Article on US port alternatives from "Inside Supply Management" magazine (January 2009)

1. Features
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January 2
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2. During his September 2008 speech at Port of Halifax's Port Days 2008, Kurt Nagle, president
and CEO for the American Association of Port Authorities in Alexandria, Virginia, said that
while all seaports deliver prosperity, no two are alike — each has different priorities, resources,
needs and challenges. quot;Variables range from a port's physical layout, the types of equipment they
use, the markets they serve and the cargoes they handle, to the way they are financed and
governed,quot; according to Nagle. quot;The thing that ties them together, however, is generally their
mission, which usually incorporates some aspect of facilitating international and domestic trade,
spurring economic development and generating opportunities for jobs.quot;
Bringing U.S. Ports Into Perspective
Just how much traffic is there at U.S. ports? According to the Journal of Commerce PIERS —
Port Import/Export Reporting Service, the number of 20-foot equivalent units (TEUs) revolving
through West and East Coast ports in 2007 was nearly 30 million containers (combined import
and export) in the past year. When examining the issues affecting ports on the West Coast versus
the East Coast, there are few similarities with the exception that coastal ports are experiencing a
global decline of 7 percent in container traffic this year.
West Coast gridlock. Along the West Coast, there are several ports stretching from San Diego
to Tacoma, Washington. However, the vast majority of container traffic from Trans-Pacific
shipping lanes comes through the ports of Los Angeles/Long Beach — the two largest U.S.
ports, respectively. Unfortunately, the primary challenge affecting both ports is the inability to
expand. Both are landlocked, without any additional land to build infrastructure. As an expert in
maritime trends, Jamie Mahoney, vice president of supply chain excellence for Auxis, a
management consulting and business technology firm in Plantation, Florida, says supply
management executives can expect the port to reach total capacity by 2014. quot;Based on the
projected container shipping rates, the port is likely to reach 18 million container loads per year
at its total capacity.quot;
What port alternatives are supply management organizations going to have on the West Coast?
As the port reaches capacity levels, surrounding ports will need to consume any excess.
Mahoney says the Port of Oakland as well as the Port of Seattle/Tacoma are the next largest and
closest U.S. ports serving the West Coast. While the United States may have the ability to spread
the capacity, Mexico's Port Lázaro Cárdenas in Michoacán is under a major expansion to
accommodate overflow capacity at Los Angeles/Long Beach. There is also a proposal to build
the Port of Punto Colonet, a megaport on Mexico's west coast, and just 150 miles south of the
U.S./Mexico border. This is a $4 billion project, which could have economic and labor
implications for the United States if a new shipping lane out-competes the U.S. West Coast on
container traffic.
East Coast expansion. According to a survey by the American Association of Port Authorities,
the port of New York/New Jersey loaded and emptied 5,299,105 containers in 2007. It's an
impressive number, but not one that's likely to increase drastically over the next several years.
Similar to the infrastructure issue on the West Coast, the port of New York/New Jersey is
essentially landlocked, with little room for expansion. However, Mahoney says an even more
critical issue is the depth of the port floor, which is a major competitive threat to the port of New

