Portable Site Selection The expansion of the Panama Canal in 2014 will have a major impact on future site selection decisions involving shipment of raw materials and finished goods to and from Europe and Asia. by BILL KING editor bounce@conway.com I t used to be that site selection was a fairly straightforward calculation when it involved shipping of raw materials and products from overseas locations, at least from a regional perspective. If a company was targeting the Asian market, it would usually opt for a West Coast manufacturing or distribution facility; if it involved European markets, then an East Coast location normally got the nod; and if it involved Latin America, Transpacific Service Corp. (TraPac) is building a new container terminal at Dames Point for Japanese shipping company Mitsui OSK Lines at the Port of Jacksonville on the northeast coast of Florida. then a Gulf Coast site likely had the upper hand.    However, now there's an enormous engineering project underway in Central America that will have a significant impact on how U.S. businesses calculate transportation costs in site selection projects for at least the next 50 years.    The Panama Canal is in the midst of a multi-billion-dollar expansion that will build a new lane of traffic along the Panama Canal through the construction of a new set of locks. The new "super canal," which is expected to be open for business in 2014, will double the tonnage capacity and allow more traffic and longer, wider ships to transit the Isthmus of Panama.    Given the economic importance a maritime port brings to coastal communities, it is not unreasonable to expect port access to become a major battleground in the competition for business attraction and retention.    "It's definitely going to have an impact," says Don Schjeldahl, vice president and director of Austin Consulting, a Cleveland-based site selection division of The Austin Company.    In a recent site location project that Austin Consulting undertook on behalf of a manufacturer engaged in shipping goods from Asia to markets in the Eastern United States, their analysis looked at three basic transportation scenarios: arriving from Asia on large ships to the ports at Los Angeles and Long Beach and then transshipping by rail to the East Coast; transferring to smaller ships on the West Coast and transiting through the Panama Canal; Many Boat Builders Choose Inland Production Sites U sing East Coast seaports to access Asia – or West Coast ports to access Europe – are not the only seemingly counterintuitive trends appearing these days in site selection decisions. Boat building is another example of where manufacturers are thinking "outside the box."    If you thought that U.S. boat builders would be located in one of the coastal states, you would be right. In fact, not surprisingly, more than 20 percent of the country's boat building work force is located in Florida. However, a surprisingly large number of builders have moved their production facilities inland to places like eastern Tennessee, central Missouri and northern Indiana.    Why? For the same reasons other manufacturers move to those regions: lower operating costs, from wages and living costs to taxes and congestion.    Access to market is not an obstacle for these inland locations, either. In fact, from Knoxville, Tenn., it is possible to travel by boat to 21 states, the Great Lakes and the Gulf of Mexico, according to Joe Foggia, president of Christensen Shipyards, which last year opened a new 400,000-square-foot manufacturing facility on Tellico Lake, just southwest of Knoxville, to build its custom yachts. The Vancouver, Wash.,-based company found it was closer and cheaper to reach the East Coast by sailing its mega-yachts down the Tennessee-Tombigbee Waterway down to Mobile Bay, than it was to sail from the Pacific Northwest through the Panama Canal.    According to the National Marine Manufacturing Association (NMMA), Florida ranks No. 1 nationally in terms of registered boats, followed by California, Minnesota, Michigan, Wisconsin, Texas, New York, South Carolina, Ohio and Illinois. On a regional basis, the Great Lakes states together earned the top spot in the regional registration rankings, accounting for nearly 3.3 million of the total 12.7 million registered vessels in 2006.    On the manufacturing side, traditional powerboat shipments – including outboard, sterndrive and inboard boats – declined by 13 percent on a year-to-date basis through October 2007 in terms of unit volume, and by 11 percent in terms of wholesale dollars, according to the October Monthly Shipment Report (MSR) recently released by the NMMA.    Advanced data available through December 2007 indicates last year ended with traditional powerboat unit shipments down 14 percent and dollar shipments down 9 percent, which NMMA president Thom Dammrich says wasn't unexpected.    "It's already been widely reported that our industry experienced double-digit declines in 2007," Dammrich explains. "However, despite the fact we're currently staring down what looks to be another challenging year in 2008, there is light at the end of the tunnel; the recent Fed funds rate cut should particularly help, as consumers establish more of a financial foothold and regain confidence in their financial well being."    