Economic Development

Cali. Ports Prepared for Panama Canal

October 9, 2012
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For years, ports on the Gulf and East Coasts have expanded and upgraded their on-dock and landside infrastructure in anticipation of more cargo once the expansion of the Panama Canal is complete (expected in 2015). Operators of the ports on these coasts believe they will have the necessary network in place to attract more cargo originating from Asia at the expense of the West Coast, notably the ports of Los Angeles and Long Beach.

Neither Los Angles nor Long Beach, are wilting in the face of this new competitive force, nor are they resting on their laurels. Both are upgrading and expanding to ensure their infrastructures are prepared to handle the largest ships during the next decade and beyond.

Executives from both ports acknowledge the potential for new competition once the canal expansion is complete.

“It would be foolish not to take a new competitive threat seriously,” says Kraig Jondle, director of business and trade development for the Port of Los Angeles. “But we already have competition from North American West Coast ports. We see the Panama Canal expansion as just an additional competitive threat.”

Competition is a part of life and business, according to Don Snyder, director of trade development for the Port of Long Beach. “We feel we are prepared for the additional competition,” he stresses.

 

The West Coast advantage

While manufacturers will have more port options from which to choose when the Panama Canal expansion is complete, Los Angeles and Long Beach are stressing their advantages, which they say cannot be matched by Gulf and East Coast ports.

One advantage is speed to market. Almost every port in Asia has a vessel bound for a Southern California port on a daily basis. “Inventory is not sitting at the port of origin waiting for a vessel,” Snyder says.

Manufacturers can ship cargo from Shanghai, the world’s largest port in terms of tonnage and containers, to a Southern Californian port in 13 days. Cargo is offloaded to myriad trucks and trains. The marine terminals at the ports of Long Beach and Los Angles handle more than 30,000 truck transactions a day and more than 100 trains leave each port every day. By train, cargo can get to Chicago in four days.

The 17-day Shanghai-to-Chicago transit time using Southern California compares with the 28 days it would take for the same destination using an all-water route to an eastern port via the Panama Canal.

And because of the logistical infrastructure in place at Long Beach and Los Angeles, ocean carriers are headed back to Asian ports by the time a ship can travel through the Panama Canal destined for a Gulf or East Coast port.

To keep the West Coast competitive, Union Pacific and BNSF Railway are spending millions of dollars in their infrastructure, building double-tracks from the West Coast to Chicago, El Paso, Texas, and Memphis, Tenn., to reduce transit times.

The ports themselves have several rail projects ongoing to ensure that trains can be efficiently moved in and out. Five of the six container terminals at Long Beach are equipped with on-dock rail and seven of the eight docks at Los Angeles have on-dock rail.

“We can handle so much because we have infrastructure, both at the port and outside,” Jondle says.

Snyder adds, “Our investment is paying off in increased rail transit times.”

Another advantage to Southern California is its population base. There are about 18 million people in the region and about 50 million people in the larger region comprising Southern California, the San Francisco metro area, Arizona and Nevada.

Large importers such as Wal-Mart, Kohl’s and Target have major distribution centers and warehouses in Southern California, allowing them to transport their product in trucks and trailers to the western United States in one or two days.

 

Room to Build

Some of those warehouses and distribution centers are about 60 miles away in the Inland Empire region of Southern California. Companies that heavily utilize the ports of Long Beach and Los Angeles that need logistical operations in Southern California can take advantage of the availability of large tracts of land at a lower cost in the region, which comprises the Riverside-San Bernardino-Ontario metro areas.

Companies can build distribution centers and warehouses that exceed 500,000 square feet in the Inland Empire, something that is difficult to do in the area near the ports of Long Beach and Los Angeles because of space, says Paul Granillo, CEO of the Inland Empire Economic Partnership (IEEP).

Several interstate highways link the ports to the Inland Empire and beyond to Texas and the Midwest.

Sketchers, one of the largest footwear companies in the United States, is using a new 2 million-square-foot distribution center in the Inland Empire to put it in proximity to the Port of Los Angeles.

