroads (AAR) estimates that a rail strike would cost the country $2 billion a day in lost economic output. The American Chemistry Council (ACC) recently said a prolonged strike would cost 700K jobs and add 4 points to the Producer Price Index (ACC Transportation & Infrastructure). Even the potential for a rail strike would create greater inflationary pressure, disrupt supply chains and harm retailers and consumers.

How did we get here?

The rail contracts expired in late 2019 and after 3-years of negotiations and mediation neither the railway companies nor the rail unions could come to an agreement. Under the Railway Labor Act (RLA) of 1926, President Biden acted by appointing three arbitrators to an emergency board to recommend a path forward. The recommendations were released on August 16, 2022. They cover over 115,000 employees of six major railroads and many smaller ones. With White House involvement, leadership of the two sides reached a tentative agreement on September 15, averting a strike that could have begun the following day. However, the tentative agreement required ratification by the unions’ rank and file members before it could be finalized.

Between September 15 and November 21, all 12 unions representing roughly 115,000 freight rail workers held separate votes. Eight unions have voted to ratify the tentative agreement, while four have rejected the deal and have returned to the negotiating table. If no agreement is reached by December 8, railroads could lock out workers or workers could vote to go on strike as soon as 12:01 AM on December 9. If one union strikes, the others all honor the picket lines, resulting in a total shutdown of the nation’s rail system.

A Shutdown Timeline

In accordance with federal safety measures, railroad carriers will begin preparing seven days before a strike by securing and prioritizing the movement of security-sensitive materials like chlorine for drinking water and hazardous materials in the rail winddown. Timeline: See a breakdown of the impact of a shutdown starting at 7 days out.

What's Next?

With the strike deadline approaching and no deal within sight, Congress needs to swiftly pass legislation codifying the Tentative Agreements reached in September.

Retailers: Congress Must Act to Avoid Rail Strike

The RLA gives Congress the authority to intervene by passing legislation to impose a new contract on the railroad companies and unions. The legislation would eliminate the ability of a rail strike. However, before Congress acts the two parties could

reach a new agreement voluntarily or lawmakers and the White House do nothing, letting workers go on strike just before Christmas.

If Congress acts there are several legislative options including:

legislation to extend the current cooling-off period
implement the terms of an unratified agreement
implement the recommendations of Presidential Emergency Board (PEB) No. 250
impose other conditions on the parties.

Congress has intervened on several occasions to respond to rail disputes that were not resolved under the RLA’s procedures. The last time U.S. railroads went on strike was in 1992. That strike lasted just two days before Congress intervened. While the preferred option is for unions and freight rail companies to come to an agreement voluntarily, absent an agreement Congress should swiftly codify the White House-endorsed agreement reached in September and ensure America’s railways stay open for business.

LINK 2023

The Retail Supply Chain Conference gathers top executives in retail to network and learn. Experience expert-led education and a bustling Expo Experience.

Retail Supply Chain Conference

In the News

“It would be pretty impactful for the supply chain. The backup into ports could reignite acute port congestion that we’ve seen. The parcel market, like UPS [which relies in part on the rails], you’ll have that impacted, as well. There would be a lot of pressure on the truck market. And with that shortened capacity, prices would increase.

NBC News

“A strike is utterly unacceptable. If a deal can’t be reached, Congress has the power and obligation to act.

"As we have seen in the past two and half years, if there is a breakdown anywhere along the supply chain, one link falters, you see that ripple effect pretty quickly and those effects just spread from there.

AP News

Our supply chain priorities include:

Invest & Modernize Transportation Infrastructure: Leverage the input of major infrastructure users, including leading retailers, to help target investment from the bipartisan infrastructure deal for maximum impact.
Strengthen Oversight of Ocean Shipping Industry: The Administration and Congress must bolster the Federal Maritime Commission’s work providing oversight of foreign-owned ocean carriers, carrier alliances, and terminal operators—sending the message that fair and open supply chains are essential to U.S. businesses and the American economy.
Fortify Supply Chain Data Infrastructure: Consistent data and metrics, along with interoperable data standards, are essential to enable the reliability and end-to-end visibility required by today’s light-speed supply chains.
Remove Barriers to Trucking: To restore capacity, the trucking industry needs over 80,000 drivers, and government policies must enable a pipeline of new drivers, as well as more efficient goods movement from reevaluating size & weight restrictions.

We continue to work together with our retail members, policymakers, and supply chain stakeholders to help the industry navigate these significant challenges and meet the needs of families and communities.