Key Takeaways:

  1. Risk Reduction: Diversifying port usage greatly benefits the supply chain, mitigating risk and improving service to end customers with increased flexibility.
  2. Growth: Businesses are experiencing new and growing customer bases.
  3. Effective: Increased volumes at ports lead to expedited delivered goods to and from businesses.

Executive Summary

Addressing supply chain risk is crucial for successful shipping and delivery of goods. Relying upon a distribution center or warehouse location on only one U.S. coast to receive and distribute goods exposes a supply chain to greater risk of disruption. A solution for mitigating supply chain risk is port diversification. When a company chooses to diversify and locate on the West and East Coast, they can experience:

• Reduced transportation costs and decreased time to different markets
• Lower risk of work stoppage at the ports
• Several more rail and vessel options
• Increased rail throughput

Port Diversification

Distribution centers relying solely on one port on either the West or East Coast will greatly benefit from diversifying their portfolio and adding another location on the other side of the U.S.

One company that is demonstrating successful port diversification is Friant & Associates, a high-end furniture manufacturer based in Oakland, California. The company located primarily at a West Coast facility before seeing the benefits of port diversification – leading them to open another facility in Suffolk, Virginia. This allowed the organization to decrease cost, time and distance separating its Midwest and East Coast clients. And with a broader market access, Friant is able to reach a completely new audience, setting them up for customer satisfaction and future growth opportunity. Another company experiencing the benefits of diversification is ACE Hardware. This year, the company is adding an additional 138,000 SF to their existing 336,000 SF East Coast import/distribution facility. ACE was one of the first companies to recognize the advantages of having import facilities on both the West Coast and the East Coast.

Panama Canal

As the Panama Canal’s new locks opened earlier this year, cargo movement to the East Coast has increased. Because new, deeper and wider locks can accommodate the growing generation of post-Panamax mega-ships, the actual tonnage of ships transiting the waterway is now 10 times the number of vessel transits. The Panama Canal can now handle ships within the 13,000 TEU (twenty-foot equivalent units) range, more than twice the 6,000 TEU capacity of the largest ships previously able to transit the canal. Several lines are taking advantage, sending ships larger than predicted on the the all-water route to the East Coast ports. In May, Cosco’s 13,902 TEU container ship made its first call on the East Coast at the Port of Virginia.

Port of Virginia

The Port of Virginia is investing $670 Million in new port infrastructure improvements. These improvements will increase the ports cargo moves by rail to 37% , truck movement to 60%, along with 3% barge movements, with the capacity to accommodate 1.16 Million containers a year. With 50-foot channels, 28 Post-Panamax cranes and two Class 1 railroads on-dock, The Port of Virginia today can handle the biggest vessels coming through the expanded Panama Canal. Projects are underway to ensure that the port remains fluid and can meet shipper’s needs for decades to come. At Norfolk International Terminal, 26 additional truck gates are being added to the north terminal, and the south terminal is being automated to increase container-handling capacity by 46%. Additionally, an expansion to its Virginia International Gateway terminal in Portsmouth will double the size of the terminal. When all projects are complete in 2020, the Port of Virginia will have an additional capacity of 1 Million containers.

Clients that locate facilities on the East Coast will benefit from the ease of moving cargo in and out of the ports. In addition, locating near the Port of Virginia can give clients easy access to two-thirds of the nation’s population.

As ports take advantage of the Panama Canal expansion and shippers look at port diversification strategies, the importance of an efficient supply chain becomes clear. With this momentum, the market share will continue to increase and will take a large part of the risk out of the supply chain.

Sources

1. “How much opportunity will the deeper, wider Panama Canal carry?” CBRE. <http://www.cbre.com/research-and-reports/About-Real-Estate–How-much-opportunity-will-the-deeper-wider-Panama-Canal-carry-September-16-2015>.
2. “Virginia port aims to grab market share via hinterland reach.” The Journal of Commerce. <http://www.joc.com/port-news/us-ports/port-virginia/virginia-port-aims-grab-market-share-hinterland-reach_20161003.html>.
3. “A Year Old, and Exceeding Expectations.” The Journal of Commerce. June 2017: 10-15. Print.

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