Intro/Outro (00:01):
Welcome to Dial P for procurement. A show focused on today’s biggest spin supplier and contract management related business opportunities. Dial P investigates the nuanced and constantly evolving boundary of the procurement supply chain divide with a broadcast of engaged executives, providers, and thought leaders. Give us an hour and we’ll provide you with a new perspective on supply chain value. And now it’s time to dial P for procurement.
Kelly Barner (00:31):
When I think about our supply chains, I think about trucks. I think about containerships, I think about warehouses, even air freight. And while I know logically that rail transport is part of the supply chain, it just isn’t the first thing that comes to mind when the potential for a rail worker strike hit the news a couple of weeks ago. I think a lot of us suddenly became aware of how important they are both logistically and economically speaking. For instance, according to the Wall Street Journal, 28% of US freight moves via the rail network, second only to trucking at 40%. Now interestingly, the trucking industry is freight rail’s largest customer. So they’re working together a lot more than we realize. According to the Association of American Railroads, about 467,000 additional long haul trucks per day would’ve been needed to handle the redirected freight that is currently carried by rail.
Kelly Barner (01:37):
And what would the cost of that be? Will the US Chamber of Commerce estimated that a shutdown of the nation’s rail service would cost the economy over 2 billion per day as long as the strike lasted? When Labor Secretary Marty Walsh, who’s from Boston like me, you can probably tell from his accent actually locally, we call him ma. When Ma Walsh announced on September 15th that a tentative agreement had been reached, everyone gave a sigh of relief after all a strike was set to begin the next day. And that is the last thing anyone needs. But I have to ask, is it really over in this episode of Dial Pay, I’m going to review what the rail worker unions want from their new contracts, the final terms and conditions of the pending agreement, what the process of ratifying that agreement looks like from here, and what all of us learned from news coverage of the strike, including whether there will be future implications from this new agreement.
Kelly Barner (02:44):
But before I go any further, let me pause and introduce myself. I’m Kelly Barner. I’m the co-founder and managing Director of Buyers Meeting Point. I’m a partner at Art of Procurement and I’m your host for Dial P for procurement here on supply Chain. Now I’m constantly scanning the news for complex stories to discuss things that are interesting but may contain a surprise or escape notice. I also follow these stories beyond the headlines, which is something we’re going to do today. And I stay on top of these stories until they go cold or reach a resolution. We release a new episode or interview on Dial P every Thursday. So subscribe and be on the lookout for future episodes. And don’t forget to check out some of the past topics we’ve covered as well. Now before we get back to the railway strike, I have a quick favor to ask.
Kelly Barner (03:39):
I truly hope you find value in the time we’re about to spend together. And if you do, here’s what I ask. Find a way to engage that works for you. We have listeners on all kinds of platforms, so give us a review on iTunes, offer up some stars on another podcast platform, share the post where you found this or give us a like or a comment on LinkedIn or Twitter. You can even send this link directly to a colleague that you think should hear it. I’m grateful for your interest and attention, and please don’t hesitate to reach out if you have an idea for a future episode of Dial Paid. All right, back to the railway strike. What was really at stake here? What was it that the rail workers unions were looking for? Well, there are 115,000 unionized railway workers in the US and they have been working for years without an active contract as disputes between the unions and the companies have dragged on.
Kelly Barner (04:41):
In this particular round of negotiations, six of the largest rail carriers, including the companies that are considered the big three bnsf, Union Pacific and csx, were all at the table as were 12 unions. The key issues involved, wages, attendance, policies, sick time and scheduling. Now, labor has steadily been declining in rail as technology and cost cutting measures have been implemented. I was really surprised by some of these figures that I uncovered in preparing for today’s episode. For instance, the railroad industry has slashed almost 30% of its workforce over the last six years. In 1970, there were 600,000 rail workers, and today there are around 150,000, although not all of them are unionized. This reduction in labor pool is one source of the strain that’s being placed on these workers. Simply speaking, it’s making it very hard for them to get days off. They are on call at all times and often receive very short notice that they need to report to work, which is where those attendance policies come into play.
