Re: [spiers] Lockout Lessons
In a message dated 10/18/02 9:46:21 AM, centerline001@earthlink.net writes:
<< Hi John-
I was just wondering about your experiences and insights regarding the
recent West Coast ports lockout situation. Were you personally affected?
Also, any lessons there for us budding import/export tycoons?
Best regards / JAMES >>
I love this question!
No, not affected at all... and small businesses really don't have to worry
too much about such problems.... mid sized business ($150 million and up)?
are the ones who get in trouble.
First, yes, if the goods are on the vessel, and you have a letter of credit
in place, do you still have to pay for the goods even though you have not
received them? I could spend a week on this, but for now, just assume the
answer is, bottom line, yes. The delay is YOUR problem.
Recall the "benefit of our insignificance"? How since we are small, since we
are new, since stores take little risk and drop little orders like confetti
on us? Well, so what if the $400 order from Nordstrom with a delivery date
Sept 30 does not make it in until Oct 30? If it is new on Sept 30, it is
still new when late on Oct 30. Our value is we are new. With most stores you
can be late and get away with it, because nobody knows and nobody really
cares about us... with stores like Nordstrom you have to call the buyer's
assistant and get the delivery date extended... which is actually easier for
the buyer when they are busy than the nuisance of canceling and then dealing
with fresh open to buy.
Small importers of melons and such don't have to worry, their goods are in
reefers on board and quite safe. An extra week or two is not going to
destroy the goods. The melons start ripening quickly at room temperature not
at 33 degrees, in the reefer on board the vessel.
The biggest importer of containerized goods in the USA is Walmart. Asia does
not have enough port capacity to deliver in the 3rd quarter everything
Walmart sells 4th quarter (let alone deliver in the 4th quarter). Therefore,
Walmart is done importing Christmas goodies by the end of June. So obviously
this lockout affected them not at all.
It is the mid-sized companies, with their "just-in-time" purchasing systems
that get into trouble. Now, this action was not a surprise. Economic
reports show a surge in imports into USA Jun Jul Aug; this no doubt was
people stocking up in anticipation of a dock action... Will we see a drop in
imports coming up to offset the advanced buying? In any event, you'd have to
be asleep at the switch to get hurt because of this delay.
Now, on to the lockout itself... (NOT a strike.)
In 1982 I was on the committee with the Industrial Employers and Distributors
Association (IEDA) that was negotiating the 3 year Master contract with the
International Longshore & Warehouseman's Union (ILWU). This being back in
the waning days of the "import company on top of a warehouse in a port city"
our company was at 3rd and Townsend in San Francisco (yes, just north of the
Caltrans Station).
The dockworkers negotiated their contract with the Pacific Maritime
Association (PMA...the newsmakers) and the warehousemen and clerks negotiated
with the IEDA (not newsmakers). And all the contracts were brought together
into a master contract.
Our contract covered ILWU warehouseman that worked in our warehouse
downstairs and the clerks who were our receptionists, typists, files clerks,
etc. Yes, we had ILWU labor for receptionists. Yes, they were expensive.
But competing on design can pay for the best.
The shop steward for the clerks took me aside and tutored me: "People say
there are unions, therefore there are problems. This is wrong... there are
problems, therefore there are unions." Later, Ray Smardon, head of the IEDA
commented in one of our meetings, "Labor law requires we meet and confer, not
meet and agree." Further, "there is no such thing as an outrageous union
demand, there are only outrageous management concessions."
Put the three together and you have the whole field of labor relations: poor
management causes workers to unite to secure justice; precisely the poor
management that ticks off employees is equally unable to deal with unions,
and tends to end up agreeing to outrageous demands after poor negotiations.
This tends to be exacerbated when the company giving in, like say Boeing, can
simply charge off their poor management capabilities to the taxpayers, in the
form of more subsidies from the government for the company.
I do recall saying "lockout" once as an option in one of our strategy
meetings in 1982 and an evisceral charge when through the room. Locking out
a union is considered so outrageous your personal safety is no longer
guaranteed. Nonetheless, a contract was agreed to, and working with union
labor we achieved a 57% increase in productivity with the new contract with
net one less full time employee. To my mind, when we hear the word "union"
we ought to think "honor labor."
The "strike issue" in 1982 was something called unfunded liability. A strike
issue is the item on the agenda that has to be agreed to or there will be a
strike. It is non-negotiable. Unfunded liability occurs when a company has
responsibility for pension fund maintenance, but for whatever reason, there
are not enough assets to cover the obligations to the retirees, and current
employees.
