Archibald CBoC Supply Chain Resilience 2010

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    Report October 2010

    Keep It Moving

    Improving the Resiliencyof Global Supply Chains

    NiNl Siy N Pbli Sy

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    Preface

    Whether a supply chain disruption is caused by a lockout,

    strike, or security incident, it can have ramifications far

    beyond a single organization. The 2002 lockout of long-

    shoremen at U.S. West Coast ports and the 2005 truckers

    strike at Port Metro Vancouver demonstrate this all too

    well. With this realization, public and private organizations

    have had to modify their business and security operations.

    The Conference Board of Canadas Centre for National

    Security took an in-depth look at these disruptions and

    studied the consequences for supply chain security

    and resiliency. This report describes the findings and

    captures the discussions of the research mission to the

    Port of Long Beach, the Port of Los Angeles, and Port

    Metro Vancouver. It also outlines a number of lessons

    and innovations that organizations have taken to mini-

    mize the effect of disruptions on supply chains and

    ensure port security.

    Keep It Moving: Improving the Resiliency of Global Supply Chains

    byAndrew Archibaldand Bjorn Rutten

    About The ConferenceBoard of CanadaWe are:

    The foremost independent, not-for-profit, applied

    research organization in Canada.

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    Conference Board, Inc. of New York, which

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    2010 he onference board of anada*Published in Canada All rights reservedAgreement No. 40063028*Incorporated as AERIC Inc.

    Forecasts and research often involve numerous assumptions and datasources, and are subject to inherent risks and uncertainties. This information

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    NNS

    xecutve Suar

    hapter 1Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

    Growing Complexity and Fragility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

    Understanding the Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

    hapter 2Four Meals From Anarchy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

    Truckers Blockade New Brunswick . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

    Immediate Impacts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

    Fair Warning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

    Critical Lessons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

    hapter 3The Complexity of Global Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

    Shutting Down the Coast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Reconstituting the Port . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

    Critical Lessons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

    hapter 4Making Systems Visible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

    Two Strikes in Vancouver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

    Merging Supply Chain Stability, Security, and Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

    Transparency in the Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

    Managing Perceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

    Critical Lessons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

    hapter 5Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

    Building Resilient Supply Chains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

    ppendx Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

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    Acknowledgements

    The Centre for National Security (CNS) brings together senior leaders from the public and private sectors to

    address key issues affecting Canadas national security and public safety. This report is a summary of a meeting

    held for CNS members, and was produced under the direction of Gilles Rhaume, John Neily, and the Centres

    steering committee. The authors would like to acknowledge and thank both Dave Mugridge and Eric White for

    taking the time to comment and provide guidance on this report.

    The primary authors are Andrew Archibald and Bjorn Rutten.

    The CNS research team would like to thank all of the individuals who shared their thoughts and insights

    during the meeting. We would also like to express our appreciation to the members of the Centre for National

    Security, including:

    The Conference Board of Canada is solely responsible for the content of this report, including any errors

    or omissions.

    Adams and Reese

    Alberta Emergency Management Agency

    Bell Canada

    Bruce Power

    Calgary Police Service

    Canada Border Services Agency

    Canadian Electricity Association

    Canadian Energy Pipeline Association

    Cisco Systems Canada

    City of Ottawa

    Commissionaires Ottawa

    Justice Institute of British Columbia

    Microsoft Canada

    Motorola

    New Brunswick Department of Public Safety

    Public Safety Canada

    Royal Canadian Mounted Police

    Symantec

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    T

    he growth of global trade has led to a global

    dependence on raw materials and products

    from distant places. As such, the shipping

    industry has developed the capability to move goods

    across vast oceans to take advantage of assets available

    worldwide such as resources, labour, and expertise.

    However, the benefit of this system also comes with risk.

    Complex global supply chains involve a diverse group

    of public and private organizations, and are susceptible

    to a host of riskssuch as inclement weather, threats to

    maritime security, mechanical failures, labour disrup-

    tions, and political or policy changes. A severe stormcan slow down shipping just as much as a border

    closure, a port closure, or political instability can.

    To understand the risks and challenges caused by supply

    chain disruptions, members of The Conference Board of

    Canadas Centre for National Security (CNS) engaged

    in a research mission to explore how critical nodes in

    global shipping were preparing for future disruptions.

    Travelling to the Port of Long Beach, the Port of Los

    Angeles, and Port Metro Vancouveras well as engaging

    the New Brunswick Department of Public SafetyCNS

    participants met with leaders who have responded to, and

    are preparing for, major disruptions to supply chains. This

    report is the culmination of the discussions, presentations,

    experiences, and expertise shared between practitioners

    and members of the Centre for National Security.

    lNiNg m iSPiNS

    2005 kS blk

    After a summer of rising fuel costs, a number of

    truck drivers in New Brunswick began blockading

    the Trans-Canada Highway on Labour Day weekend

    in 2005. Beginning on the Trans-Canada Highway near

    Edmunston, but spreading to other parts of the province

    over four days, trucking ground to a halt in a region

    with few transportation alternatives.

    Keep It MovingImproving the Resiliencyof Global Supply Chains

    i Smmy

    t a gance

    Although global supply chains are beneficial,

    the system has many inherent risks and

    challenges.

    Some of the members of the Conference

    Boards Centre for National Security engaged

    in a research mission to understand how

    ports are preparing for the risk of major

    supply chain disruptions.

    This report is the culmination of the discus-sions, presentations, experiences, and expertise

    shared between individuals who have prepared

    for, and responded to, major port disruptions

    in recent years, and the members of the Centre

    for National Security.

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    The effects of the blockade were almost immediate.

    Within hours, the impact was felt locally and in less than

    36 hours, regionally. In two days, consumables such as

    eggs, milk, liquor, and cigarettes were noticeably less

    available, while supplies for medical and critical infra-

    structure facilities were dwindling.

    identfn crtca dependences, and the ost vunerae

    routes or nodes n supp chans, are essenta to deveopn

    the approprate contnenc pans

    The lessons learned from this incident include:

    Supp chan dsruptonswhatever the causecan

    have edate oca pacts on ctes and reons

    The dependency of most communities on a steadysupply of goodsfood, fuels, chemicals, medical

    suppliesreinforce the importance of ensuring

    that transportation routes remain unobstructed.

    Identifying critical dependencies, and the most

    vulnerable routes or nodes in supply chains, are

    essential to developing the appropriate contingency

    plans. Taking a proactive, holistic approachwhich

    includes both the public and private sectors to prevent,

    mitigate, and manage disruptions for continuity of

    operationsis a necessity.

    nderstandn that the te to faure of crtca

    nfrastructure s as portant as understandn nter-

    dependences When assessing how to avoid the

    cascading effects of critical infrastructure failure

    (e.g., the number of organizations that rely on the

    products and services of another organization), know-

    ing the length of time between one failure and the next

    provides emergency managers and responders with

    a more sophisticated understanding of the crisis they

    may be facing.

    2002 WS S P lk

    The truckers blockade in New Brunswick demonstrated

    the speed at which a disruption can impact a region, but

    the 2002 lockout of port workers on the U.S. West Coast

    shows the complexity of global supply chains.

    Due to a protracted bargaining process to negotiate a

    new contract between the International Longshore and

    Warehouse Union (ILWU) and the terminal operators and

    shipping companies represented by the Pacific Maritime

    Association, the union workers were locked out of the

    West Coast Port facilities for 10 days. The ripple effect

    of the port closures was felt around the globe.

    As the ships stopped being offloaded at U.S. Pacific ports,alternative facilities were sought. However, there were

    few viable options because of the amount of paperwork,

    advance notice required, operational capacity, and a

    lack of additional capacity. With more than 250 ships

    waiting off the U.S. West Coast ports, and an estimated

    cost of $2 billion to the U.S economy per day, the fed-

    eral government ordered the two sides to resume work.

    The end of the lockout was not the end of the backlog.

    Stopping the offloading was much easier than reconsti-

    tuting it, as docks were crowded and overwhelmed by thenumber of goods in need of transportation. Three months

    after the conclusion of the lockout, some coastal facilities

    were still working through the backlog.