Kelly Barner (05:59):
So the final terms and conditions of the agreement involve voluntary assigned days off, an additional paid day off, the ability for workers to take time off for routine doctor’s appointments without being penalized, not having any loss of attendance points for hospitalizations or surgical procedures. And of course the money is important here. The biggest wage increase in more than four decades, they’ll be scaled up 24% between now and 2024. 14% of that hits immediately. And there will also be an assignment of thousand dollars annual bonuses over five years. There will be no increases to healthcare copays and deductibles, and all of these changes will bring the average railroad workers pay to $110,000 a year by 2024. So here’s where we dig beyond the headlines, because we all gave such a sigh of relief, but the union members have not yet ratified the agreement. And although there was a lovely ceremony in the White House Rose Garden, this is not over by a long shot.
Kelly Barner (07:12):
All of these union members across the country have to ratify the agreement, and the process may stretch into November, especially when you include the time required for all of the different unions to vote and for those votes to be counted and reported. Now, if it were even that simple, I still probably wouldn’t be covering this story. So you know, there has to be more to it. For one thing, there are two sets of potential agreements on the table. There’s the contract proposed by the rail carriers and then there are the terms proposed by the Presidential Emergency Board or p b. So there’s the offer from the railways, and then there’s sort of this somewhat objective mediated middle ground provided as an alternative, a survey of rail workers at the Smart Transportation division, which is one of the largest rail related unions in the US, found that nearly eight in 10 members would have voted to reject the carrier proposed contract.
Kelly Barner (08:15):
The grassroots group railroad Workers Union found that more than nine out of 10 railroad workers would vote to reject the p b recommendations and go on strike instead. So large groups have sort of tentative sense, almost like polling data that indicate their members are not going to vote to ratify of the two. The p b guidance, which all of the unions accept, the two biggest have agreed to is considered less worker friendly. So now we need to figure out why was the announcement made that the strike had been averted? And are the folks negotiating on behalf of the union leadership thinking in the same place that the individual workers are? There’s a huge question, and this is part of why the member votes stretch out into mid-November. Some of the groups where we’re hearing rumblings that the members may not vote to ratify have pushed those votes out maybe to give a little bit of time for discussion, consideration, uh, and potentially trying to bring people into agreement.
Kelly Barner (09:18):
So the guidance from the PEB is not actually an agreement on the table. It’s more like advice from a mediator. So as advantageous as all of these concessions to the workers sound, neither proposed agreement is being received particularly warmly. Here’s an example of how they differ. The union members wanted raises of 31% over the course of the next five years. The railroads offered 17 and the p b recommended 22. So you’ve got this range from 17% to 31% that are all being talked about. And yet, from what I’ve read from multiple sources, the union members actually seem less concerned about the money than they are the benefits. Apparently they believe that their salaries can be worked out, but the benefit terms and attendance policies that are being enforced very rigidly are making it incredibly difficult personally for them to hold these jobs. Now, the ink on all of these agreements and recommendations and proposals wasn’t dry before voices of discontent started to emerge, and some of them are pretty colorful.
Kelly Barner (10:31):
So as was reported in the Hill, quote, Ron Cameron Cow, an organizer at Railroad Workers United, which represents rank and file railroaders said that there’s a lot of anger, confusion, and hostility towards the new agreement which many workers feel is intentionally vague. That same article quotes an engineer from Norfolk Southern who asked to remain anonymous for fear of retaliation. Quote, workers are off and this time we actually have a lot of leverage. I know I’m not going to accept anything less than what we deserve. So the current agreement with the carriers actually only covers the two largest unions Of the 12, it covers the smart transportation division and the brotherhood of locomotive engineers and trainmen, one of the smaller unions, the 5,000 members of the International Association of Machinists and Aerospace Workers has already voted to reject the p b guidance and authorize a strike.
Kelly Barner (11:37):
It has plans to resume negotiations and hold off until, at least at the time they were talking about it publicly, the end of September. We’ve obviously made it past that. And so their vote is an example of one that’s been pushed out. It’s currently scheduled to to take place no later than November 20th. So they’re sort of inching all of these votes forward, trying to build consensus around the agreement, increasing the pressure on everyone is the fact that Congress has all kinds of ideas about how they can head off a strike. I think everyone, including Congress is hoping that does not become necessary because if there is a strike, it’s more than just the freight capacity that will be needed or the cost to the economy. It’s also about moving people. There will be significant interruptions in Amtrak service. This rail agreement doesn’t just include freight.
