Port problems

  • Pandemic supply chain issues begin to dissipate as shipping costs and delays decrease
  • US West Coast Port Operators and Dockworkers Negotiate New Labor Contract; current deal expires July 1
  • A slowdown and then a strike crippled West Coast ports in 2014 and 2015, disrupting the distribution of Asian-made clothing and other goods.

The news was buried amid increasingly dire inflation reports, but fashion’s logistical nightmare appears to be easing. Container shipping costs are down more than a third from their peak last fall (although they still more than doubled pre-pandemic levels), according to freight market Freightos . But supply chain managers can’t breathe easy yet. As the effects of the pandemic on garment factories and shipping ease, labor disputes at US West Coast ports threaten to throw the crucial trans-Pacific trade route back into chaos. Barring a last-minute breakthrough, unionized dockworkers at 29 West Coast ports, from Southern California to Seattle, will work without contracts. Unions and management said they would continue with normal business during negotiations. But the last time the two sides were at an impasse, in 2014, a months-long downturn culminated in a strike the following February. Just as with Covid, the ripple effects on global supply chains lasted for months, with retailers struggling to keep shelves stocked and then facing a flood of out-of-season goods as ports exhausted their backlog . In recognition of the high stakes, President Joe Biden met with union and port officials during a visit to Los Angeles earlier this month, and recently signed into law a bill to reduce shipping costs.

The essential : It’s too early to tell if the region’s ports will see a repeat of 2015 – labor negotiations routinely extend beyond the expiration of the previous contract without serious disruption. However, brands need to keep a close eye on discussions and dust off storage plans and alternate shipping routes they may have last used in 2015.

Nike’s worldview

  • Nike releases fourth quarter results on June 27
  • The company has had to deal with blockages from China, the loss of its business in Russia and the turbulence of the American economy.
  • Nike’s outlook for the coming fiscal year will help shape fashion industry expectations

There’s not much one brand can do: Nike’s results next week will include a period when many of its Chinese customers (which accounted for just under 20% of overall sales in fiscal 2021) were stuck, it suspended operations in Russia (the brand said last week it was officially leaving the country) and may have seen the first signs of a weakening US economy. Nike has been through tough times before, including a period last fall when its Vietnamese factories were closed during a Covid outbreak in the region. Production quickly resumed, and continued investment in direct-to-consumer sales has helped the brand control who gets its sometimes limited inventory. And of course, Nike’s problems are not unique. Adidas, Under Armor and the others face many of the same geopolitical issues. But as one of the big drivers of the pandemic, the biggest player in the sportswear category has yet to go down.

The essential: Nike’s fourth-quarter results look back on situations like China’s lockdown, which has since been lifted. The brand’s outlook for the next 12 months is more important to the industry as a whole. Few other brands have the size or global perspective of business. A surprisingly optimistic or pessimistic sales forecast will send shockwaves through the fashion world.

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