Tag: ports

OM in the News: West Coast Port Disputes and Global Supply Chains

Some ships are anchored offshore because of West Coast port delays
Some ships are anchored offshore because of West Coast port delays

“Shipping companies say West Coast ports could shut down if a new contract isn’t reached with dock workers,” writes the Los Angeles Times (Feb. 14, 2015). A flotilla of ships — filled with cars, electronics and clothes from Asia — have anchored off the coast waiting for the docks to clear. Both sides blame each other for the severe traffic jam. A shutdown promises to delay numerous products from Asia including furniture, cars, toys, clothes and electronics. About 12.5% of U.S. gross domestic product is tied to goods that flow through the 29 West Coast ports. The ports of Los Angeles and Long Beach together handle 40% of the nation’s incoming container cargo. The dispute centers on a new contract for roughly 20,000 dock workers at the ports.

Businesses that rely on the ports for their goods are likely to face rising costs from delays and possibly lost sales. The last time the ports closed, in 2002, some manufacturing plants were idled because they relied on timely shipment of parts. Businesses can re-route some products by air or to East Coast ports. But that’s costly.  If customers ordered Asian-made electronics or other goods, they probably won’t receive them as quickly if they have not already arrived in the country. If the products did arrive, however, but are stuck on the docks, customers may have to wait even longer.

The impact on supply chains is massive. Honda and Toyota are cutting back production at several North American plants. Honda reduced production at plants in Ohio, Indiana and Ontario as the labor tension has slowed delivery of critical parts to keep the production lines running smoothly and efficiently. Parts such as electronics and transmissions are in low supply. Honda has been working to maintain the flow of parts to North American plants utilizing alternative means of transportation.

Classroom discussion questions:

1. What are the impacts on supply chains?

2. Why are the shipping alternatives limited?

 

OM in the News: Logistics and The Port of Savannah

Although logistics is one of many topics in Chapter 11 (Supply Chain Management),  USA Today (Oct.3, 2011) details its critical role in an article about the Port of Savannah, the nation’s fastest growing shipping port. The bustling 1,200 acre site touches the lives of 44% of the US population, serving as a supply line to 15 states, and is one of the few ports handling more exports than imports (only the Port of LA is bigger). But Savannah is at an important crossroads, as the Panama Canal completes  (in 2014)  its first major expansion in 100 years. When that project is done, the canal’s locks will be able to hold cargo ships 3 times the current capacity. This means that cargo currently unloaded at West Coast ports, and shipped by rail across the US, will be able to dock directly at East Coast ports like Savannah.

The only problem is that Savannah (and most other Eastern ports) do not have channels deep enough to handle these larger vessels (called “post-Panamax” ships). A long sought channel-deepening project would result in 15-20% cheaper shipping costs. For example, Home Depot, which imports about 20% of its goods through Savannah, says: “The deepening of the port creates efficiency and lowers the cost of doing business. We can pass the savings on to our customers”.

The holdup: the federal government. The Port asked for permission to start the harbor project in 1996. Congress authorized a study in 1999. But approval for the $569 million expansion  requires the signoff of the Secretary of Commerce, Secretary of Army, Secretary of Interior, and the EPA. Port officials complain that this ” is one of the longest studied projects in history”.

Discussion questions:

1. Why is the dredging of the Eastern ports an important topic in OM?

2. Why is Savannah a major port for product exports? (Other Eastern ports include Miami, Jacksonville, Ft. Lauderdale, Charleston, Baltimore, Wilmington, Philadelphia, NY, and Boston).