Kelly Barner (12:34):
And then if we look at a few specific things, typically shipped by rail, the big one that comes up is crude oil. 300,000 barrels of crude oil are shipped by rail every day, and this has a ripple effect. Refineries might have to slow production if deliveries of crude oil are delayed according to the American fuel and petrochemical manufacturers. This in turn moving through the supply chain could lead to shortages of gasoline and diesel fuel in some places, including the Northeast. Automotive is worried new car deliveries would be affected since most of them travel by either dock or rail. And of course, the big concern food. Food may take a hit if rail because it is the primary transportation method for a third of all grain and fertilizer is disrupted. So we know it’s going to be inconvenient, expensive, even worrisome, especially as we get into the winter months.
Kelly Barner (13:34):
But there’s been a lot we’ve been able to learn from this, including what might be the future implications of a strike. And part of how we got to see this is as we got into that September 14th, September 15th and the strike was looming on the 16th, how did different railways adjust thinking that there might be an issue on the horizon? So in anticipation of the strike, Amtrak proactively canceled long run trips. If a strike started, they didn’t wanna have people getting stranded partway between their origin and destination points. Another big change was that railways stopped moving hazardous shipments that might otherwise have been stranded mid trip and create very real danger for the people living in those communities. So there’s not just the potential of the strike. There are all of the calculations going place as companies and rail rail providers make different decisions about hedging against the uncertainty.
Kelly Barner (14:36):
So what this shows us is that as much as we talk about supply chain risk and risk mitigation and plans to hedge all of this off, sometimes the cost of mitigation can be as disruptive as the disruption itself and nothing is over until it’s over. You can have as many rose garden ceremonies, and I do love to hear from my friend Marty Walsh, but until these railway workers sign on to one or more of these agreements, it hasn’t really been averted. It’s just been postponed. And the closer we get to the holiday season and the closer we get to cold weather, some of the implications of a disruption actually go up. So one of the other cautionary tales that I think comes out of this actually has nothing whatsoever to do with railways, with labor unions. It has more to do with how we read the news.
Kelly Barner (15:38):
If we’re not reading beyond the headlines, we’re missing the true implications of what’s actually being communicated to us. Those of us that work in supply chain have been inundated with coverage over the last two or three years, every single headline everywhere above the fold, supply chain, supply chain, supply chain. But if you just read the headline, you’re missing the information that’s going to advise the way you do your job. The information you start to monitor, the decisions you make, the timing for those decisions mean here it was trumpeted that the strike had been averted, but that’s rather temporary when you look into this whole ratification process. And I think what I find interesting is that the more that the voices pronouncing success have to win or lose from the situation, the more skeptical we need to be about just how close that is to the truth or whether we need to dig a little bit deeper.
Kelly Barner (16:37):
Clearly, this is a situation where there’s not only misalignment between the headlines and what’s actually happening. There may also be misalignment between those negotiating on behalf of the unions and the workers that they propose to represent. Now, that’s my point of view, and I can assure you that as we go through October and November, I will be keeping an eye on news stories, on ratification decisions. And just as interestingly on the scheduled dates for those votes, I think there’s gonna be some really interesting jockeying because I do agree with that engineer. They have some real leverage this time, and I think they’re planning to use it. Now, I’ve shared with you how I look at this story and how I’m planning to monitor it going forward, but I wanna hear from you. I always say, As much as I’m grateful that you listen, your job doesn’t stop there.
Kelly Barner (17:38):
Please become part of the conversation. Here’s a couple of questions. Are you surprised at the central role that rail freight plays in the supply chain? How might this affect shipments your company was planning? Do you have mitigation strategies in place? Is it possible for businesses to address the concerns of workers and consumers in the current environment where workers and cash flow are both in short supply? Do you think we’re in for more drama and fireworks? And has this maybe changed the way that you will read the news headlines or interpret just how done an agreement is? I don’t know, but please let me know. Until next time, I’m Kelly Barner and I’ve enjoyed spending this time with you. Thank you so much for your time, and on behalf of Dial P for procurement and supply chain now, I wish you a great rest of your day.
Intro/Outro (18:36):
Thank you for joining us for this episode of Dial P for procurement and for being an active part of the supply chain now community. Please check out all of our shows and events@supplychainnow.com. Make sure you follow Dial P four procurement on LinkedIn, Twitter, and Facebook to catch all the latest programming details. We’ll see you soon for the next episode of Dial P four, Procurement.
