In the early hours of Aug. 22, 2024, rail freight traffic in Canada came to a screeching halt as the country’s two main rail companies, Canadian National (CN) and Canadian Pacific Kansas City (CPKC) locked out 10,000 employees.
The shut down came as a result of an ongoing labor dispute between the railroads and the Teamsters Canada Rail Conference. All rail traffic in Canada and cross-border shipments to the U.S. subsequently stopped.
While the transportation industry had been anticipating the labor action for several weeks — if not months — the strike nonetheless had shippers bracing for extended delays, higher costs, and supply chain disruptions.
And, though the strike was effectively ended later the same day by an arbitration order from the Canadian government, it highlighted the potential ramifications of a major transportation labor strike on supply chains across Canada, the U.S., and abroad.
At Anderson Trucking Service (ATS), we’ve weathered many labor actions and supply chain interruptions in our nearly seven decades in business. As experts in supply chain management, we have the insights necessary to advise shippers on navigating these uncertain moments in time.
So, let's take a deeper look at what shippers should expect from a major railroad shutdown in Canada.
We'll explore the ripple effects caused by a transportation industry labor action and present you with best practices for navigating one, helping you to be better prepared the next time a strike, well, strikes!
What Should Shippers Expect?
A major railroad — or in the case of the Aug. 2024 strike, railroads — stoppage could lead to significant economic harm and major supply chain disruptions in both Canada and the U.S. if not resolved quickly.
Railroads move half of all Canadian exports — worth CAD 380 billion in 2022. Approximately 6,500 containers enter the U.S. by rail from Canada daily.
The longer a strike goes on, the more far-reaching and long-term the economic impacts can be. The Canadian government is therefore highly motivated to bring railroad strikes to a swift conclusion, as proven by its near-immediate issuance of arbitration with the workers' union less than 17 hours after the Aug. 2024 strike began.
Shippers have few alternatives to rail, so any railroad shutdown could lead to disruptions at ports and in major industries like agriculture, automotive, forestry, grain, manufacturing, mining, and oil — with potential long-term economic consequences.
Here’s what shippers could expect from a lengthy strike of the Canadian railroads:
- Severe Delays: With rail traffic halted and cross-border shipments stopped, expect considerable shipment delays — not just raw materials, but also finished products, which could lead to production slowdowns or stoppages.
- Limited Capacity: Simply put, there will not be enough truck capacity to haul the tonnage stranded by a widespread railroad strike. According to CBS News, it would take about 300 trucks to carry what one train can transport, making it a less feasible alternative for high-volume shipments.
- Increased Costs: The reliance on alternative transportation methods like trucking could lead to increased costs. Trucking is generally more expensive per ton-mile than rail, and with the sudden surge in demand, prices for trucking services may rise sharply.
- Port and Warehouse Congestion: Facilities like ports and grain elevators would likely become congested as rail-dependent shipments pile up, causing further delays — particularly for time-sensitive cargo like perishables and just-in-time manufacturing components.
- Impact on Inventory Levels: Companies may struggle to maintain adequate inventory levels if a strike is prolonged. This could force some manufacturers to cut back production or even temporarily shut down operations.
Related: From Headlines to Headaches: How to Prepare Your Supply Chain for Disruptive Events
Contact Your Transportation Provider
Only time will tell how any strike will last and what, if any, the long-term impacts will be.
Our best advice is to contact your transportation provider if you believe your shipments may be affected by a forthcoming or ongoing labor action.
When a strike occurs in the transportation industry, it's vital that shippers communicate both with their providers regarding any necessary action and with their customers regarding potential delays.
Ultimately, your most valuable resource as a shipper during a transportation labor dispute is your provider. They will be able to advise you best on possible transportation alternatives for your specific shipments, if necessary, and planning for longer-term supply chain disruptions.
