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.