    Lessons learned by the organizations involved with the

    2002 lockout include:

    he end of a supp chan dsrupton s not the end of

    the proe Once conditions have evolved to a point

    where operations can resume, serious consequences

    must still be addressed. Advance planning on how

    services will resume and be prioritized requires as

    much attention as how to avoid having them stopped

    in the first place.

    econsttuton of supp chan operatons shoud e ed

    prvate sector oranzatons worn wth puc author-

    tes While no-one fully understands all aspects of a

    global supply chain, stakeholders need to recognize

    that no-one knows global supply chains better than

    the private sector organizations that run key elements

    of these systems. However, there is a need to be aware

    of which critical products need to reach their final

    destination in a timely manner. Working with public

    authorities can aid in this identification, and govern-

    ments can shape the conditions necessary to expedite

    a return to normal operations.

    Port operators ust e predctae Supply chains face

    minor disruptions on an on-going basisweather,

    earthquakes, disease outbreaks, labour disruptions,

    etc. Many companies are adept at finding alter-

    nate routes to their final destinations, in the most

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    cost-effective ways. Despite their flexibility, when

    companies have to reroute from a port or destination

    too many times, ports risk losing their business for

    good, as organizations seek greater predictability.

    It is in the interest of port facilities to work with

    stakeholders to ensure that the risks and impactsof a shutdown are effectively mitigated.

    ort per cent of contaner traffc at Port metro ancouver

    s handed trucs n and etween the ternas

    kS SikS P m N

    The complexity of the global supply chains passing

    through a critical nodesuch as the U.S. West Coast

    ports and Port Metro Vancouverneeds to be visiblefor the node to operate efficiently. This was learned

    during the 1999 and 2005 truckers strikes at Vancouvers

    port facilities.

    Forty per cent of container traffic at Port Metro Vancouver

    is handled by trucks in and between the terminals. When

    the truckers protested rising fuel costs and low rates of

    pay in 1999, and again in 2005, rail capacity was used

    up and the congestion was felt as far away as Toronto,

    Montral, and Halifax. To overcome the immediate

    congestion and backlogs in the future, Port Metro

    Vancouver and its partners launched several initiatives

    to build trust and to boost the transparency of supply

    chains going through the ports facilities. The increased

    visibility gives them greater predictability and security.

    budn supp chan transparenc heps copettors

    oo eond the protecton of on ther usness to the

    protecton of the entre ssteMaking sophisticatedbusiness decisions requires an understanding of

    an organizations context. But in complex global

    supply chains, most organizations are unable todo so. By exchanging data that is relevant to other

    supply chain partners, companies can collectively

    make better operational decisions that are of benefit

    to themselves, their customers, and others in the

    supply chain. Understanding the dependencies

    and interdependencies that exist can help all stake-

    holders improve their levels of preparedness and

    response capabilities.

    Supp chan transparenc ads wth rs assessents

    Required by law for many international shipments,

    the sharing of cargo information between public andprivate organizations can aid in the management of

    risk while boosting transparency of the goods entering

    a port facility. By categorizing cargo as high- or low-

    risk, an incentive is created to be transparent and to

    share information. This applies to both domestic and

    foreign cargo as it passes through port facilities.

    manan the perceptons and expectatons of supp

    chan partners s fundaenta to udn confdenceWith networks distributed around the world, ship-

    ping companies often make their decisions without

    the benefit of first-hand information. If shippers

    believe there will be problems at a port, they will make

    decisions to reduce risk. Communicating constantly

    to reinforce stability and reliability, and to build trust,

    is essential to ensure that stakeholders around the

    world base decisions on facts.

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    gWiNg mPliy N giliy

    With the development of global trade,

    countries have come to depend heavily

    on raw materials and goods that cross vast

    oceans from distant countries and continents. It would

    be difficult to overstate the importance of todays global

    supply chains.

    The global shipping industry is capable of moving goods

    great distances efficiently in order to take advantage ofresources, labour, and expertise available worldwide. The

    efficiency of this system depends on safe, secure, and

    open borders, quick intermodal transitions (e.g., from

    truck to ship to rail), and limited disruptions to this

    international system.

    he reance on just-n-te shppn eans that dsruptons

    to the sste can have devastatn pacts

    While todays global supply chains have brought many

    benefits, they also come with their own risks. These supply

    chains are systems within systems within systems. They

    comprise many organizations from numerous industries,

    and are broadly distributed around the globe. As such,

    these systems are extremely complex, and open to a wide

    range of threats. The reliance on just-in-time shipping,

    while reducing warehousing costs, means that disruptions

    to the system can have devastating impacts within very

    short periods of time. With little inventory on hand, or

    goods with a short shelf life, disruptions to a supply chain

    can have disastrous implications on a global scale within

    a matter of dayslocal effects can be felt within hours.

    Delays have the potential to cause significant difficulties

    that span continents. In some industries, the window for

    construction, manufacturing, or selling is short, and delays

    result in missed opportunities or major increases in cost.

    Introduction

    P 1

    hapter Suar

    Transportation delays have the potential

    to cause significant difficulties that span

    continents. In some industries, the window

    for construction, manufacturing, or selling

    is short, and delays result in missed oppor-

    tunities or major increases in cost.

    We must look at systematic solutions to ensure

    that organizations and jurisdictions can avoid

    supply chain disruptions, and respond effect-

    ively when found in the midst of one.

    To better understand the complexities and the

    challenges of supply chains, the Conference

    Boards research team used three case studies,

    of varying size and scope, which demonstrate

    the impact that disruptions can have.

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    That said, it is important to recognize that supply chain

    disruptions occur frequently. As some have described

    it, this is an outdoor sport and accidents happen.

    Companies have to contend with inclement weather of

    all kinds, mechanical failures, strikes, changing market

    conditions, political and policy changes, and threats tomaritime security.

    And, while adjusting to fluctuations can be done, its noteasy to do, nor is it desirable. This is especially true at

    a major port where shipping, trucking, and rail systems

    all intersectthereby creating a critical node. When a

    disruption first occurs at one node, one would think that

    rerouting the traffic is a viable option. However, there

    are a number of factors that make rerouting cargo on

    short notice difficult and something that most stake-

    holders try to avoid.

    iily iNg

    To begin with, the paperwork required to export and

    import goods is filled out and submitted days in advance

    of arrival. Since the September 11 terrorist attacks, a num-

    ber of countries have implemented security programs that

    require information to be transmitted to customs officials

    prior to the ship entering territorial waters. According

    to one industry leader, . . . loading and discharging a

    5,000 TEU ship involves close to 40,000 documentsand some 6,000 to 7,000 customs transactions.1

    Another more serious stumbling block to rerouting cargo

    is that many other facilities are typically operating near

    capacity. While the recent economic decline has reduced

    activity at many ports, it is expected that previous levels

    will be recoveredand that increased port capacity will

    be required in the years ahead. Without sufficient capacity,

    a disruption at one node will create further congestion at

    other ports that may not be able to take on additional work.

    If the cargo can be offloaded at another port, moving the

    cargo to its final destination may prove to be a significant

    challenge. Rail and truck capacity are arranged days, and

    sometimes weeks, ahead of arrival. Therefore, diverting

    1 Statement by C.C. Tung, Chairman and CEO, Orient Overseas Ltd. asquoted in Vickerman, Marine Terminal, slide 126.

    Securn goa Supp hans

    Many supply chains that end in North America begin at

    manufacturing facilities in foreign countries. With many

    stakeholders involved, and transactions made far beyond

    the continent of North America, it is an ongoing challenge

    to manage the man-made threats along the supply routes.

    Typically, goods are manufactured and then transferred

    via intermodal transport to consolidation or port facilities

    where concerns over corruption and the ability to secure

    cargo exist. Once a container is on a ship destined for North

    America, it is likely to reach North American shores without

    extraordinary intervention.

    After containers are off-loaded at a North American port,

    the intermodal transportation continues. In some cases,

    containers are not opened until they reach the inner

    continent via road and rail.

