The expanded Panama Canal, which will allow much larger ships to pass through and will double the capacity, is expected to be completed in 2014.
The first impact is that port cities east of the canal are preparing the handle the larger ships.
The second impact is that firms will have to re-evaluate their supply chain infrastructure.
Many firms currently bring product into the US through the West Coast ports of Los Angeles and Long Beach. Many of the containers that arrive on the West Coast are shipped via rail or truck to destinations east of the Mississippi River.
So, now that larger ships and more volume can pass through the Panama Canal, does it make sense to shift volume to east coast ports?
The answer will vary for every firm, but the drivers will be:
- Cost to ship product through the Panama Canal versus the cost to ship through a west coast port
- Time to ship through the canal versus through a west coast port
- Location of customer demand
- Location of existing production and distribution facilities
I suspect that these new options will increase the need for network design analysis. Not only will the panama canal create a new option, but the west coast ports, inland ports, and railroads will likely work to become more competitive as well.