January 2012 | Commentary | In Perspective

Protesting Economic Ignorance

Tags: Supply Chain Management

I'm a big fan of freedom of speech, the right to assemble, and peaceful protest to effect change. But when exercising these rights, protesters must be aware of unintended consequences and potential collateral damage.

At some point in the future, I suspect I'll be explaining the "occupy" movement to my grandchildren when they study the history of the Arab Spring, the global economic crisis, and the various protest movements. Although the results will be calculated by then, right now questions are still flying about why the Occupy group chose to target ports and disrupt commerce.

The disruptions appear to be too short-lived to have had a major impact on supply chains. But while searching the store shelves for the one holiday gift my grandchild most desired, I had to wonder whether its absence was a result of overwhelming demand or a kink in the supply chain.

Perhaps as I describe the events of 2011 to my grandchildren, I'll have an opportunity to insert some lessons on supply chain management that the protesters failed to appreciate. Included might be the point that when you disrupt a supply chain, the effects tend to expand.

Along with large corporations trying to move goods are a vast number of small companies whose very existence may be threatened by a disruption of goods during their prime selling season. And consider similar smaller companies that are not retailers but are just as dependent on a smooth-flowing supply chain.

Add to the list of those affected: the dray drivers who are paid by the load. After a one-day disruption at the Port of Oakland, truckers who could not pick up loads at the port lost $500 to $1,000 each, and a potential $100 per day for delivery delays that might result.

Even the labor unions asked the Occupy groups to allow workers to do their jobs. That should have been an easy request for the protesters to fulfill—even if they don't fully understand how supply chains operate and the fact that 99 percent of any port disruption's impact is most likely to be felt by the 99 percent they claim to represent.

Up to 2,000 union longshoremen were unable to do their jobs, according to port officials. And with annual earnings for longshoremen reaching $200,000, the impact adds up. Loss estimates for the one-day disruption at Oakland vary from $4 million to $8 million.

Protesters who did sufficient research to determine Goldman Sachs, a target of their efforts, owns a stake in SSA Marine apparently missed the fact it is only a three-percent stake. They should have spent some of that research effort examining the true economic impact of the supply chain disruptions they initiated. They would not have had to look far. The disruptions of auto parts supplies resulting from the March 2011 dual disasters in Japan were widely reported in the mainstream press.

Looking to recent history—the 2002 contract talks between terminal operators and the International Longshore and Warehouse Union—yields a quote from Stephen Cohen, a professor at the University of California-Berkeley. His 2002 comment sounds eerily contemporary to 2011: "A shutdown of West Coast ports could retard the nation's economic recovery and trigger an international financial crisis."

Protests can bring positive change if they aim at the right targets. They add to the chaos if they are misdirected.

On target: a campaign that went viral when Chase increased bank fees. The protest called for dissatisfied customers to move their accounts to credit unions and smaller banks. Chase got the message and rolled back some of the fees.

Off target: disrupting a supply chain to get the attention of the financial community and legislators.