    This means that the security of supply chains to Canada and

    the United States are highly dependent on measures taken

    at foreign facilities. Foreign ports must provide manifests

    to Canadian and U.S. ports before containers are loaded

    onto ships. If containers are considered a high risk, they are

    screened before being loaded. Screening all containers will

    be a requirement of foreign ports for cargo destined to the

    United States, starting in 2012. Foreign countries are criticizing

    this rule, and hope that it will not proceed because it will

    involve considerable costs and cause significant delay. So

    far, it has been found that building relationships, ensuring

    transparency at steps along the way, and filtering potential

    high-risk shipments are proving successful.

    Source: The Conference Board of Canada.

    he Standardzaton of Shppn

    Since the 1950s, there has been an increased movement

    toward containerization (the use of standard-sized containers

    for the shipping of cargo by ship, rail, and truck). Containers

    are measured in twenty-foot equivalent units (TEUs), as somecontainers are approximately 20 feet in length (1 TEU) and

    others are 40 feet in length (2 TEUs).

    Most container ships transport 5,000 TEUs (or approximately

    3,000 containers), though it is not uncommon for larger

    ships to carry between 8,000 and 10,000 TEUs. Some

    newer ships in Europe carry 14,000 TEUs, and the next

    generation of ships will carry as many as 19,000 TEUs.

    Today, the greatest restrictions on capacity are the depth

    and width of harbours and canals such as the Panama

    Canalor major shipping lanes, such as the Straits of

    Malacca between the Indian and Pacific Oceans.

    Source: The Conference Board of Canada.

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    cargo means that trucks and railcars also need to be

    diverted and schedules altered. Additional labour is

    also required to offload containers from the ships to

    the trucks or trains. And not all ports have the ability

    to rapidly scale their labour force in response.

    Finally, diverting cargo is more expensive. In some cases,

    it may actually be cheaper to divert entire ships to distant

    ports. For example, if the point of origin is in Asia and

    the final destination is toward eastern North America, it

    may make more sense for the ship to pass through the

    Panama Canal and offload at an East Coast port, rather

    than to unload at a West Coast port and ship by truck or

    rail across the country. This takes more time, but would

    avoid congestion and the higher cost of rail or truck

    transportation. However, this is only feasible if all the

    goods have a similar destination and the vessel was notschedule to make multiple stops at West Coast ports.

    s our dependenc on oa supp chans has rown, t s

    essenta that we understand n deta what woud happen

    f those crtca sstes stopped worn

    Fundamentally, the ability of shippers to adjust to

    changing global conditionse.g., weather, congestion,

    labour disruptionsgives them the ability to make

    permanent changes to their trade routes if they do not

    perceive sufficient levels of predictability and reliability

    in portions of the system.

    NSNiNg iSkS

    As our dependency on global supply chains has grown, it

    is essential that we understand in detail what would hap-

    pen if those critical systems stopped working. Likewise,

    we must look at systematic solutions to ensure organiza-

    tions and jurisdictions can avoid these situations and

    respond effectively when found in the midst of one.

    In the spring of 2009, members of The Conference Board

    of Canadas Centre for National Security (CNS) engaged

    in a research mission to understand, specifically, how

    ports are preparing for the possible risk of major supply

    chain disruptions. CNS members travelled to the ports

    of Long Beach and Los Angeles in California, and Port

    Metro Vancouver in British Columbia to meet with the

    individuals who have prepared for, and responded, to

    major port disruptions in recent years. Over the courseof the three-day research mission, the CNS members

    met with representatives of the:

    Alameda Corridor Transportation Authority

    American President Lines

    Burlington Northern Santa Fe Railroad

    British Columbia Trucking Association

    California Office of Homeland Security

    International Longshoremen and Warehouse Union

    Los Angeles Port Police

    Port of Long Beach

    Port of Los Angeles Port Metro Vancouver

    hese studes effectve deonstrate the chaenes

    caused the supp chan dsrupton

    Furthermore, the Centre for National Security members

    engaged the New Brunswick Department of Public Safety

    to learn about the realities that the Maritime provinces

    face when supply chains are disrupted.

    PP

    To better understand the complexities and the challenges

    of supply chains, The Conference Board of Canadas

    research team used three case studies of varying size and

    scope that demonstrate the impact disruptions can have.

    While these case studies are not the typical incidents we

    have studied in the past, these three studies effectively

    demonstrate the challenges caused by the supply chain

    disruptionwhether the cause is man-made, accidental,

    or natural in origin. Specifically, we have examined the

    following incidents:

    he 1999 and 2005 rucers Stres at Port metro

    ancouverIn 1999, truck owners and operators

    who handled 40 per cent of container traffic at the

    port of Vancouver stopped working in protest of

    low pay and a number of other issues. After 30 days,

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    they resumed work with a new agreement. However,

    by 2005, rising fuel prices and the resurfacing of issues

    led to a wildcat strike of nearly 1,000 container

    truckers.2 After available rail capacity was used up,

    the backlog began to be felt in Toronto, Montral,

    and Halifax.3 he 2002 West oast Port locoutBecause of a pro-

    longed and escalating contract dispute, the shippers

    and terminal operators at U.S. West Coast ports

    at Long Beach and Los Angeles locked out the

    International Longshore and Warehouse Union

    employees on September 30, 2002. Despite the

    fact that the lockout lasted only 10 days, more than

    250 ships were lined up offshore, and the economic

    impact was estimated to be $2 billion per day.4

    he 2005 rucers bocade n New brunswcRising

    fuel costs in the summer of 2005 led to disruptionson the highways of New Brunswick. Truck drivers

    pulled over on the side of the Trans-Canada

    Highway and created a line of traffic that stretched

    over 15 kilometres in some areas.5 Food and goods

    required for the functioning of critical infrastructure

    were caught in the disruption. Shortages on store

    shelves occurred quickly as the transportation of

    consumer goods ground to a halt.

    The leaders who experienced these disruptions shared,

    with CNS participants, what is being done to boost

    securitynot only at these critical nodes, but also

    throughout the entire supply chain.

    2 CBC News, B.C. Port Strike.

    3 Flavelle, Port Logjam Takes Toll.

    4 Conan, Analysis: West Coast Port Lockout; Nyhan, RipplesFrom Port Lockout.

    5 CBC News Online, N.B. Truckers Protest Gas Hikes.

    he entre for Natona Securt

    To help improve the capacity of public and private sector leaders to address

    national security challenges and improve resiliency, The Conference Board

    established the Centre for National Security (CNS).

    The objective of the Centre is to build leadership capacity to identify, mitigate,and respond to national security and public safety threats. The Centre focuses

    on helping leaders develop a mutual understanding of these threats, and finding

    ways to improve our collective resiliency.

    In the most recent research mission, CNS members were able to see firsthand

    the barriers toand solutions forenhancing supply chain and port security.

    Travelling to the Californian ports of Los Angeles and Long Beach, and to the port

    of Vancouver, B.C., members heard the lessons learned from the disruptions at

    three of North Americas key ports.

    Source: The Conference Board of Canada.

    Ships stretch over the horizon during a typical day at the Port of Long Beach.Photo by Andrew Archibald

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    In a 2004 story reported by The Sunday Times, MI5

    (the United Kingdoms security agency) suggested

    that an interruption to the food supply system would

    lead quickly to large-scale disorder, looting, and rioting.

    The phrase M15 used was that Britain is four meals

    from anarchy.1

    The concept is useful for examining how a region or

    country would respond to a food shortage and the kinds

    of behaviours that the public would exhibit. These ideas

    are particularly valuable for developing tabletop scenarios

    1 Iredale and Grimston, Britain Four Meals Away.

    designed to reveal threats to, or vulnerabilities of, supply

    chains, and for understanding the nuanced consequencesof a sustained interruption to the food supply system.

    But, in 2005, this scenario moved from being a tabletop

    exercise to a reality in Eastern Canada when a truckers

    blockade of the Trans-Canada Highway brought traffic to

    a standstill and stopped the supply of goodsincluding

    foodto the region.

    her exstn contracts dd not accoodate the rapd

    and severe fue cost fuctuaton

    kS blk NW bNSWik

    With fuel costs rising throughout the summer of 2005,

    many independent truck drivers operating in Atlantic

    Canada (and elsewhere) were beginning to see their

    profits drop, or totally disappear, by September because

    their existing contracts did not accommodate the rapid

    and severe fuel cost fluctuation. In todays context, the

    $0.85 per litre price they were protesting seems very low.

