Having worked as an Interim CFO for multiple consumer products companies over the past three years, my concern (which is not being discussed) is what happens in the medium term to freight costs, not what happens today.

Short-term, approximately 50 cargo ships have become “floating storage” off the east coast. After the new contract is ratified, there will be incremental port charges on every container processed. Companies should prepare for higher freight rates/port fees and decide if they will pass along increases or if they will give up that margin in an attempt to increase market share.

Higher freight costs pressure companies with lower value goods (e.g., textiles, furniture and apparel) because freight costs are a larger percentage of their COGS, compared to a technology company like Apple, where freight is a small percentage of an iPhone’s final cost.

My Recommendation: CFOs should watch the monthly NY Fed Global Supply Chain Pressure Index (GSCPI), which integrates transportation cost data and manufacturing indicators to provide a gauge of global supply chain conditions that have been increasing since April 2024.

Image source: NY Fed GSCPI

“The International Longshoremen’s Association and the United States Maritime Alliance, Ltd. have reached a tentative agreement on wages and have agreed to extend the Master Contract until January 15, 2025 to return to the bargaining table to negotiate all other outstanding issues,” The ILA and the the USMX said in a joint statement. ILA wages will increase 61.5% over six years under the tentative agreement, sources told CNBC.

https://www.cnbc.com/2024/10/03/port-strike-ends-as-workers-agree-to-tentative-deal-on-wages-and-contract-extension.html