Thousands of railroad workers could strike before the end of this week, causing a potentially massive disruption to the U.S. supply chain. Last week, two of the country's largest rail unions failed to agree on a new contract with rail carriers, after asking for more quality of life provisions covering attendance policies, as well as vacation and sick days. 
 Negotiations between railroads and unions were expected to continue today.  Unions have until a minute after midnight on Friday to reach tentative deals, or workers will strike. Suketu Gandhi, partner at Kearney, joins Cheddar News' Closing Bell to discuss.

Closing Bell

Rail Strike Deadline Threatens America's Supply Chain

Well look, here's our main story today, thousands of railroad workers could strike before the end of this week causing a potentially massive disruption to the U. S. Supply chain. Well, last week, two of the country's biggest rail unions failed to agree on a new contract with real carriers after asking for more quality of life provisions covering attendance policies as well as both vacation and sick days ago, associations between railroads and unions were expected to continue today and unions have until a minute after midnight on friday to reach tentative deals or workers will strike. So joining me now is Gandhi partner at the global management consulting from kearney as to thank you so much for coming on the show. What is the reason for this dispute in the first place between the railroads and these unions? Um to be transparent, don't have a full visibility on on what causes the dispute. But I think as you were raising the point christian right before the start, which was the impact on supply chain, It can be quite intense because somewhere between, you know, 15-17% of our goods move through this chain. So the impact is quite large, certainly a large impact here. How much is at stake when it comes to the economic implications? It is really focused on different industries. So the places that are kind of fully dedicated to this would be moving bulk goods. So large amount of soy bean and wheat and tofu and things of that sort of corn. The second big area is bulk goods, um cars, large parts uh really uh things that are not fit easily in a, in a truck or are very bulky and heavy or have a hazard implication. So, so some of our oil can flows through that also. So the industries that are impacted are quite wary. And then the second order effect and the last time we spoke christian, you had recognized the fact that the second order effects are as big as the primary impacts. Well, certainly, I think for people wanting the supply chain issues to finally ease as you get to as well as bring down prices right. We are going to get a read on consumer prices tomorrow. This does pose a major challenge. Any indication if we do see a strike, how long it might last and what those implications would be. Um, I just don't have any visibility to the negotiation to be a prognosticator to be transparent, but I hope it's short because if it is a few weeks our existing inventory and you know, sub components might allow us to survive that without any large implications. But if it goes beyond a few weeks, then that can have really large implications. This almost feels like, you know, the classic old movie planes, trains and automobiles. If it's not one thing, it's another thing that causes your supply chain to get disrupted and, and that's a big challenge. Now, any expectations to get too as to whether or not Congress or even president biden would intervene. Certainly we know biden's whole platform for decades has been pro union. And he's encouraged that while he's been in office as well. Well, he's also known to be the railroad president. Um, so I I think I hope he does involve himself and and gets this result quickly is all I can say. Yeah, I think a lot of people hoping for a quick resolution as well in terms of an interruption in service. How are you finding from a management perspective and the different entities are preparing for that? That is a critical question from a management perspective. Because what has happened over the last three years is management has really started looking at what are the signals? How can we sense changes in demand or changes in supply? We saw that first at the ports, then we also saw on the roads and now we could see on on the railroad tracks and having the ability to say that which parts of my supply chain are gonna get impacted is where management is focused, um, that are leading companies that have focused on this for the last three years and really made it it through what we call sense and pivot model. And that has turned out to be powerful. But others are now quickly scrambling to understand which parts of your chain Are affected by this. And there's an easy rule of thumb, if it is both, it's big and it's quite cheap, then you might be on the rail. Mm Hmm. So, I am reading here in fact, as you can see that reports indicate the biggest freight railroads in the US have already seen in these past six years, a workforce reduction of 29%. What's been behind the decline that we've been seeing over these past years. Um, the probably the biggest one that you could point to is better technology. Right. Um, things have gotten significantly more efficient. And then the second part is also as, uh, folks retire right, bringing new folks into this industry has been a tad bit harder. But technology is what I would say has been a big driver of the reduction in folks needed to drive this really important part of our logistics infrastructure. What's the negotiating leverage that both sides have here that could indicate how long it will play out. I if I haven't been, I do not know on both sides of the issue what what the challenges are. But the biggest thing I would say is there's a national interest here because as you know, more and more production is being moved closer to the customer from outside the country to inside the country. And having a railroad structure that works is probably a really important component. So there are significant more jobs, better opportunity. And third, a way to be really differentiated in the global marketplace is what I would say again, national interest is probably a much more common binding team. All right, so we got to leave it there. Thank you so much for coming on the show. Thank you. That's a catchy Gandhi partner at the global management consulting firm Kearney.