    But at the time, it represented a significant increase. To

    draw attention to the issue, and to demand tax relief

    measures, truckers in the region began organizing

    protests to coincide with the Labour Day weekend.2

    2 Easton, Why the Elastic Broke.

    Four Meals From Anarchy

    P 2

    hapter Suar

    Chapter 2 examines, in detail, the 2005

    New Brunswick truckers blockade of the

    Trans-Canada Highway.

    The chapter also discusses the impact of

    the blockade, how it spread, how it affected

    the delivery of essential goodsincluding

    perishable foodsand how the problem

    was eventually resolved.

    A number of critical lessons can be learnedfrom the event, and are outlined in the chapter.

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    On Monday, September 5, 2005, local protests emerged

    around the community of Edmundston, near the Canada

    U.S. border. The protests were small and were considered

    a local concern for police in the area. 3 Non-commercial

    traffic on the Trans-Canada Highway was still able to

    pass without delay.4

    On Tuesday, more truckers joined the Edmundston

    protest; approximately 200 trucks had stopped along

    the major highways around the town. There were also

    reports of smaller protests developing elsewhere in the

    province.5 As the volume of trucks increased, the ability

    of traffic to continue to flow through the region was

    significantly reduced.

    3 Easton, Why the Elastic Broke.

    4 Transport Canada, Transportation in Canada, 2005.

    5 Easton, Why the Elastic Broke.

    As the number of protesters increased, authorities

    developed plans to manage the effects of blockades

    on the regions transportation corridors. Part of one

    enforcement option was to hire tow truck companies to

    remove the trucks and allow other traffic to pass freely.

    However, very few vehicles were capable of towingsuch large trucks, and some companies were hesitant

    to tow the trucks for fear of losing the future business

    of their core customers.6

    s the voue of trucs ncreased, the at of

    traffc to contnue to fow throuh the reon was

    snfcant reduced

    By Wednesday, September 7, media reported that morethan 300 trucks had stopped near Edmundston creating

    a line of traffic over 15 kilometres long.7 Drivers who

    were on the Trans-Canada Highway nearing the region

    were stopped and presented with a petition against the

    rising cost of fuel.8 Throughout the day, reports received

    by provincial authorities indicated that six other protests

    had developed within New Brunswick. By the end of

    the day, the blockade near Edmundston had grown to

    400 trucks.9

    With the protests spreading across the province and truck

    traffic stopped, communities in New Brunswick and

    Nova Scotia began to feel the impacts.10 The availability

    of many consumables including eggs, milk, liquor,

    and cigaretteswas noticeably reduced. As concerns of

    shortages grew, there were reports of people purchasing

    goods in larger amountsthus further reducing supplies.11

    6 Ibid.

    7 CBC News Online, N.B. Truckers Protest Gas Hikes.

    8 Ibid.

    9 Easton, Why the Elastic Broke.

    10 Ibid.

    11 Ibid.

    Road Map of New Brunswick

    Source: New Brunswick Department of Transportation.

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    PS Wi lS

    On September 8, media reports indicated that the Royal

    Canadian Mounted Police (RCMP) had stated that

    protests stretched across the province.12 Despite the

    coordinated appearance of the protests, no specific

    leaders were apparent for authorities to engage withand undertake negotiations. By this time, more than

    1,000 trucks had stopped on the sides of the highways,

    and the transportation of consumer products ground

    to a halt.13

    The protests had become more of a movement as an

    increasing number of trucks stopped on the edges of

    the highways. The largely spontaneous nature of the

    blockades, the expansion to 11 different locations, and

    the lack of clear leaders, created serious challenges to

    resolving the situation.

    more than 1,000 trucs had stopped on the sdes of the

    hhwas, and the transportaton of consuer products

    round to a hat

    In addition, political leaders and senior emergency

    services personnel in adjoining jurisdictions were

    concerned that the blockade would spill over. In fact,

    one protest did occur in Nova Scotia, near the New

    Brunswick border.

    igiNg kP SPPly iNS miNg

    With truck transportation impeded, and no end in sight

    to the blockade, concern was growing in the private

    sector. Food producers and distributorswho rely

    on just-in-time delivery to ensure their products reach

    consumerswere concerned about the spoilage of

    many goods, and began to raise their concerns.

    The Canadian Restaurant and Foodservices Association

    (CRFA) shared, in a letter to the Prime Minister of Canada

    and the premiers of the Atlantic Provinces, that its mem-

    bers object to having supplies, essential to the operation

    12 CBC News Online, N.B. Truckers Beef Up Protest.

    13 CBC News Online, Truckers Face Tickets.

    of restaurantsheld hostage. The letter continued to note

    that transport trucks carrying perishable products such as

    beef, chicken, fish, and fresh fruits and vegetables were

    caught in the blockade. This was creating shortages for

    CRFA members.14

    Likewise, the president of the Canadian Council of

    Grocery Distributors (CCGD) called for government

    and law enforcement agencies to act now to avoid

    further spoilage, lack of access to food and groceries,

    and lost business.15

    immi imPS

    The impact of the truckers blockades on Eastern Canada

    was immediate. Within a matter of hours, local effectswere being feltand those effects became regional in

    less than a day and a half.

    Soe crtca nfrastructure factes were wthn hours

    of shuttn down

    By the fourth day, there were food and medical supply

    shortages in the region, and contingency planning to

    manage goods and services shortages had commenced.16

    This led to government officials facing difficult decisions

    on whether rationing of food and other critical supplies

    would be needed.

    Not only were the food and medical sectors affected by

    the blockade, but also gasoline and diesel distribution had

    been affected, requiring ambulances and other government

    services to access government fuel depots. Also, some

    critical infrastructure facilitiesdependent on frequent

    truck shipments of products to meet environmental

    standardswere within hours of shutting down.

    14 Canadian Restaurant and Foodservices Association, CFRADemands End.

    15 Canadian Council of Grocery Distributors, Illegal Trucker Strike.

    16 Easton, Why the Elastic Broke.

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    N NW bNSWik

    Much of the trade to Atlantic Canada is by road. And

    while there are many route options available between

    Toronto and Qubec City, virtually all of Atlantic

    Canadas eastwest trade occurs on one highway

    the Trans-Canada Highway. With the truck blockadespreventing the transportation of goods by road, alternative

    methods were explored. But, there were few viable

    options, as shown below:

    While it may seem obvious that alternate roads could

    be used for the transportation of goods by truck, the

    situation was more complex than that. Not all roads

    are constructed to be able to support the traffic weight

    and frequency typically supported by major high-

    ways like the Trans-Canada. As a result, alternate

    routes would literally have collapsed in a matter of

    hours from the increased traffic. Sending trucksparticularly those carrying foodthrough the United

    States was not feasible because of the extensive series

    of pre-clearances required.

    Sending shipments by rail is an alternative. But, the

    schedule to ship by rail is set five to seven days in

    advance and the system typically runs at full capacity.

    Railhead logistics arrangements would have to be

    created to arrange local shipping. This meant that it

    would have been up to another week before goods

    were flowing again if trains were to be used

    assuming capacity was available.17

    Flying in products and goods would be a very

    expensive proposition and offer very limited capacity.

    For many critical goodssuch as chemicals, fuel,

    or foodthe volume required and the sheer weight

    would have made air transportation impractical

    except for specific goods of high value.

    On September 9, the RCMP were successful in

    clearing the most significant blockade of truckers

    on the Trans-Canada Highway, south of Edmundston.

    With this tactical action, the strategic goal of opening

    the roads and allowing the transportation of commercial

    goods was finally achieved and most other blockades

    ended shortly after.18

    17 Easton, Why the Elastic Broke.

    18 Ibid.

    i WNiNg

    Despite the rising fuel prices and the obvious impact that

    it would have on those in the transportation industry, the

    truckers blockade in New Brunswick caught many off-

    guard. But warning signs and parallel situations had pre-sented themselves in previous years in other jurisdictions.

