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Averted U.S. Railroad Strike Is Wake-Up Call For Company Executives
From:
Edward Segal, Crisis Management Expert Edward Segal, Crisis Management Expert
Washington, DC
Monday, September 26, 2022

 

Commentary From Crisis Management Expert Edward Segal, Bestselling Author of the Award-Winning Book "Crisis Ahead: 101 Ways to Prepare for and Bounce Back from Disasters, Scandals, and Other Emergencies" (Nicholas Brealey)

The deal to avert a national railroad strike that President Joe Biden announced last week does not mean business leaders should assume that the chances of a service stoppage have completely passed. Indeed, the possible strike is a wake-up call for companies and organizations about the need to prepare for such a situation.

''The agreement does not mean the threat of a strike has gone away entirely,'' according to CNN. ''The deal needs to be ratified by union members. But it's good news for a wide range of businesses that depend upon the freight railroads to continue to operate and for the wider U.S economy. About 30% of the nation's freight moves by rail,'' the news organization reported.

"If they accept the deal that was announced at about 5 a.m. (0900 GMT), workers whose pay had been frozen will win double-digit increases and will be allowed to seek certain types of medical care without fear of being punished, union leaders said. The agreement includes an immediate 14.1% wage rise, the railroads said," according to Reuters.

Had the national railroad strike become a reality, the labor stoppage would have created another crisis for thousands of companies and organizations. The impact on companies, organizations, and fragile supply chains would have depended, of course, on the duration of the strike.

But like any potential crisis, there are steps business executives can take now to help guard their companies against the fallout of a rail strike—no matter when one starts or how long it lasts.

Reality Check

"The amount of trucking capacity needed to offset the effects of a possible rail strike simply does not exist, so companies will be forced to search for raw material substitutes and be prepared to draw down inventories on the supply side," Jenny Dobmeier, teaching assistant professor of the supply chain at the University of Denver, said via email.

"On the demand side, companies should immediately analyze orders and carefully define priorities, serving their most important customers first and delaying production and shipments on lower priority or non-contractually obligated orders," she counseled.

"These risk mitigation plans during a supply chain disruption are best handled by mobilizing cross-functional teams to coordinate interventions and responses quickly and effectively," Dobmeier noted.

First Things First

"The first thing companies need to do is understand how many shipments are currently either on freight trains, in rail yards, or supposed to be shipped via rail from the ports of entry," Mirko Woitzik, global director of intelligence solutions at Everstream Analytics, said via email.

 "Where it's still possible, get critical shipments off freight trains or change the onward mode of transportation at the ports of entry and arrange alternative transportation via truck or air freight to final destinations. This will help companies keep their own operations running and avoid penalties from customer contracts.

"For shipments from Asia into the Midwest, companies should change the port of destination for critical shipments to Canadian ports like Vancouver or Prince Rupert. Then arrange onward transportation to Montreal or Toronto—where they can then be trucked to Midwest destinations."

'The Most Concerning Aspect'

"The most concerning aspect of the [averted] railroad strike is that most companies don't receive freight from rail directly, so they don't always know what materials are transported via rail," Ryan Burns, a supply chain expert and owner/principal of RBB Management Consulting, said via email.

"First, each business should look at its critical material needs for the next 1- 2 weeks. Use that full information to call your freight providers and talk to them about how rail could impact your deliveries. Then share your priorities with them so that they understand what you want moved by a truck first if the strike will delay your goods," he advised.

"At the end of the day, communication of your needs and communicating the supplier's ability to meet your needs back to your operations team and other leadership is key. Outside of logistics alone, think about local secondary sources where you may get materials quicker, even if at a higher cost, to bridge any gaps," Burns said.

Focus On Contingency Planning

"Organizations should focus on contingency planning and clearly articulating those plans to their stakeholders—in particular their customers/consumers and employees," Andrew Moyer, executive vice president and general manager at crisis management agency Reputation Partners, said via email.

He added that,''…organizations should be considering what alternative arrangements they can make to support employees who depend on rail for their commutes. This could involve more flexibility to work from home or, where other work locations exist in close proximity, seeking a location that is accessible via non-rail travel."

Explain And Assess

"When communicating with customers and consumers, organizations should seek to explain the actions they are taking and what that means for their ability to meet current orders and expectations. Have they built up excess inventory, and how long are they prepared to weather potential disruptions? Are they shifting their shipments to other modes of delivery, and what does this mean for availability and costs?" Moyer asked.

"Organizations that are investing in preparedness and planning, and communicating those plans clearly, have an opportunity to further burnish their reputations and build additional goodwill with their stakeholders," he concluded.

 

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Edward Segal is a crisis management expert, consultant and the bestselling author of the award-winning Crisis Ahead: 101 Ways to Prepare for and Bounce Back from Disasters, Scandals, and Other Emergencies (Nicholas Brealey). Order the book at https://www.amazon.com/gp/product/B0827JK83Q/ref=dbs_a_def_rwt_bibl_vppi_i0

Segal is a Leadership Strategy Senior Contributor for Forbes.com where he covers crisis-related news, topics and issues. Read his recent articles at https://www.forbes.com/sites/edwardsegal/?sh=3c1da3e568c5.

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