We all know supply chain management requires planning, not just for the products being shipped or received in the next couple of weeks, but also for shifts in long-term international trade. The Panama Canal expansion project immediately comes to mind.
The $5.25 billion expansion project is expected to be completed in late 2014 to coincide with the canal's centennial celebration (though a construction snag could delay completion until early 2015). It will double the canal's capacity by adding a pair of three-chamber locks on the Pacific and Atlantic ends. The project will dramatically increase traffic by allowing the world's largest cargo ships to pass through the canal. These large ships, many of which would be coming from Asia, would get easier access to ports along the Gulf of Mexico and the East Coast. Changing trade routes could give many companies new shipping alternatives.
There is a lot of noise about the significance of this project and how it will affect trade and commerce. Accenture says the larger vessels may offer economies of scale that could change trade flows and even create new ones.
Those companies that import a high volume of manufactured goods from Asia and distribute those goods across the US and Canada may benefit from new access routes and distribution hubs along the East and Gulf coasts.
New markets may open for China to source raw materials, such as coal from [Colombia] and iron ore from Venezuela. These markets do not currently have a cost-effective transportation option.
Ports up and down the US Eastern Seaboard and around the Gulf of Mexico are betting big on this project, and they have the support of the US government. The New York Times reported last week that the Obama administration is speeding up the review process for developing and deepening ports' harbors in places such as New York, Miami, Charleston, S.C., Savannah, Ga., and Jacksonville, Fla.
The Council of Supply Chain Professionals' Supply Chain Quarterly recently took a look at some of the questions regarding the expansion. The report provides a counterpoint to the mainstream news media's belief that this project will be a game-changer for supply chain managers.
There is no doubt that an expanded canal will allow larger vessels to ply the all-water route from Asia to the East and Gulf Coast regions of North America... However, cargo routing ultimately is a function of shippers' supply chain optimization, not of ocean carriers' linehaul economics.
Regardless of what shakes out in 2014 and beyond, the expanded canal will significantly change the international flow of goods. Now is the time for supply chain professionals in the electronics industry to plan for possible changes and think about how the project will affect their companies' operations.
At what ports do my products and my supply chain partners' cargo currently arrive? How are goods transported once the containers are unloaded from ships?
What are my total transportation costs (ships, trains, and trucks), and how will fuel prices and other factors change those costs in the next few years?
Would there be price or efficiency advantages in shipping my cargo to a different port and trucking it a shorter distance to an inventory distribution center or the customer's site?
How would a change in shipping routes affect lead times, vendor-managed inventory hubs, just-in-time delivery, and customer satisfaction? Would a new route optimize my supply chain practices?
How are my logistics partners planning to use the expanded canal? When and how will their shipping routes shift? How will they be setting up their shipping lines between the US, Asia, and Europe, and how will that fit into my logistics plan and supply chain strategy?
Are my supply chain partners changing their shipping routes, and will a shift in their logistics strategy affect my production, demand planning, inventory management, or product delivery schedules?
This is just the tip of the iceberg, but time flies, and 2014 will be here soon enough. Avoid the scramble.
The Manufacturing Data clearly indicates that the World's largest Exporters(& Economies) are all slowing down very,very sharply(or already in Recession).
Now if the leading Exporters of the world(And I am sure the Data for Germany also looks very similar) are all in very bad shape today;what is the need to ship more and more products all around the world?
The Conference Board has a very poor record of Forecasting Economic Growth and Recessions.
I would rather look at Real time Data today.
And the Real-time Data is bleak,very Bleak.
I don't dispute there will be some changes in Supply chain practices especially in the case of VLCCs and other Supermax sized Ships.
But we can't dispute the role of Demand here either.
Regards
Ashish.
P.S Do you know who is funding this expansion?
I have a bad feeling they will be waiting very,very long for ROI here.
tech4people - good point, but there could some global growth acceleration from 2013 to 2016 and then another drop from 2017 to 2025, according The Conference Board. The bigger issue may be keeping the slowdown in check with average output per capita, the business/research firm said, adding: "A recovery in advanced economies will be more than offset by a gradual slowdown in emerging ones as they mature, with the net result that global growth will slow. But the biggest risk ahead for the global economy is not this slower overall growth in output but a slowdown in average output per capita, which will determine how fast living standards can be supported and raised." More details here: http://www.conference-board.org/data/globaloutlook.cfm
This is a long way of saying yes, the flow of goods and the demand of goods will hinge on the economic health of many countries and individual consumers. What I'll be curious to see is how the canal expansion shifts existing supply chain practices and if new trade routes/inventory hubs migrate in new directons.
Barbara - You raise a good point about South America. You have me thinking about how the canal expansion will specifically help Brazil, which is already booming, and how the Brazil-China route may be strengthened.
Long-term I am sure it will benefit the Supply-Chain immensely but in the short-term[Say through to 2015]:I don't see much impact on the Supply Chain or Global Economy from this move.
The reason is because Global Demand is collapsing and Economies are slowing perceptibly as we speak.
If there is no demand to speak of,What is the need for Commodities,etc ?
I am seeing that today in Collapsing prices of Iron Ore,Bauxite,Cement,etc today.
Hi Jenn: This is a really helpful article about something that I didn't know a lot about. I'm not sure how much supply chain material is hindered by capacity at the Canal, but expansion certainly can't hurt. Additionally, with so many regions in South America booming in electronics, I would imaging traffic will only increase. Thanks for the post--very interesting
Hospice - agree... I think it's going to be interesting to see how companies and shippers take advantage of the widened canal. We'll see if it lives up to its promises.
I imagine this capacity increase will significantly improve the shipping economics for the larger heavier items and the eastern seaboard will be the major beneficiary.
Panama canal expansion will ease international trade as the largest cargo ships could easily pass through the canal. It will increase the canal traffic and consequently will have a positive effect on most supply chains including the electronics supply chain.
The source of the second quote is The Council of Supply Chain Professionals' Supply Chain Quarterly, but what is the source of the first quote? The New York Times is cited as the source of a paraphrased item after the first quote, but it's not clear if that newspaper is also the source of the quote. Sorry if I missed it.
A new report shows that most of the worrisome issues that the supply chain industry has been dealing with for years are not new, but there are some new concerns that need answers. Here’s a look at what keeps supply chain professionals up at night.
When it comes to shipping supplies from China to Europe, trains might be the most cost-effective way companies have available to them. DHL is looking to jump on that bandwagon.
For many dealing with the enormous task of tracking,
reporting, and resolving issues associated with
potential counterfeit parts, there is a collective
hope that 2013 will bring clearer guidance on what
needs to be done by whom and when.
A necessary foundation for moving efficiently at real-time speed, supply chain analytics is still very much at the beginning stages of development at many companies.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
To save this item to your list of favorite EBN content so you can find it later in your Profile page, click the "Save It" button next to the item.
If you found this interesting or useful, please use the links to the services below to share it with other readers. You will need a free account with each service to share an item via that service.
Tweet This