From November 2014 until February 2015, the International Longshore and Warehouse Union (ILWU) was engaged in a protracted labor dispute with the Pacific Maritime Association (PMA), the organization responsible for negotiating labor agreements covering the 29 West Coast ports. Collectively, the West Coast ports account for 43.5% of U.S. trade and more than 70% of imports from Asia.
For a full six months after an agreement was reached to end the West Coast Shutdown, many carriers and shippers continued to feel the effects of inventory buildup, and the ratio of inventories to final sales remained unsustainably high. The shutdown highlighted the fragility of the global supply chain, the dependence of logistics companies on the West Coast gateway and the need for technology to improve port efficiency.
In response, many importers and supply chain providers have diverted some of their cargo to eastern U.S. and Gulf Coast ports in an effort to fix what Averitt Express executive Charlie McGee characterized as a broken model. The expansion of the Panama Canal in May 2016 will certainly help. The Canal is finally set to open a third, wider lane of locks after a decade-long, $5-billion expansion project. That will move the line of embarkation 100-200 miles further inland from the East Coast, making the East Coast ports more competitive and effectively changing the dyamic of what can be moved through them. But diverting shipments alone is not enough to insulate logistics companies from future bottlenecks or slowdowns.
“Supply and demand are so closely matched right now,” said Candace Holwicki, director of global transportation and logistics for TriMas Corporation, in an interview with the Journal of Commerce . “There's no room in the industry for one glitch. It sends everything into a tailspin. The West Coast ports proved that.”
The long-term solution may lie in technology — specifically, software that improves port efficiency and allows shippers to determine if diverting freight makes sense. Hapag-Lloyd, for example, has begun pilot testing a cloud-based stowage planning system, which aims to improve waiting times and reduce unexpected changes by making cargo data available to carriers and terminal operators in real time. Greater transparency in information should allow terminal operators to more efficiently allocate resources. And that, ultimately, will help reduce congestion and create additional capacity.
As we continue into 2016, we'll be keeping a close eye on the effect of the Panama Canal expansion and the ways companies are continuing to adopt and help evolve logistics technology.