In October, ports across the US were shut down after the International Longshoremen's Association (ILA) went on strike for the first time since 1977. port strike closed 14 major ports and threatened to disrupt more than half of US global trade.

The ILA represents about 45,000 port workers and the union went on strike to demand higher wages and a ban on automation. Fortunately, the shutdown only lasted for three days, and the ILA and the US Maritime Alliance extended their contract through January 15, 2025.

However, if they fail to reach a deal in the new year, port workers could go on strike again. It is a good idea for small businesses to start diversifying them supply chain and getting ahead of overseas orders now, just in case we find ourselves in a repeat situation.

Related: 5 ways to effectively navigate supply chain disruptions

Economic impacts of a port strike

How a port strike will affect the U.S. economy depends largely on how long it lasts, but shipping delays are likely to be the first and most visible sign. on 2 billion dollars worth of goods flow through these ports every day and a strike would affect everyday items like perishable foods, various types of alcohol, durable goods and raw goods.

Delays can hurt small businesses that rely on shipments from overseas suppliers, causing low inventory and lost revenue. If the shutdown lasts more than a month, it may cause the cost of imported goods to rise and contribute to inflation. Shipping costs may also increase due to increased delays.

A prolonged port strike would hurt retail, agricultural and manufacturing businesses, and over time, it could force businesses to lay off workers to cut costs. A prolonged strike could also damage US relations with its global partners and cause other countries to seek alternative trading partners.

Related: 7 Strategies for Growing Your Business When Supply Chain Disruptions Are Everywhere

How businesses can mitigate risk in the future

A port strike presents many challenges, but businesses have time to prepare so they are not caught off guard. January to March tends to be a slower period for retail sales, so businesses will have more capacity to keep their supply chain moving. Let's look at five ways small businesses can prepare for another port strike.

Reserve with inventory

Businesses have until January 15 to start their construction inventory and preparing for another shutdown. Start reviewing inventory levels to accurately forecast demand and determine what you'll need to break even. Prioritize high-margin products and items that are essential to your business operations.

Diversify your supply chain

Another way small businesses can protect themselves is by diversifying into several different suppliers. Start building relationships with suppliers in different countries or countries and look for opportunities to source these items at the local level. Domestic suppliers may be more expensive, but they will reduce your dependence on international ports.

Use inventory management software

If you don't already use it inventory management softwarenow is a good time to start. This software gives you real-time visibility into your inventory levels, making it easier to forecast demand and make informed purchasing decisions.

Inventory management software uses AI to analyze historical data and external factors to predict future demand. It can also help you determine which articles are most popular and should be prioritized.

Communicate with your customers

Since an ongoing port strike can cause delays and inventory shortages, it's important to communicate with your customers. Let them know about potential delays and increased costs before these problems occur. Being ahead about these challenges will help you build trust with your customers and let them know you are doing everything you can to manage the situation.

Set clear expectations for how long delays can last and recommend alternative products that are available. Make sure your customer service team is prepared to handle customer inquiries and that it's easy for customers to contact your business.

Be prepared for additional costs

If another shutdown occurs, small businesses should expect inventory, storage and shipping costs to rise. Coming with cash flow solutions now will ensure your business absorbs these costs without any major disruption.

If you don't already have one, establishing a line of credit can help cover the cost of additional inventory and additional storage space. You can also negotiate with your suppliers to extend payment terms and free up your cash flow.

Related: How to secure the inventory you need during a supply chain nightmare

According to the Conference Board, a nonprofit think tank, a one-week shutdown could cost the U.S. economy 3.78 billion dollars. Hopefully the ILA and the US Maritime Alliance will reach an agreement before January, but business owners need to be proactive and plan for the worst-case scenario.

Take the time to assess your supply chain now and look for ways you can strengthen it. Diversifying your supply chain and stockpiling inventory now will help you minimize the consequences if another strike occurs. It will also help you maintain your relationships with your customers.