    September 1998French truckers blocked ports

    and roads as part of a protest against long working

    hours. Vehicles were blocking border crossings into

    Belgium, Luxembourg, Germany, Italy, Spain, and

    the English Channel.19

    January 2000French truckers set up 50 blockades

    across the country to protest shorter work weeks.

    This was the second protest in a three-week period.20

    November 2003In Perth, Australia, 200 trucks

    blocked the port in protest against unloading delaysthat they claimed were putting them out of business.21

    December 2004Several thousand truck drivers in

    Cyprus blockaded the islands two main sea ports in

    protest of European Union harmonization laws.22

    nother chaene s the at to transate other crses

    to ones own oranzaton

    A challenge for most organizations is to maintain an

    environmental scan that would prepare them for the risks

    they face. With so many incidents occurring globally, it

    is difficult to be constantly assessing to identify where

    parallels may exist. However, doing so can help ensure

    the readiness of regions to confront threats, understand

    vulnerabilities, and manage consequences.

    Another challenge is the ability to translate other crises

    to ones own organization. Sometimes, the parallels are

    not immediately obvious. Therefore, it is necessary to

    look beyond the specific conditions or facts and discern

    where indirect lessons can be identified and internalized.

    19 BBC News, French Truckers Blockade Ferry Ports.

    20 The Independent, French Truckers Blockade Roads.

    21 AAP General News, WA: Truckers Blockade.

    22 EUbusiness, Cyprus Truckers Blockade Ports.

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    iil lSSNS

    A number of critical lessons can be learned from

    the experience of the 2005 truckers blockade in

    New Brunswick:

    Supp chan dsruptonswhatever the causecanhave edate oca pacts on ctes and reons

    The dependency of most communities on a steady

    supply of goodsfood, fuels, chemicals, and medical

    suppliesreinforce the importance of ensuring

    transportation routes remain unobstructed. Identifying

    critical dependencies, and the most vulnerable routes

    or nodes in supply chains, is essential to developing

    the appropriate contingency plans. Taking a pro-active

    approachwhich includes both the public and private

    sectors to prevent, mitigate, and manage disruptions

    for continuity of operationsis a necessity. rses n other countres provde an on-on source of

    nforaton aout parae or sar rss to our own

    stuatons Learning from others experiences, rather

    than learning first-hand, is a far better way to prepare

    our organizations and our communities for what may

    be inevitable emergencies. While blood lessons

    are often learned more quickly, organizations can

    benefit from learning from disruptions experienced

    by other jurisdictions, making industries and regionsmore prepared. Participating in dialogue with industry

    partners and international organizations can aid in

    sharing the experiences of others.

    nderstandn the te to faure of crtca nfrastruc-

    ture s as portant as understandn nterdependencesWhen assessing how to avoid the cascading effects

    of critical infrastructure failure (e.g., the number of

    organizations that rely on the products and services

    of another organization), knowing the length of time

    between one failure and the next provides emergency

    managers and responders with a more sophisticatedunderstanding of the crisis they may be facing.

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    Whereas the truckers blockade in New

    Brunswick demonstrated the immediate

    local and regional impacts of a supply

    chain disruption, the 2002 lockout of the International

    Longshore and Warehouse Union at the ports of Long

    Beach and Los Angeles shows us the global implications,

    as well as the complexities, of reconstituting a supply

    chain once it has been stopped.

    The five largest port complexes in the United States handle

    85 per cent of all U.S. commercean increasing portion

    of which is transported in containers. Together, the Port

    of Long Beach and the Port of Los Angeles account for

    44 per cent of all containers that enter or exit the

    United States. As will become evident, haltingoperations at these ports had major repercussions.

    SiNg WN S

    Over the summer of 2002, the International Longshore

    and Warehouse Union (ILWU) and the Pacific Maritime

    Association (PMA), which represents shipping com-

    panies and terminal operators, attempted to negotiate

    a new contract for the 10,500 unionized employees at

    U.S. West Coast ports. After more than eight months

    of negotiations, tension was growing between the two

    sides and no deal had been reached.1

    he fve arest port copexes n the nted States hande

    85 per cent of a S coerce

    The sticking point was PMAs desire to implement new

    technology that would improve productivity, security,

    and communication between stakeholders, and to auto-

    mate key aspects of the shipping process. From the

    unions perspective, this would mean a loss of jobs.2

    1 CNN Money, Bite of Port Lockout.

    2 Farris, Are You Prepared?

    The Complexityof Global Networks

    P 3

    hapter Suar

    Chapter 3 examines the 2002 lockout of the

    International Longshore and Warehouse Union

    at the ports of Long Beach and Los Angeles.

    The chapter explains the far-reaching impact

    of the lockoutit even affected international

    markets.

    Although work eventually resumed, the

    disruption continued to cause problems

    for months, such as a backlog of cargo.

    A number of critical lessons can be learned

    from the event, and are outlined in the chapter.

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    As the negotiations faltered, the ILWU members slowed

    work across the West Coast ports. The union argued that it

    was simply refusing overtime and following its contracts

    to the letter. However, the companies represented by PMA

    saw the slowdown as strike with pay.3 As a result, PMA

    locked out the workers on September 30. Because roughlyone-third of all U.S. trade (valued at $300 billion in

    2002) goes through the West Coast ports, the impact

    of the labour dispute would be felt across the globe. 4

    iPPl

    Ports are a nexus of supply chains, modes of transporta-

    tion, and other critical infrastructures. Therefore, a local

    disruption in Long Beach and Los Angeles had impli-

    cations that reached far beyond the United States. The

    10-day lockout led to a number of layoffs and the closing

    of manufacturing facilities in some parts of Asia.5

    man copanes that were dependent on the effcent

    functonn of the ports were ae to tae actons to

    tate the pact of the ocout

    With an estimated 60 per cent of ships at sea at any given

    time, and taking approximately 11 to 13 days to cross the

    Pacific Ocean,6 the impending arrival of container ships

    created serious cause for concern. After only two days,

    more than 100 ships were waiting off the West Coast

    to be unloaded.7 By October 4, 162 ships were sitting

    idle at the ports, or anchored just offshore, and another

    13 were arriving that day.8 As each day passed, the num-

    ber of ships continued to grow and pressures mounted

    to end the lockout quickly. Local residents began raising

    their concerns about the environmental impact of the

    ships idling in the port area, the risks of fuel leakages

    from the ships, and apprehensions about the foreign

    crews coming ashore.

    3 Wolk, Behind the West Coast.

    4 Ramstack, Shipping Dispute Sends, p. A01.

    5 Kok, Presentation and Remarks.

    6 Flynn, PrivatePublic Partnerships.

    7 Day, Businesses Drawing.

    8 Nyhan, Ripples From Port Lockout.

    Some companies were able to prepare themselves in

    advance for the lockout. Because the negotiation pro-

    cess had gone on for months, many companies that were

    dependent on the efficient functioning of the ports were

    able to take actions to mitigate the impact of the lockout.

    For example, some retailers had imported extra productbefore the lockout in preparation for the upcoming holiday

    season and some were looking at alternative ways to move

    product. Because clothing companies have only a six-week

    window to sell their product before it is marked down,

    air shipment was a viable, albeit expensive, option.9

    urn the ocout, soe traffc dd contnue to fow

    throuh the ports

    But many organizations were not in a position to stock

    up in advance. Manufacturerswho operate on a just-

    in-time schedulefaced significant challenges. Lacking

    warehouses to stockpile additional parts, many facilities

    could not maintain operations for more than a few days.

    For example, the joint General Motors and Toyota facil-

    ity known as NUMMI could only stockpile enough parts

    for five to seven days. The engines and transmissions for

    many of the cars built at the Fremont, California facility

    came from Japan. On Wednesday, October 2, a NUMMI

    spokesperson said they had not received a shipment for

    four days and would likely have to stop the assembly

    line by the next dayThursday, October 3.10

    It is worth noting that during the lockout, some traffic

    did continue to flow through the ports. Members of

    the Centre for National Security were advised that

    four categories of activity were maintained at the ports:

    1. The unloading of perishable goods.

    2. The flow of military-related ships or goods for

    the military.

