nyone involved in logistics or supply chain management today knows that New York and Los Angeles dominate U.S. port activity. Combined, the two cities processed almost 19 million containers last year – well over 50 percent of the nation’s total. Why is no secret: Both ports enjoy robust port infrastructure and offer direct- access transportation networks and millions of nearby consumers.
But a steady increase in container volume, sparked by the continued growth of world trade, is generating intense interest in alternative port markets around the country. Supply chains are now longer and more complex than ever, and companies are realizing they need to build flexibility and redundancy into their distribution networks in order to mitigate slowdowns from congestion, weather, labor strikes and other problems. Distributing goods via a secondary port is one way to achieve that objective.
Port authorities on the East, West and Gulf coasts understand this dynamic full well. Tacoma, Houston, Norfolk, Charleston, Savannah and others are all vying to position themselves as leading alternative ports in the U.S. Winners and losers will be determined by a variety of factors as this process plays out. One of the most important – the percentage of population within a one- day’s truck drive – is obviously beyond any port authority’s control. But there are a number of other key areas where the actions of the public and private sectors at the local level can have real impact:
The size of the average container ship has increased massively in recent years. The largest coming on line today have a capacity in excess of 10,000 containers – so large they can’t fit through the Panama Canal. These so- called “post- Panamax” ships make up an increasingly significant portion of the fleet that carries raw materials and finished goods between the U.S. and manufacturing centers in China, Taiwan and other parts of Asia.
Any port that wants to play in the big leagues must have an infrastructure in place to handle these ocean- going behemoths, along with medium and smaller- sized container vessels. Channel depth, terminal size, and the size and number of container cranes all combine to influence a port’s total capacity. “Land- side” infrastructure – including the access a port offers to interstate highways and rail freight – is equally critical, enabling goods offloaded from ships to move out of the port quickly and on their way to market.
Most ports are actively investing in infrastructure with an eye on future growth. The Virginia Port Authority (VPA) plans to triple capacity at the Port of Virginia over the next 15 years. It recently completed a $400 million expansion at the Norfolk terminal that dredged the 50- foot inbound channel and added a total of eight new cranes to support an increase of 2 million containers per year. Already, this investment has helped increase the number of international shipping lines calling on the port.
No matter how robust a port’s infrastructure is, it can’t be successful if the world’s key shipping lines choose to bypass it as a port of call. There’s no magic number of individual lines at port to ensure success, but ports want enough variety and redundancy to ensure consistent service to a variety of destinations.
The importance of liner service was underscored by the experience of Portland, Oregon. Container service at the Port of Portland almost ended in 2004 following the exit of two of its three trans- Pacific steamship companies. From 2004 to 2005 container volume at the port decreased more than 40 percent.
Later, local authorities were able to secure support from the state to modernize the port’s infrastructure, which they immediately began marketing to overseas shipping lines. This proved successful, and in early 2006 the port added two new Taiwan- based shipping lines.
Warehouses are a crucial link in the modern supply chain. They enable basic distribution. They function as processing centers for goods. And they enable companies to store enough inventory to meet unexpected surges in demand and to cushion themselves from the impact of a break in the chain.
A secondary port looking to grow its market share must make sure it has an adequate supply of Class A distribution space to serve present and future demand. Many ports on both coasts that enjoy decent infrastructure are lacking in this regard. Even top tier port markets have a need for greater supply. For example, the Port Authority of New York/New Jersey and the New Jersey Economic Development Authority have teamed to boost the amount of high- quality distribution space in the region through the “Portsfield” initative, to facilitate transformation of brownfield sites.
Today no single port outside of New York and Los Angeles processes more than 6 percent of total container traffic. For the foreseeable future, those two cities will continue to dwarf all other markets as import/export hubs. But there are sound reasons for port- and trade- dependent companies not to put all their eggs in those two baskets. Secondary ports that invest wisely in infrastructure, build strong relationships with shippers and work to ensure a robust supply of distribution space face a future bright with opportunity.