The LEED-certified, highly automated facility exemplified the type of facility that the Inland Empire is trying to attract. “It is not about running a forklift or tossing boxes,” Granillo says. “Employees need to be able to use a computer because the computer runs the machines.”

For this reason, the Inland Empire, a traditional blue-collar region, is making efforts to improve the educational attainment for its residents. According to Granillo, 18 percent of residents have a bachelor’s degree or higher. “We have to raise that number in order for hiring sectors to be able to come into the Inland Empire and find a trained workforce,” he maintains.

An IEEP committee is working with the region’s 30 institutions of higher education and businesses to create a curriculum to produce the next generation of workers.

The region has a workforce that is ready to do the job, but training is critical, Granillo stresses. The unemployment rate in Riverside and San Bernardino counties was 12.6 percent in June, according to the California Employment Development Department. Granillo says it is the highest rate in the country for metropolitan areas of 1 million or more people.

“To meet the needs of the logistics and manufacturing industries, we’re trying to build relationships with businesses and community colleges to get the training that is now required in those sectors,” Granillo says.

 

As Near as Possible to California

Located in proximity to the Nevada-California border, the Reno-Sparks-Tahoe metro area attracts numerous manufacturers wanting to either relocate from the Golden State because of its rising business costs or locate as close as possible without actually being in the Golden State.

“We get a lot of companies that want to avoid California because of its business climate,” says Stan Thomas, executive vice president of the Economic Development Authority of Western Nevada.

The Reno-Sparks-Tahoe metro area comes out substantially better when its business climate and costs are compared with Los Angeles and San Francisco, says Darryl Bader, CEO of ITS Logistics, a Reno-based third-party logistics provider.

The metro area is a magnet for distribution operations, with about 72 million square feet of space available for manufacturing and logistics operations. More than 70 trucking companies, supported by hub operations for Federal Express and UPS, operate in the region. Companies can ship product by one day ground service to about 60 million people in the western United States.

“Companies in the region have [transportation] choices,” Thomas says.

Nevada is heavily tied into the California market. About 80 percent of goods warehoused in Nevada are bound for California markets – about 50 percent to 60 percent of that number going to Southern California.

“The entire structure and backbone of our distribution network is built on servicing the California market,” Bader says.

As with much of Nevada, the Reno-Sparks-Tahoe metro area has been hit hard by the economic recession. Unemployment peaked at about 18 percent and is currently about 11.5 percent.

“There are plenty of overqualified workers ready to go,” Thomas says. “Companies can pick and choose a workforce. They are paying full benefits and giving employees an opportunity to grow with the company.”

Truckee Meadows Community College in Reno offers customized workforce training programs, taught either by college instructors or company representatives.

“Our company doesn’t struggle to find a talented workforce,” Bader says. “We’ve been on a consistent growth path for the past 13 years, attracting and retaining good workers.” wt  

 

Sidebar

No In 2002, a 10-day labor lockout during contract negotiations caused congestion and delays at the ports of Los Angeles and Long Beach. Management and labor agreed on a new contract and business as usual returned to both ports, with ocean carriers docking at terminals and unloading cargo in a timely manner. Since then, neither port has experienced congestion.

But that hasn’t stopped reports from persisting that both ports continue to deal with congested terminals and ships waiting days before they can unload cargo.

Both ports strongly deny those reports.

“Ships come to the berths immediately,” says Don Snyder, director of trade development for the Port of Long Beach. “Any talk of congestion is completely false.”

Likewise, Kraig Jondle, director of business and trade development at the Port of Los Angeles, says, “There is efficiency and throughput at the port and no congestion.”

Michele Grubbs, vice president of the Pacific Merchant Shipping Association, which represents marine terminal operators and ocean carriers on the West Coast, including Long Beach and Los Angeles, agreed that congestion at either port is a non-issue.

“The terminals are very fluid,” she notes. “There are no problems with congestion. There haven’t been any problems for a long time.”Congestion at Long Beach or Los Angeles.

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