One place to start, though, might be the intermodal arteries near major ports. Stifling traffic jams around those routes — called choke points — often prevent goods from even leaving docked vessels.
The problem was overscored in 2004, when ship traffic got backed up at the Port of Long Beach, which handles 37 percent of the cargo coming from Asia. The delays, fueled mostly by a shortage of dockworkers, eventually pushed deliveries back by a week or more during the critical holiday shipping season. To help alleviate the traffic, major carriers imposed a congestion surcharge of $200 per 20-foot container.
Singed by the experience, some supply-chain managers have looked to hedge their bets. Giovingo reports that some Fidelitone clients now bring goods through several different West Coast ports, including Oakland, Seattle, and Long Beach.
Some businesses have gone farther north. Pete Riley, senior vice president of integrated supply chain and Six Sigma at Textron, says the Providence-based maker of Cessna airplanes and Bell helicopters ships a fair amount of its products through Vancouver. “That’s helped us manage through the ports issue,” says Riley, though he acknowledges that “ports are [still] strained.”
Indeed, Aberdeen’s Enslow says early data suggests that port delays may once again dog this year’s holiday shipping season. To avoid congestion on the West Coast, a large number of businesses now route some of their goods from China through East Coast ports like Savannah and Virginia Beach.
The strategy makes sense on paper — until you look at a map. Ships bound for Savannah from Shanghai, for instance, must pass through the Suez or Panama canal, a journey that takes substantially longer than a trans-Pacific trip. The extra mileage means added uncertainty for supply-chain managers. “It requires carrying a little more inventory closer to home,” says Georgia Tech’s Langley. “And that defeats the purpose of a JIT plant.”
Another complication: newer, larger cargo ships can’t get through the Panama Canal. While the ships can hold 8,000 cargo containers or more, these behemoths are simply too large for a canal that was built to accommodate vessels from the Gilded Age. Greg Aimi, director of supply-chain research at AMR, says the ships are also too large for many of the channels on the East Coast. “It could take up to five years to remedy the problem.”
Featherbeds and Nest Eggs
It will take much longer to fix the railroads. Although two train operators are investing $200 million to double, triple, and quadruple track lines in the Powder River Basin, more rail must be laid nationally. Likewise, signals and switches on some Western lines are more than 100 years old. A proposed 25 percent tax credit would help spur some investment. But, at the moment, the U.S. rail system is in such bad shape that the American Society of Civil Engineers gives the network a C- grade. Says P&G’s Duckworth: “Consistency and reliability of rail service is a challenge.”