With negotiations between the International Longshoremen's Association (ILA) and the U.S. Maritime Alliance (USMX) resuming January 7 ahead of the January 15 deadline, the timing of a potential dockworker strike at U.S. East and Gulf Coast ports is critical. It could especially strain retail supply chains and negatively impact smaller companies disproportionately, according to experts at Moody’s Corp.

“A disruption now could ripple through key sectors like retail, automotive, electronics, and agriculture, driving up costs, delaying production, and impacting inventory levels,” said John Donigian, senior director of supply chain strategy at Moody’s, the economic research arm of Moody’s Corp., in a January 6 statement. Donigan pointed out that retailers are replenishing post-holiday inventory, manufacturers are securing components, and the upcoming Chinese New Year adds pressure to strained shipping networks.

Pressure is mounting for a resolution on the issues of automation and job security, and building robust supply chains demands balancing operational efficiency with workforce transitions, Donigan said. “Reskilling programs are critical to preparing workers for roles in managing automated systems, while policies should ensure modernization benefits are shared fairly,” he said.

Failure to reach an agreement and an extended strike similar to the one seen in West Coast ports in 2002 would begin to have a material financial effect on East and Gulf Coast ports, added David Kamran, assistant vice president, Moody’s Ratings, the bond credit rating business of Moody’s Corp. “Operator ports, which generate revenue based on cargo volumes, are most at risk. An extended strike would not only have an adverse effect on ports but could also impact the retail sector and shipping companies,” Kamran warned.

And, while many U.S. retailers have already diverted shipments, and received year-end holiday goods earlier than usual to ensure product availability, a longer strike could hurt retail profitability, said Christina Boni, Moody’s Ratings senior vice president of corporate finance. Expensive problems include delay in future deliveries, with seasonal and fashion goods arriving past their peak selling period, resulting in lower sales and an increase in markdowns to clear these goods.

Further, diversion of future shipments to West Coast ports would become more difficult and costly if a stoppage was prolonged as ships back-up and remain unloaded, reducing available capacity. “Larger retailers with scale are better positioned to move product as shipping capacity wanes,” said Boni. “Smaller companies with less sophisticated supply chains and planning capabilities to pivot quickly would be most at risk.”