Mid-size importers are not likely to shift cargo from the West Coast of the United States to East Coast ports because it is cost prohibitive, according to logistics expert Stephen Craig.
The surge in cargo volume that major U.S. East Coast container ports have experienced this year at the expense of their West Coast counterparts has come mostly from large shippers because smaller companies can’t afford to alter their supply chain network, according to one logistics expert.
Many shippers appear to have permanently diverted a portion of their Asian container imports from West Coast ports to those on the East Coast in response to massive cargo delays associated with a breakdown in contract talks with dockworkers during Q4 2014 and Q1 2015. Ports such as Los Angeles, Long Beach, and Oakland have had flat to declining volumes for the year while Savannah, Charleston, New York/New Jersey, Norfolk, Jacksonville and others are growing at double-digit rates in 2015.
Many shippers have kept cargo coming to East and Gulf Coast ports even after the port congestion cleared on the West Coast because of satisfaction with customer service and cargo flow on and off the docks.
Network modeling conducted for clients by enVista, a supply chain consulting and IT services firm, indicates companies will experience a 2.5 percent to 5 percent increase in transportation costs by shipping all-water to the East and using new distribution centers, motor carriers and other service providers, Managing Partner Stephen Craig said during a panel discussion at the Ohio Conference on Freight in Cincinnati.
“There’s no way in hell” mid-size shippers will make that switch, he said.
The last port shutdown on the West Coast was more than 12 years ago, so it doesn’t pay to build in strategic flexibility for a once-a-decade event when an importer can make tactical adjustments when needed that are dramatically less expensive, Craig said.
The difference for big shippers is that they have to pre-plan cargo diversion to make sure they can find vessel, truck and warehouse space during a crisis, he added.
“We got some bigger clients for who the risk is so high that it strategically it makes sense” to diversify gateways “because they are a bigger piece of the chain and when they go to make a tactical response the capacity is not going to be there,” said Craig.
The Ohio Conference on Freight is organized by the Ohio-Kentucky-Indiana Regional Council of Governments, the tri-state departments of transportation and the Toledo Metropolitan Area Council of Governments.
Shipper size matters in port diversification choice