    3. Cruise ships.

    4. Goods going to or from Hawaii, as these products

    are a lifeline for the state.

    9 CNN Money, Bite of Port Lockout.

    10 Day, Businesses Drawing.

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    It was put forth that these operations continued, in part,

    because of political concern. The stakeholders knew there

    would be significant backlash and loss of support if these

    activities ceased.

    Like manufacturers, agricultural importers and exporters

    also are dependent on efficient delivery. The size and

    perishable nature of agricultural products mean that

    any delays in the import and export of goods are

    costly, and there are few alternative options.11 When

    the lockout occurred, Chiquita Brands International had

    18,000 boxes of bananas in a Port of Long Beach ware-

    house and another 180,000 boxes en route.12 Apple

    producers in Washington State had part of their autumn

    harvest awaiting export. One commentator remarked that

    it was likely to be our [the U.S.s] first great export of

    applesauce, after the fruit had spoiled.13

    11 CNN Money, Bite Of Port Lockout.

    12 Day, Businesses Drawing.

    13 Conan, Analysis: West Coast Port.

    SimiNg imP

    With the cessation of the loading and unloading of

    most goods at all U.S. West Coast ports, many analysts

    began estimating the effect it would have. Early estimates

    claimed it would cost the U.S. economy $1 billion per

    day while the Federal Reserve Bank in San Franciscoestimated that the economic impact would snowball and

    could be costing the U.S. economy $2 billion per day.14

    Stephen Cohen, a professor from the University of

    California at Berkeley who specializes in regional

    economics, elaborated on how the lockout could have

    such a large impact. He estimated that the jobs of up

    to 70,000 people were directly affected by the lockout.

    These included the dock workers, truck drivers, and

    employees of the shipping companies. Indirectly, Cohen

    stated that theres probably another 25,000 people whoprovide services to the import and export companies

    and dock workers who also would be affected.15

    iNiNg NW S mk

    Manufacturers, agriculture producers, and retailers alike

    began diverting their vessels to other ports in Canada,

    Mexico, and even the U.S. East Coast. However, this

    was not always a solution or a feasible option.

    ar estates caed t woud cost the S econo

    $1 on per da

    It was quickly found that the ports in Mexico did not

    have the infrastructure to handle a large amount of

    the back-logged cargo. The port of Ensenada on the

    Baja Peninsula was able to handle nearly 30,000 of the

    diverted containers but, with 50 million containers han-

    dled annually by the U.S. West Coast ports, there were

    many more.16 Moreover, once the cargo was offloaded

    south of the U.S. border, there were concerns over the

    capacity of rail and trucking companies to move it back

    into the United States and on to the final destinations.

    14 Nyhan, Ripples From Port.

    15 Cohen, Panel interview.

    16 Ibid.

    he nvronenta ipact of idn

    When hundreds of ocean-going vessels are held up because

    of disruptions, the subsequent delays and congestion can

    have an environmental impact. When handling time is delayed

    dockside, the idling of trucks and trains can cause equal con-

    cern. In studying the effect that supply chain disruptions can

    have, it is important to look beyond the economic impact and

    include all three tenets of modern marine policymaritime

    security, marine safety, and environmental protectionto

    identify the far-reaching effects.

    In many cases, much of the information required to study

    the potential environmental degradation is already available.For example, the Port of Long Beach collects the emissions

    data for many modes of transportation, such as vessels,

    trucks, harbour craft, locomotives, and yard equipment. This

    information is then compared with the number of twenty-

    foot equivalent units (TEUs) handled at the ports facilities.1

    The ability to quantify the effects of a supply chain disrup-

    tion is critical to understanding the true costs, and the

    potential environmental toll is no different.

    1 Port of Long Beach, 2009 Air Emissions.

    Source: The Conference Board of Canada.

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    The situation at the northern ports near Vancouver,

    British Columbia was similarthey were operating at

    near full capacity and did not have the additional space

    needed.17 Furthermore, the longshore workers at British

    Columbias ports are affiliated with the International

    Longshore and Warehouse Union in the United States,and many people doubted the workers would be willing

    to increase productivity and undermine the position of

    their southern colleagues.18

    Wth the West oast ports shut down and oa supp

    chans dsrupted, Presdent bush ased a federa court

    to nvoe the Taft-Hartley Acton ctoer 8

    With few viable options on the West Coast, other optionswere considered. Since many of todays container vessels

    are too large for the Panama Canal, ships began sailing

    around Cape Horn at the tip of South America to reach

    the eastern ports of the United States. Because of this,

    transportation companies based near the Gulf and the

    Eastern coast experienced an increase in business.19

    In many cases, the shipments were destined for the

    Western states, which meant increased costs for some

    and increased business for others.20 Typically, it is most

    cost-effective to keep cargo on water routes because the

    costs are dramatically lower than for any other mode

    of transportation. (See Chart 1.) Shippers must weigh

    the lower costs against the urgency to deliver the goods

    when making their final transportation decisions.

    With the West Coast ports shut down and global supply

    chains disrupted, President Bush asked a federal court

    to invoke the Taft-Hartley Acton October 8. The seldom-

    used Taft-Hartley Actof 1947 orders the stakeholders of

    a labour dispute back to work for an 80-day cooling off

    17 Day, Businesses Drawing.

    18 Conan, Analysis: West Coast Port.

    19 Ramstack, Shipping Dispute.

    20 Ibid.

    period.21 With a temporary injunction granted, long-

    shore workers resumed operations at U.S. West Coast

    ports on the evening of October 9, 2002.22

    N N lk, b N PblmS

    The fact that the ports were up and running did not mean

    an end to the disruption. Analysts estimated that by

    October 9, there were more than 250 ships off the coast

    waiting to be unloaded.23 In order for the containers to

    be offloaded, space was needed at the ports. Clearing the

    backlog required additional truck and rail capacity.24

    At the end of October, large retailers such as Walmart

    had their delivery trucks working overtime to handle

    in two weeks what would normally be shipped in a

    month and a half.25

    Despite the injunction and the resumption of trade, the

    dispute continued. The Pacific Maritime Association

    accused longshore workers of slowing operations while

    21 Wolk, Behind the West Coast.22 Conan, Analysis: West Coast.

    23 Ibid.

    24 Ibid.

    25 Desjardin, Effects of West Coast.

    hart 1Distance That One Tonne of Cargo Can Be CarriedWith Five Litres of Fuel(kms)

    Source: Huygens, International Perspectives on Shallow DraftShipping, p. 8.

    Plane

    Truck

    Train

    Ship

    0 100 200 300 400 500 600

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    the union said not enough workers were hired to deal

    with the backlog. A PMA spokesman shared with media

    that We arent making significant progress in unclogging

    the cargo pipeline.26

    The delay clearing the cargo may have also beenexacerbated by the methods used to resume operations.

    For example, ocean carriers and terminal operators

    made a string of individual economic decisions in the

    absence of any coordinated approach that made the

    congestion worse.27

    This was seen when carriers, wanting to return to normal

    schedules, had their ships loaded with full cargo contain-

    ers as quickly as possible. Typically, ships arrive at the

    U.S. West Coast ports with full containers, but only 10 per

    cent of the returning containers carry goods. This situationresulted in empty containers staying at U.S. West Coast

    ports creating further congestion by taking up space and

    lowering the number of containers available overseas.28

    Without containers making their way back, there were

    fewer containers to fill with additional goods destined

    for North America.

    This experience draws attention to the need forand

    value ofa coordinated maritime commerce resumption

    policy. By developing agreed-upon standards and pro-

    cesses prior to disruptions, organizations can work col-

    laboratively to avoid making decisions with unintended

    negative consequences.

    NSiiNg P

    Stopping a port from operating is much easier than

    reconstituting operations. A port can be stopped almost

    immediately by everything from a major accident to a

    labour dispute to a terrorist attack. In fact, the same is

    true about many critical infrastructures.

