Those who manufacture, sell and engage in play can find it easy to forget the logistics that goes into getting a product from “there” to “here.” It all seems kind of simple, pack the product into a container, put the container on a ship, off load it and send it to wherever it is finally destined.
That won’t change but how cargo is going to get to its destination; how long its going to take and what it is going to cost will. That is according to a New York Times article by Dionne Searcey, “Making Everything Shipshape.”
Consider these variables:
- The Panama Canal is being widened which is going to allow it to handle larger container ships. That means that importers will be in a position to bypass the west coast ports in Long Beach, Tacoma and Seattle and thereby get there product to Gulf Coast and East Coast markets more quickly but not necessarily more cheaply. There is going to be an increase in the cost of passing through the canal but it has not yet been announced so no one knows how big the impact will be.
- That sounds like bad news for the West Coast ports but not so fast; there is a new breed of bigger container ships on the way and, ironically, they won’t fit through the newly widened Panama Canal. For that reason, the west coast ports are building infrastructure to accommodate the ships. The cost of the build out will be passed on to the users so look for prices to go up at those ports as well.
- West Coast dock workers and the ports may have to enter negotiations as the current contract has ended. The last time this happened the ports were shut down. At this point, it appears that neither side wants a fight but whatever happens we can expect to see labor costs go up.
- Some production is moving to Viet Nam and Thailand. The shortest way to the U.S. from those countries is surprisingly the East Coast. Those container ships pass through the Suez Canal.
- The Port of Prince Rupert on the Canadian West Coast is closer by three days to Asia than the U.S. ports. This plus Canadian railroads cutting their fees is making that Port a competitive destination.
It appears to me that the future is going to be one in which products from Asia are going to make it to market faster but probably at a greater cost. How much faster and how much greater the cost are still unknown. No matter what happens, the way we get our goods to market is going to change. For the better; it’s going to depend on who you ask.