Last Updated: November 11, 2022
The global supply chain is in chaos. It certainly won’t be the first time you’ve heard that over the last two-and-a-half years, and unfortunately it may not be the last, either. However, one factor causing the seemingly endless disruption is a more recent development than COVID-19 and raw material shortages: the looming threat of a U.S. rail strike.
Industrial action has been commonplace in different countries around the world in recent years, but a strike by railroad unions in the U.S. could have severe implications for everyone throughout the country.
Haven’t I Heard This Before?
Probably, yes. Talk of a rail strike was rife in the late summer. Disagreements between U.S. railroads and their labor on issues including sick time and penalties for missing work had led to unions voting to strike, which would have resulted in a nationwide rail shutdown that was due to go into effect after midnight on Friday, September 16, 2022. It would have been the first such strike in around three decades.
That strike, however, was averted at the 11th hour, after the Biden administration secured a tentative deal between major U.S. railroads and unions representing tens of thousands of workers on Thursday September 15. The agreement followed 20 hours of negotiations, which were brokered by Labor Secretary Marty Walsh.
With workers having gone three years without a pay increase during the contract dispute, the deal would see them secure double-digit raises, including an immediate 14.1% wage rise, and permit them to seek certain types of medical care without fear of being punished.
So, What’s Changed?
While the agreement had been announced, it had not yet been ratified by all railroad unions, and votes took place over the coming weeks to determine if the deal was to be agreed. As of November 9, nine of the 12 unions voting on the agreement had announced their results, with seven unions approving the deal and two unions rejecting the deal.
The first union to reject the deal was the Brotherhood of Maintenance of Way Employees Division of the Teamsters Union (BMWED), which announced its results on October 10 after tallying the votes of 11,000 workers. They were followed on October 26 by the Brotherhood of Railroad Signalmen (BRS), which represents more than 6,000 members.
Is Strike Action Imminent?
A strike is not imminent, but it could be called for very soon.
Results for the remaining three unions — The International Brotherhood of Boilermakers, SMART Transportation Division, and Brotherhood of Locomotive Engineers and Trainmen (BLET) — are expected during the week beginning November 14. While two of those unions, SMART Transportation Division and BLET, represent almost 50% of the workers covered by the agreement, the damage may already have been done. Just a single union voting to strike could trigger a nationwide shutdown, as workers from other unions are expected to be reluctant to cross a picket line.
However, a strike cannot occur immediately due to labor laws specific to railroad unions, which dictate that workers cannot take action during “cooling off periods” that follow a “no” vote by membership. The initial cooling-off period was due to end on November 19, before BMWED announced on November 9 that they would hold off on any potential action until early December to enable railroads to establish their best offer without the looming threat of a walkout.
It is unlikely, though, to ever reach that stage. That’s because, as part of the Railway Labor Act, a ‘presidential emergency board’ can be formed after the president is notified by the National Mediation Board (NMB) that a dispute between a rail or air carrier and a union will "threaten substantially to interrupt interstate commerce to a degree such as to deprive any section of the country of essential transportation service." The formation of an emergency board extends the initial cooling-off period indefinitely while the board deliberates on recommendations to resolve the impasse. Only after either party rejects the board’s recommendations will a final 30-day cooling-off period begin.
In summary, though industrial action could be called within a matter of days, the chances of it actually taking place any time soon are virtually nil.
How Would a Rail Strike Impact the Supply Chain?
For now, let’s put emergency boards and indefinite cooling-off periods to one side and assess the impact a nationwide railroad strike would have on the country and the supply chain.
$2 billion per day in lost economic output. That’s an estimate by the Association of American Railroads of the financial impact of strike action that has been cited within the Department of Transportation, leading U.S. Chamber of Commerce President and CEO Suzanne P. Clark to label a strike an “economic disaster” with “catastrophic economic impacts.”
A nationwide rail strike would shut down 30% of the country’s freight, exacerbating the already dire transportation of goods and having a direct impact on U.S. agriculture, energy, healthcare, manufacturing, and retail sectors. If those industries are badly affected, it could lead to:
- Shortages of raw materials and empty store shelves.
- Further increases in soaring energy prices.
- Another surge in inflation.
- Lives lost due to shortages of medical devices and supplies.
- Further slowing of vehicle production.
- Sky-rocketing prices at the pump initiated by more fuel shortages.
A rail shutdown would also halt most passenger and commuter rail services and devastate Amtrak operations, leading to thousands of days’ worth of lost productivity, dealing a further blow to the country’s economy, as well as disruption to the lives of so many commuters.
What Can I Do?
As has been the case throughout the last two-and-a-half years, reviewing and refining your organization’s supply chain processes is critical to minimizing the impact of disruptive events such as a rail strike. Whether it’s engaging multiple suppliers, investing in technology, or choosing an inventory management strategy that’s right for you, strengthening your supply chain and ensuring its resilience has never been more important.
If you’d like to find out how joining a GPO like CNECT can help you achieve supply chain resilience and protect your organization against the worst effects of procurement issues, don’t hesitate to get in touch!