    26 Desjardin, Effects of West Coast.

    27 Mongelluzzo, Lingering Mayhem, p. 15.

    28 Ibid.

    For example, during hurricane season in the Southern

    United States, it is not uncommon to shut down oil

    refineries to protect the workers and the operations.

    This can be done quite quickly. But restarting these

    complex processes can take as long as two weeks and

    must follow a specific sequence.

    When operations stop at a port, there is a cascading

    effect as a series of complex systems must either find

    alternative routes (which is sometimes possible) or cease

    their operations (which can be financially devastating).

    bk-P Wi bklg

    Since ships, trains, and trucks are constantly under way,

    the limited storage at port facilities is often quickly

    filled when smooth shipping ceases. Before the recent

    global economic slowdown, many ports were operating

    he esupton of marte oerce

    With the recognition that a large disruption to global

    maritime trade would quickly have a global impact, many

    countries and international organizations are working

    toward strategies for maritime commerce resumption.Working collaboratively with partners, Transport Canada is

    developing a strategy to ensure the maritime industry is

    resilient and can resume operations as soon as possible

    and to align the existing plans and boost preparedness of

    public and private stakeholders.1

    At the international level, 10 economies from the Asia-Pacific

    Economic Cooperation studied the trade resumption after

    a major disruption to supply chains. Their proposed Trade

    Recovery Programme (TRP) advocates a risk-based, total

    supply chain security approach, which emphasizes the need

    to share the responsibility of ensuring the security of trade

    across all nodes of the supply chain.2 Concentrating onpost-incident action to return to normal trade, the TRP

    sequences the required steps for economies to make after

    a terrorist attack that disrupts trade.

    1 Bartley, Canadas Maritime.

    2 Asia-Pacific Economic Cooperation, APEC TradeRecovery, p. 1.

    Source: The Conference Board of Canada.

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    at near capacity. Infrastructure has yet to catch up to

    the quantity of shipped goods.29 This tempo means that

    there is little additional space to accommodate a build-up

    of cargo. In fact, the 10-day lockout of port workers in

    September 2002 created a backlog in containers that

    lasted well into December.30

    SiNg iNmiN

    A key element to reconstituting a port is the collection

    and sharing of information. Transparency within a supply

    chain and between stakeholders is critical to knowing

    where exactly certain products and assets are when a

    disruption occurs. One lesson learned by the Port of

    Long Beach leadership is that information needs to be

    provided to the stakeholders in real time.31 Doing so

    ensures that organizations can make decisions based

    on their own priorities, or allows the markets to dictatehow product is sorted, thereby resulting in less gridlock

    at port facilities.

    When a dsrupton occurs, t s a atter of hours efore

    are copanes en can for updates and nforaton

    aout the status of ther caro

    When information is shared among stakeholders, the

    right allocation of assets can be determined. Everything

    from ships, trucks, and rail cars to crane operators and

    longshore workers all have to be organized ahead of

    time to move the cargo efficiently through the port.

    PiiiiN

    With the inevitable gridlock that forms after a disruption

    at a port, and the finite means of moving containers, cargo

    must be prioritized. Representatives from Port Metro

    Vancouver shared that when a disruption occurs, it is a

    matter of hours before large companies begin calling for

    updates and information about the status of their cargo.32

    29 Perrone, Remarks Before the Centre for National Security;Benavente, Port Operations.

    30 Benavente, Port Operations.

    31 Barratta, Business Continuity Model.

    32 Kee, Remarks Before the Centre for National Security.

    In the case of the 2002 lockout, there was very little

    prioritization. The sheer number of containers stacked

    five-high in what one expert aptly dubbed colourful

    glaciers made it virtually impossible to pick and choose

    which cargo would move first. In reality, it was a last

    in, first out policy. In other words, the last containers

    to arrive were the first to leave because they were at

    the top of the stack and were most accessible.33

    However, it is important to recognize that, in some cases,

    the prioritization of goods is necessary. There are certain

    products that are critical to the functioning of commun-

    ities. If a shortage occurs, essential services may be

    compromised, compounding the challenges created by

    the disruption. In these cases, it is essential for the public

    and private sectors to cooperate to identify which ship-

    ments need to reach their destination faster than others.

    A number of initiatives are under way that can help

    with the prioritization of goods. Initiatives such as the

    Advance Commercial Information and the Automated

    Commercial Environment programs from the Canada

    Border Services Agency and U.S. Customs and Border

    Protection, respectively, are helping to identify cargo

    ahead of time. When a disruption occurs, the advance

    sharing of information can help move products through

    gridlocked facilities.

    33 Benavente, Port Operations.

    A ship waits to be serviced at the Port of Long Beach. Photo by Andrew Archibald.

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    With or without prioritization, it was still necessary to

    direct resources in the supply chain for weeks to address

    the backlog of cargo. For example, prior to the lockout,

    BNSF Railways facility at the Port of Oakland was hand-

    ling between 600 and 800 twenty-foot equivalent units

    (TEUs) each month. As ships were diverted to the Portof Oakland at the end of the lockout, the rail company

    increased the number of TEUs it was handling 10-fold

    over a period of just a few days. As a result, additional

    rail capacity needed to be diverted from other operations

    to handle the increase, and shippers needed to prioritize

    what went first.34

    Wth or wthout prortzaton, t was st necessar to

    drect resources n the supp chan for wees to address

    the aco of caro

    Ultimately, letting the companieswhich know the

    supply chain and their cargo intimately manage the

    prioritization process is the most efficient and effective

    way to reconstitute the supply chain. These players

    already have the required relationships with other

    operational-level individuals to identify how best to

    get cargo flowing again. They know what is most

    important to their clients, how to route goods most

    quickly, where bottlenecks will occur, and how best to

    navigate a global intermodal supply chain. Additionally,

    these companies know how to make decisions about

    which ships and containers need to be moved first, and

    how to address ships and containers that carry mixed

    goods. Added to this is the fact that they are also the

    most motivated to rapidly reconstitute operations

    because if they are unable to do so, customers will

    shift to other service providers.

    34 Johanson, Santa Fe Railroad Partnership.

    iil lSSNS

    The 2002 lockout provides many important lessons

    about the implications of major port disruptions.

    Three key takeaways are perhaps most important:

    he end of a supp chan dsrupton s not the end ofthe proe Once conditions have evolved to a

    point where operations can resume, the serious con-

    sequences of the disruption must still be addressed.

    The many organizations that comprise a supply chain

    will seek information about the current status of

    operations and will need to coordinate their activities

    before the system can resume operations. Planning

    how services will resume and be prioritized requires

    as much attention as how to avoid having them

    stopped in the first place.

    econsttuton of supp chan operatons shoud eed prvate sector oranzatons worn wth puc

    authortes While no-one fully understands all aspects

    of a global supply chain, stakeholders need to recog-

    nize that no-one knows them better than the private

    sector organizations that run key elements of these

    systems. Resuming economic activities is one of the

    best ways to bring normalcy to the companies and

    regions that have been disrupted. Private sector oper-

    ators understand what major clients need first, where

    specific containers are in the system, and how best to

    move them quickly. That said, there is a need to be

    aware of which critical products need to reach their

    final destination in a timely manner. Working with

    public authorities can aid in this identification.

    Port operators are requred to e predctae Supply

    chains face minor disruptions on an on-going basis

    weather, earthquakes, disease outbreaks, labour dis-

    ruptions, etc. Many companies are adept at finding

    alternate routes for their products to reach their final

    destinations in the most cost-effective ways. Despite

    their flexibility, when companies have to reroute from

    a port or destination too many times, ports risk losing

    their business for good, as organizations seek greater

    predictability. It is in the interest of port facilities to

    work with stakeholders to ensure that the risks and

    impacts of a shutdown are effectively mitigated.

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    The sheer scale of operations, the global distribu-

    tion of the systems, and the complexity of oper-

    ations make it impossible for a single individual

    or organization to entirely see a supply chain. Taking

    a systems approachunderstanding how organizations

    connect to one another, how goods flow, and where

    dependencies and interdependencies existis essential

    to managing global supply chains. More importantly, a

    systems approach is fundamental to successfully restarting

    such complicated systems once they have been stopped.