NMMA's MSR tracks manufacturers' shipments to dealers for both boats and outboard engines using a control group of boat and engine manufacturers. The 2007 boat control group represents about 77 percent of the overall boat marketplace while the outboard engine control group represents approximately 95 percent of the market. – by Bill King or sailing all the way around South America and up to the East Coast.    "The widening of the Panama Canal would definitely change those cost structures," said Schjeldahl.    Ports along the East Coast – and the West Coast – are already beginning to respond to the new opportunities a wider Panama Canal will present.    According to the U.S. Maritime Administration, roughly 40 percent of the container business to the U.S. currently passes through the West Coast ports of Los Angeles and Long Beach. The enormous congestion at those ports, along with concerns about the capacity of our domestic rail system, has long had businesses looking for alternatives.    "We will begin to introduce direct Asian service later this year," said Jerry Mallot, executive vice president of the Jacksonville, Fla., Regional Chamber of Commerce. "Mitsui, a Japanese shipping carrier, is building a $250-million terminal that will double overall terminal volume in first year. In addition, Hanjin, a South Korean carrier, will build an even larger terminal that will triple our container activity."    Hanjin is one of the world's biggest container carriers, moving more than 100 million tons of cargo annually while operating in more than 50 countries. In the U.S., Hanjin's subsidiary, Total Terminal International, currently operates dedicated terminals in Long Beach and Oakland, Calif., and Seattle, Wash. The 170-acre Hanjin Shipping Terminal in Jacksonville will begin operations in 2011, with capacity to handle 1 million twenty-foot equivalent units (TEUs) annually.    Tokyo-based Mitsui O.S.K. Lines has already begun construction on a new container terminal at Dames Point in the Port of Jacksonville that is set to begin operations in late 2008. The 158-acre facility is intended to load and unload container ships sailing to and from ports in Asia.    "We also have about 5 million square feet of distribution space under construction for companies that want to use these Asian services," said Mallot.    Other ports along the East Coast are also expanding their capabilities in anticipation of the improved access to Asian markets.    "The Port of Charleston is already positioned well for the Canal expansion, with its deeper water channels ready to accept post-Panamax ships," said David Ginn, president and CEO of the Charleston, S.C., Regional Development Alliance. "In preparation for the Canal expansion, some of the nation's most prominent developers are investing in port-related projects in our region. In fact, more than 20 million square feet of class A industrial distribution capacity is planned for within 30 miles of the Port."    According to officials at the Port of Charleston, major investments in the Charleston area by Hillwood Investment Properties, Childress Klein, Johnson Development, Rockefeller and others are moving along, taking advantage of the proximity of the Port of Charleston. In nearby Orangeburg, Jafza International has purchased 1,300 acres to develop a $600 million logistics, manufacturing and distribution hub.    Development of a new, 280-acre terminal at the former Charleston Navy Base is moving ahead, with permits issued in April of last year. Building demolition and site prep started last year, and PB Americas was awarded a more than $8-million contract to provide construction management services during the site preparation phase. The $550-million Phase I of the project is expected to open in 2013, and the terminal at build out will increase Charleston's port capacity by about 50 percent. Why is this important to local economies?    Well, to gauge the economic impact of a maritime port on the local community, one need look no farther than an economic impact study recently completed by the College of William & Mary's Mason School of Business, which determined that the Port of Virginia's three general cargo marine terminals in fiscal 2006 accounted for more than 340,000 jobs and $41 billion in total revenues across the state of Virginia. The report measured the port's impact for fiscal 2006 on three levels: direct, indirect and induced.    "The Port plays a mega-role because of the significant international connection, the growth of the Port in imports and exports, and all the maritime-connected industries located in the region," says Jones Hooks, president and CEO of the Hampton Roads Economic Development Alliance, the regional economic development for the Virginia Beach-Norfolk-Newport News metropolitan statistical area. "It also gives us tremendous name recognition internationally, as well."    Bill King is the former chief editor of Expansion Management magazine. He is currently managing partner of B&L Research and can be reached at billking@bandlresearch.com.