Port congestion on the west coast of North America proved to be a major concern in 2014 and by all accounts will continue to be with us as we move forward in 2015. Initial reports of slowdowns at Los Angeles and Long Beach, CA were the tip of the iceberg as the effects of delayed shipments, and increased costs, were felt by importers, and their customers, throughout the supply chain. And Canada was no exception as the Port of Vancouver struggled with its own issues last year.
There’s enough room for blame all around however, and there was certainly no shortage of finger pointing as customers blamed carriers for delays, ship-owners blamed Ports for lack of infrastructure improvements, carriers blamed Ports and ship-owners for lack of chassis, unions blamed Ports for container-processing delays, and Ports were afraid to blame anyone for giving them so much business. Regardless, it’s not as though the industry shouldn’t have seen this coming. There’s no shortage of engaged stakeholders, but there is undoubtedly a shortage of coordination in terms of industry sectors working together to accurately forecast demand, enabling all parties to effectively assess capacity requirements. The fact that everyone acted so surprised when it happened was about as logical as everyone driving towards a cliff, then wondering why they fell off.
Can these problems be fixed this year? The short answer is probably not. Why? The answer is in the statistics. Port of Los Angeles total TEU movements (loaded and empty) for November 2014 YTD over the same period for 2013 increased 6.5%. Total TEU movements at the Port of Long Beach increased 1.6% for November 2014 YTD over 2013, and 2.8% at Port Metro Vancouver for the same period. This trend towards increased container handling requirements is a predictable result of globalization, at least as long as lower retail prices remain a determining factor for so many organizations in striving for competitive market advantage. Coupled with increased free trade agreements initiated by the U.S. and Canada, larger ocean vessels and lower fuel costs, these developments will do nothing to alleviate port congestion in the short term. Failure to recognize these limitations this year, without at least looking for alternatives, means we’re still driving towards a (congestion) cliff, we’ll just be doing it in larger vehicles.
As the saying goes, “Increased business is good for business”. But at some point, businesses have to acknowledge the relationship between forecasting, capacity planning and customer service. In other words, sometimes a more effective solution can be found by avoiding the problem, rather than by trying to fix it. For example, the Panama Canal expansion project, now 83% complete and slated for completion in 2016, will offer improved access to southern U.S. ports from Houston to Miami, relieving the delays so often experienced at many U.S. west coast ports. In Canada, Prince Rupert B.C. is a viable alternative to the congestion at Port Metro Vancouver, offering the shortest trade route to Asia and express rail service to the U.S. mid-west.
In fairness, congestion is not a condition unique to marine ports. Airfreight shippers in southern Ontario for example will soon benefit from the addition of a new cargo facility nearing completion at the John C. Munro International Airport in Hamilton. The new 70,000 sq. ft. facility will provide improved market access to SW Ontario for international cargo shippers, as well as an effective alternative to Toronto’s busy Pearson International Airport. The Hamilton facility will provide a full range of logistics offerings including cross-dock services for cargo and courier shipments, Customs formalities and capabilities for temperature-controlled products.
Most importantly, the challenges of 2014 should serve to remind us that supply chain planning warrants consideration when it comes to business strategy. Working proactively with your freight forwarder to identify strategies that avoid supply chain bottlenecks in the long term will prove a more effective solution for many importers and exporters in the years ahead.
Posted by: Laurie Turnbull, CITT, P.MM – Supply Chain Consultant, Cole International
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