    The experiences of Port Metro Vancouver (PMV), and

    the actions it has taken over the last several years, pro-

    vide a particularly valuable example of how to make

    supply chains more visible so they can be more effectively

    operated, and how to improve the resiliency of thosesystems in times of crisis.

    The ports of Long Beach and Los Angeles have invested

    heavily in the protection of their facilitieswith side-

    scanning sonar, state-of-the-art camera systems, and a

    host of other initiativesbut Port Metro Vancouver has

    taken a very different approach to ensuring the continuity

    of operations. The port operators have actively engaged

    the entire port community, are working closely with sup-

    ply chain partners to improve information sharing, and

    have established a level of transparency in the system

    that optimizes the performance of key stakeholders.

    sstes approach s fundaenta to successfu

    restartn such copcated sstes

    Their approach reflects the multi-use and geographically

    distributed nature of the Vancouver port. Unlike many

    other ports, which are used almost exclusively by the

    shipping community, the Vancouver port waterfront

    is a mixed community of residential real estate, retail

    and hotel facilities, pleasure craft, yacht clubs, ferries,

    and water taxis. Added to this are aircraft that make

    approximately 63,000 landings and take-offs at the

    Inner Harbour Airport each year.

    Making Systems Visible

    P 4

    hapter Suar

    Chapter 3 studies two labour disruptions (truck-

    ers strikes) that had serious consequences for

    the operations at Port Metro Vancouver.

    The chapter examines how the port used

    these events as a catalyst to develop simple,

    yet sophisticated, approaches to supply chain

    management and port security.

    Lessons learned have enabled Port Metro

    Vancouver to create better supply chaintransparency than most other ports have.

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    The approach taken at PMV is also shaped by the dis-

    ruptions to its operations that the port has experienced

    in recent years. In this chapter, we examine two labour

    disruptions that had serious consequences on the oper-

    ations at Port Metro Vancouver, and how the port has

    used these events as a catalyst to develop simple, yetsophisticated, approaches to supply chain management

    and port security.

    W SikS iN N

    As do many other ports, Port Metro Vancouver has had to

    navigate its own share of labour disruptions. Due to the

    complexity of ports, it is not surprising that they experi-

    ence these situationsin fact, it is surprising that ports

    do not experience them more often. The operation of aport requires a wide range of organizations, each fulfilling

    critical roles that are often entirely dependent on the suc-

    cessful performance of a number of other organizations.

    For example, organizations involved in a ports operation

    typically include the following:

    shipping agents

    carriers

    stevedores and terminal operators

    railroads

    truck owners and operators

    customs agents

    warehousing operators

    pilotage and tug boat operators

    longshore labour

    shippers

    freight forwarders and brokers

    Like all ports, Port Metro Vancouver manages relation-

    ships with a long list of companies that have linkages

    around the globe. With so many interests at play in such

    a competitive industry, it is not surprising that operations

    have periodically been disrupted by labour disputes.

    1999kS PS N lb lk

    Between July 22 and August 23, 1999, approximately

    450 independent truck owners and operators stopped

    work at the port to protest low rates and a container

    transportation system that limited the productivity

    of the drivers.1 The disruption ended after 30 days

    when a memorandum of agreement was established that

    included increased trip rates and a shift to hourly wages.2

    However, the move toward a standard hourly rate didnot occur for many, and rate cutting began to erode the

    compensation outlined in the memorandum of agree-

    ment. In November 1999, another dispute began as

    about 2,000 longshore workers were locked out of

    port facilities after months of negotiations that resulted

    in a stalemate. The two sides were at odds over the

    potential use of a greater number of non-unionized

    contract workers.3

    Wth so an nterests at pa n such a copettvendustr, t s not surprsn that operatons have

    perodca een dsrupted aour dsputes

    As the lockout continued, the effects were felt across the

    country and organizations looked for alternative methods

    to export and import goods. One manufacturing company

    in Manitoba resorted to shipping product to Seattle.

    However, this was less than optimal due to a one-third

    reduction in product weight being shipped because of

    differing weight restrictionsVancouvers port facilities

    permitted 65,000 pounds to be shipped, whereas Seattle

    limited the company to 45,000 pounds.4

    At the time, the lockout was estimated to create losses

    as high as $100 million a day.5 Despite the costs,

    both the Government of Canada and the Government

    of British Columbia declined to become involved.

    1 Government of Canada, Final Report, p. 6.

    2 Ibid.

    3 Zalm, Canada Notes.

    4 CBC News, B.C. Port Strike Hits Home.

    5 Zalm, Canada Notes, p. 49.

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    After eight days, a mediators proposed settlement was

    accepted by both sides and port operations resumed on

    November 15, 1999.6

    2005kS SP WkiNg

    The next major dispute to hamper supply chains and portoperations came in 2005. Truck owners and operators

    argued that they were being paid between $300 and

    $400 per day, while operating a truck was costing them

    $350 per day.7 Similar to the 1999 truck dispute, rising

    fuel costs and dwindling profits led approximately

    1,000 truckers, who served the port terminals, to

    undertake a wildcat strike on June 25.8

    s each wee passed, $32 on worth of oods sat

    near the docs, quc resutn n heav coneston

    But the term strike is used loosely in this case. The

    reality was that there was no single organization behind

    the strike. Instead, 90 to 95 per cent of the truckers were

    independent owners and operators. While non-unionized,

    they shared strong cultural ties as many of the truckers

    in the region are from the Punjabi community. Out of

    frustration, the truckers simply decided to stop working.

    They could not be fired, they could not be legislated back

    to work, andsimilar to the truckers blockade in New

    Brunswickthere was no-one to negotiate with.

    The truckers, specialized in moving shipping containers,

    were responsible for transporting 40 per cent of the goods

    imported and exported through Vancouvers port. As each

    week passed, $32 million worth of goodsincluding

    food, furniture, and electronicssat near the docks,

    quickly resulting in heavy congestion.

    With containers piling up, businesses began looking for

    alternatives. At first, for many who were importing, the

    solution was as simple as placing an arriving container

    6 Eight-Day Lockout Lifted at Some Canadian Ports.

    7 CBC News, Vancouver Port Strike Drags On.

    8 Ibid.

    immediately on a rail car. However, as railroad capacity

    was used up, the effects were felt as far away as Toronto,

    and other options were needed.9

    As the strike continued, carriers began redirecting ships

    to other portsin places such as SeattleTacoma, LosAngeles, and Long Beachand offloading Canadian-

    bound cargo to avoid the growing delays around

    Vancouver. Canadian rail companies also stopped

    accepting shipping containers for delivery to the

    port of Vancouver. The ports of Montral and

    Halifax began to feel the backlog.10

    Some organizations were unable to find alternative trans-

    portation solutions and had to pay storage fees for the

    product that was sitting near the docks.11 In one case,

    a company was paying $1,000 per day to store sevencontainers during the strike.12

    urn the fna wee of Ju, ntensve dscussons

    resuted n a deadoc and the dspute seeed to

    have no end

    With their hands tied, many businesses could only ride

    out the strike and hope that their warehouses had enough

    stock. One company observed that because of the strike,

    for the first time in 28 years of operations, the firm

    almost reached the point where it had no supply. 13

    A facilitator between the two sides, appointed by both

    the federal and provincial governments, worked through

    the month of July to reach an agreement. During the final

    week of July, intensive discussions resulted in a deadlock

    and the dispute seemed to have no end. 14

    9 Flavelle, Port Logjam Takes Toll, p. D02

    10 Ibid.

    11 Traffic World, Vancouvers Strike Waves, p. 6.

    12 Stewart, Small Firms Left to Mop Up.

    13 Ibid.

    14 Government of Canada, Final Report, p. 9.

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    However, on July 29, the facilitation team outlined a

    potential solution that required the federal government

    to issue an order-in-council, exempting the stakeholders

    from compliance with the Competition Act. This cleared

    the way for a resolution and on August 4, 2005, the trucks

    were once again moving a backlog of six weeks worthof containers.15

    At the end of the 2005 truckers striketo break the

    gridlock at PMV and to start containers moving again

    stakeholders came together and offered a $50 bonus to

    drivers for each containe