[December 06, 2012]

Potential US East and Gulf Coasts Port Labor Strike Could Further Destabilize International Trade: Marsh

A potential labor strike by longshoremen along the US East and Gulf Coasts at the end of the year could have devastating economic consequences as inventory depletion, rerouting, hoarding, and price speculation ripple through supply chains of global companies, Marsh warned in a new report published today. Those not prepared for such disruption could face adverse operational and economic impacts including increased expenses, decreased revenues, loss of market share, and reputational damage.

The longshoremen's labor contract with port operators along the East and Gulf Coasts is set to expire December 29, 2012. If a compromise cannot be reached, ports from Maine to Texas could see work stoppages-similar to what was experienced the past eight days with the clerical workers' strike at ports in Los Angeles and Long Beach, California.

In the event of an additional strike, retail, agriculture, food, and beverage companies would be hit especially hard due to their profit-driven strategy of keeping inventory levels low and the sudden and severe backlog and rerouting pressures caused by a work stoppage, Marsh said in its report: US Port Strikes-What's at Stake and How to Manage Your Risk. For each day of backlog accumulated during a port closure, affected organizations would typically need about eight days to stabilize inventory levels within their supply chains, the report said.

"The ability to move goods freely is an essential componen of the global economy," said Gary S. Lynch, Global Leader of Risk Intelligence and Supply Chain Resiliency Solutions for Marsh Risk Consulting and lead author of the report. "As we saw with the West Coast port strike, such events have broad consequences, such as destabilizing trade flows, business, and economic conditions. That strike and a potential East and Gulf Coasts one come at an inopportune time given low growth in key markets like the US, Europe and China.

"This potential crisis on the East and Gulf Coasts and the substantial economic losses that occurred on the West Coast demonstrate why global businesses must be prepared for powerful and possibly crippling disruptions that can happen without warning," he said. "Those companies with the right portfolio of risk strategies can more effectively protect themselves from potentially severe losses, while simultaneously gaining market share from less-prepared competitors."

According to Marsh's report, companies have many options when designing and implementing a risk management portfolio to respond to a port strike. In addition to port-of-entry diversification, companies also should consider various alternative sourcing and buying strategies, changes to their manufacturing process, and risk financing solutions, including voyage frustration and trade disruption insurance.

About Marsh

Marsh, a global leader in insurance broking and risk management, teams with its clients to define, design, and deliver innovative industry-specific solutions that help them protect their future and thrive. It has approximately 26,000 colleagues who collaborate to provide advice and transactional capabilities to clients in over 100 countries. Marsh is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 53,000 employees worldwide and annual revenue exceeding $11 billion, Marsh & McLennan Companies is also the parent company of Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; Mercer, a global leader in human resource consulting and related services; and Oliver Wyman, a global leader in management consulting. Follow Marsh on Twitter (News - Alert) @Marsh_Inc.

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