This being 1982, and the end of a recession (although no one new it was the
end) previous foolishness by poor management left a shortfall between
obligations to workers and the underlying assets to provide for those
obligations.
And example was the owner of a trucking company who wanted to retire... he
had an unfunded liabilty that made his company less than worthless, and he
could not go bankrupt without losing his house because, as always,
incorporation cannot protect your personal assets in a bankruptcy, if a bank
is party to the deal. So he could not sell, he could not quit... he was
stuck. And then came deregulation lite of trucking, which bankrupted him
anyway, and left all of his workers without pensions.
Now, the ILWU wants pensions funded, but know it is unlikely, and so they go
for the bucks, now. A buddy of mine makes $160,000 per year being on-call by
pager for 2.5 days a week 24 hours. His beeper goes off, he heads down to
the docks, a deckhand drops a line over the side, my buddy wraps the line
around a dolphin, securing the ship, and he motorcycles back to whatever his
duties happened to interrupt. Nice work if you can get it. And the
longshoremen "get it"... take all of your money now. But don't give up your
pensions either.
The technological changes on the docks would cause a big reduction in labor,
meaning less people feeding the pensions, already unfunded. The solution
could be a payment to the union pension to cover the shortfall. But that
figure is so big it would bankrupt the payees. So eventually the government
will transfer wealth from some people to others, or, under the cover of
"national security" take over the docks.
Which brings us to the unheard of "lockout." The PMA brought in a union
buster to lead this current effort. The man has no maritime experience, he is
a ringer, brought in to do a dirty deed. The union knows this, so who knows
what will happen ultimately. It ain't over.
Look for "unfunded liability" in news reports, it comes up often, but it is
not an "issue". The issue for us is dealing with the hardest part of the
business, coming up with the right products, so we can please the most
important part of the business, the customers. A longshoreman's strike is a
piece of cake compared to that.
John
Friday, October 18, 2002
Lockout Lessons
Lockout Lessons
Hi John-
I was just wondering about your experiences and insights regarding the
recent West Coast ports lockout situation. Were you personally affected?
Also, any lessons there for us budding import/export tycoons?
Best regards / JAMES
Tuesday, October 15, 2002
Trade lead
Re: [spiers] Trade lead
In a message dated 10/14/02 6:51:45 PM, danglynn2002@yahoo.com writes:
<< Hi John,
I've gotten a lead that a particular US made product
is in short supply in a particular country. How would
you suggest I go about filling this supply?
Thanks,
Dan Glynn >>
Dan,
Chapter eight in the book lays out how I would proceed, but you alarm me.
There are shortages of USA products all over the world very often. My
concerns would be
1. Are you an expert in the product area; if not, how will you out-compete
those who are?
2. News of a shortage implies an emergency and high profits - just the
scenario needed to separate the eager from their money, just today I got
another email asking me to help transfer $26 million from an African nation
into my bank account. Your customer's urgency may mask a scam in progress.
I was thinking about how negative my responses are recently, and to mind came
the image from long ago of a duckherd in China, guiding a huge flock of ducks
along a road (were they geese? now I don't recall)... any way, he tapped
away with a bamboo rod at those that would wander off the path... the ducks
probably thought he was a mean old man because all he did was whack ducks all
day...
Anyway, the trick here is to develop a product based on retailers appraisal
of an idea being good but does not yet exist... and simply seeing if you can
get enough orders to cover the supplier's minimum production run profitably,
in a workable amount of time.
From there you have an accomplishment, and you can then repeat this over and
over changing things for the better each time.
Something none of you have done (or at least no one has admitted it...) is
you have not been scammed in an international trade transaction; you have not
bought a load of items you were sure would sell, only to find after you
imported them, that they would not sell; you have not wasted mass amounts of
time and money chasing impossible ideas; you have conserved your resources so
that when the time is right, you can move ahead.
The time is right when you have customers for your product. When you find
yourself in a store looking for something that is not quite there (I wish
this hammer was non-magnetic) then you are naturally working in the area of
the first milestone in this business. Shop on!
John
Monday, October 14, 2002
Trade lead
Hi John,
I've gotten a lead that a particular US made product
is in short supply in a particular country. How would
you suggest I go about filling this supply?
Thanks,
Dan Glynn