3. York/New Jersey. quot;The port has a depth of about 45 feet, which means the larger ships being
built today require more draft,quot; he explains. quot;Unfortunately, the material lining the seabed floor
that leads up to the port is comprised of bedrock. Thus, blasting would be required to deepen the
harbor, all at a cost of tens, if not hundreds, of millions of dollars and a five- to 10-year
completion schedule.quot;
To accommodate the larger container ships, ports farther south, such as Norfolk, Virginia,
Savannah, Georgia, and the Florida ports of Jacksonville and Port Everglades, are rapidly
expanding as population grows to allow freight to be brought closer to the point of consumption.
quot;Whether it's building warehouses or distribution facilities that are contiguous to port operations,
these southern ports have the space to expand and that's what they're doing,quot; says Mahoney.
quot;When Home Depot builds 1.4 million square feet of warehouse space and Target builds 2.1
million square feet that abuts the port in Savannah, that's a major advantage for the facility.quot; The
port expansions also provide U.S. economic growth and additional jobs throughout the region.
Support to Coastal Ports
While both coasts are responding to congestion and infrastructure issues, further development
inland will add logistical support and may shorten lead times as more capacity in Mexico comes
online. Inland ports, such as those in Huntington, West Virginia, St. Louis, Missouri, Pittsburgh,
Pennsylvania, and Memphis, Tennessee can transfer a significant amount of containers by
waterway or railway into areas closer to consumption.
As global trade increases, the need for U.S. ports to have the capacity and infrastructure to
accommodate new port technologies and larger vessels is paramount in maintaining efficiencies
throughout the supply chain. As evidence indicates, challenges remain at U.S. ports and other
segments of the logistical network. With economic volatility and long-term port congestion
expected, supply management professionals must be flexible in how they manage the flow of
goods domestically and between countries.
Gateways to the Hemispheres Expanding (Online­only Content)
Throughout the world, port authorities are ramping up their capacity levels and infrastructure to
accommodate larger vessels, increased container traffic and new shipping lanes for greater global
efficiency. Two ports in particular, the Panama Canal in Panama and Prince Rupert Port in
British Columbia, Canada, are transforming hemispheric container shipping.
Panama Canal. Opening in 1914, the Panama Canal is a man-made structure of epic proportions
that provides passage to both the Atlantic and Pacific Oceans. According to Wikipedia, in 1934 it
was estimated that the canal would reach capacity at 80 million tons per year. However, today's
traffic is more than three times that expected amount — which is creating a number of
bottlenecks.
As an expert in maritime trends, Jamie Mahoney, vice president of supply chain excellence for
Auxis, a management consulting and business technology firm in Plantation, Florida, says to
alleviate the pressure and allow throughput of larger vessels of up to 12,000 TEUs (referred to as

4. Super-Post Panamax vessels), a project is underway to build additional locks to accommodate
larger ships and improve the throughput rates. quot;As the West Coast reaches capacity, more
container traffic will come through the Panama Canal,quot; he says. quot;As the project sees completion
by 2013, it will help facilitate global trade into the United States via Trans-Pacific and Trans-
Atlantic shipping lanes.quot;
Prince Rupert Port. In the extreme northwest portion of North America lies Prince Rupert Port
in British Columbia, Canada. According to the Prince Rupert Port Authority, it is their vision to
be quot;a leading trade corridor 'gateway' between North American and Asian markets.quot; How is the
Port Authority faring with its vision? According to Price Rupert officials, quot;Among the 42,555,
20-foot equivalent units (TEUs) moving through the port's Fairview Container Terminal in the
first six months of this year, 50 percent accounted for outbound containers, with 39 percent laden
for export to Asia.quot; Expansion at the port is part of meeting the goals of that vision.
Recognizing the capacity issues affecting U.S. West Coast ports, Prince Rupert Port began its
expansion efforts to capitalize on the likelihood that Los Angeles/Long Beach will reach
capacity by 2012 or 2014, says Mahoney. The expansion includes taking advantage of its
logistics flow into the United States via the Canadian Northern Railway. quot;The premise for the
supply chain flow is to bring the containers into the port, unload them from the ship and transport
the containers on rail cars where they can be connected into the U.S. distribution channels,quot; says
Mahoney. quot;The port has been very successful selling the idea and delivering on its intent to move
goods to the point of consumption to the eastern United States quicker than if they originated at a
West Coast port.quot;
Another advantage for Prince Rupert Port is its geographic location for ship navigation. Shipping
vessels leaving China, Korea and Japan can save up to two days of sailing time due to the
reduced distance on the great circle sailing route. Rather than sailing straight across to the West
Coast, it's actually closer to travel farther north through Prince Rupert Port. quot;It's a shorter transit
time, less fuel consumption and a quicker point of entry for getting freight on the ground and
railed to destination than to travel south around the great circle route and back up to Los
Angeles/Long Beach,quot; says Mahoney.
Port projects throughout the Americas, including the Panama Canal and Prince Rupert Port, have
the ability to increase container traffic and improve throughput efficiencies, which is good news
for organizations. Supply management professionals should follow port projects that are near
their supplier facilities and customer base because they may yield more cost-effective shipping
alternatives for all global partners in the supply chain.
For more information, send an e-mail to author@ism.ws.