ISM specialty questions address West Coast port labor impact and fuel prices

In certain periods of time, there tends to be trends, themes, or takeaways that are top of mind when addressing or viewing certain things. In recent months, two of the major talking points in the supply chain and logistics space have been the West Coast port labor disruption and the drop in oil prices.

Those two items were featured as the “special questions related to the early months of 2015” in the Institute for Supply Management’s (ISM) Spring 2015 Semiannual Economic Forecast issued earlier this week.  Each question was presented to the ISM’s manufacturing and non-manufacturing member respondents.

The port question asked the panels to comment on whether their particular businesses were impacted, and if so, whether the impact was short term (impact cleared within a few months) or long term (having a lasting effect on most of the year).

On the manufacturing side, 38.7 percent of respondents said their businesses were not impacted, with 47.7 percent saying there was a short term impact, 9 percent cited a long term impact, and 4.5 percent said they were unsure.

The findings for the same question on the non-manufacturing side were in the same ballpark, it seems. 54 percent said their businesses were not impacted, and 34.5 percent said there was a short term impact, 4.6 percent pointed to a long term impact, and 6.9 percent were unsure.

Brad Holcomb, chair of the ISM Manufacturing Survey Business Committee, said he was not surprised by the question’s findings for manufacturers.

“The way we asked the question was if it would be cleared up in the first few months of the year, so that is the nature of the 47.7 percent saying it was a short term impact,” he explained. “For the long term part, we asked if it would linger on for the balance of the year essentially, and the findings were mostly straightforward and tied into how much import and export activity a company does.”

Holcomb said that these findings show over all that the West Coast port labor disruption did create problems for manufacturers but not huge problems. And he added that both data and comments in the report point to this situation being less of an issue going forward, even though it is not over yet, with some lingering questions and issues.

“I thin it will wane fairly quickly and be finished with over the next several months, with those affected doing workarounds,” said Holcomb.

For non-manufacturing, Tony Nieves, ISM Non-Manufacturing Survey Business Committee, said that 54 percent of respondents not being impacted does not come as a surprise, because most non-manufacturing industries do not deal in tangible goods.

But for the industries that do deal in tangible goods, he said, there is a high percentage of impact there.

“People close to the port issue are talking about a 7-week backlog of containers on the water for cargo waiting to get into the port,” he said. “There was the utilization of air freight and overland trucking and re-routing and diverting shipments and things of that nature, and I am still getting comments about the remnants of what happened in our monthly reports,” he said. “It will still be a while before everything gets back up to par, and I think the biggest thing was it delayed the top line on the revenue and definitely affected the bottom line with increased acquisition costs.”

Oil prices question: The second question focused on the net annual impact of the fluctuating price of oil and other commodities.

For manufacturing respondents, 14.5 percent said it has had a negative impact on business, 41 percent cited a positive net impact, 35.5 percent said there was a negligible impact, and 11 percent were unsure.

Holcomb said the answers were quite interesting in that the price of oil had a large impact but many people were thinking of the impact as negative.

“We polled [people] and found that most of it was actually a positive impact, and that applies to most of our industries that enjoyed lower costs of things like raw materials, running their plants, and on the negative side, that pertained more to the petroleum products and coal sectors, which were impacted on the revenue side and had to shot down projects and do layoffs,” he said.

Nieves said that the isolation in terms of a negative impact is limited to oil companies and companies that deal in brokering fuel and fuel related products, which subsequently lowered margins due to the reduction in price.

“For the most part, when looking at the different impacts, the positive one it is cheaper or less expensive as far as whether it be conducting business or shipping, among other things,” he noted. “The question remains of how much of that was actually passed through, and even though prices were lower, fuel surcharges remain, as do bills of lading and invoices. It was not actually being ‘pulled through’ on the non-manufacturing side as much as you would have thought it might be.”