2014 Panama Canal Expansion A Game Changer For Lean Logistics

2014 Panama Canal Expansion A Game Changer For Lean Logistics

In their Spring 2011 Newsletter: Perspectives on Global Supply Chains, Jones Lang La Salle highlights how the expansion of the Panama Canal will alter our supply chain strategies. The paper reviews the expansion’s correlation to oil prices and slower shipping methods, port competition, and shipping diversification and reveals why the expansion will be a “game changer:”

  • Maximum ship capacity in the current state is 4,400 TEUs while maximum ship capacity in the future state is 12,600 TEU
  • Significant Increase in access between Latin America and China and other emerging Asia markets
  • The Colon Free Trade Zone, located at the gateway to the Canal on the Atlantic-side is already the second largest FTZ in the world
  • Related investment and construction in port terminals, rail lines, and warehousing/facilities

Although the newsletter has an industrial real estate point of view, the information is valuable to any logistician as supported by the Council of Supply Chain Management Professionals’ (CSCMP). The group’s 2010 Annual Global Conference featured keynote speaker Rodolfo Sabonge, Panama Canal Authority's VP of Market Research and Analysis. In addition to the points already expressed above, Mr. Sabonage described how are strategic planning of the global supply chain will need to change:

  • Shippers and carriers can now embrace a "reverse intermodal" approach, skipping calls on the U.S. West Coast and funneling containers destined for other U.S. markets through trans-shipment hubs in Panama.
  • Shippers and carriers can will be able to operate backhauls from U.S. East Coast, U.S. Gulf, Central America, and South America served by the new class of giant vessels
  • In addition to containerized shipping, large bulk and liquid carriers will have entirely new routes available whereby reducing commodity prices
  • New trade flows between South America, Europe, and China will be introduced

With the potential to be the next great hub for global supply chains and to compete with the likes of Singapore and the Netherlands, Panama will need to improve its logistics performance by investing in technology and people. As a result, well-regarded universities are also setting up shop in Panama. In 2010 the Supply Chain and Logistics Institute of Georgia Tech launched the Logistics Innovation and Research Center in Panama City. Led by Dario Solis, Managing Director, the Research Center has already offered several programs such as the Lean Supply Chain Professional series and courses on Inventory/Transportation Planning and Analysis and Warehouse Planning and Management. The Massachusetts Institute of Technology (MIT) and its Colombian affiliate, the Center for Latin American Logistics Innovation, have also announced their intent to open an education center in Panama.

Not only is the Panama Canal expansion critical to understand as logisticians, but also as lean practitioners. By expanding capacity, enabling new shipping lanes, and fostering trade relations, the expansion will challenge our everyday logistics decisions. Lead times will need to be recalculated. Inventories will need to be adjusted. Sourcing strategies will need to be examined. The Post Panamax state will drive optimization models foreign to our eyes. Our ability to effectively measure and manage by Total Cost and Systems Thinking will be more important than ever as we redefine our global supply chain strategy in 2014 and beyond.

Written by Erika Roberts, Director of Sales and Marketing at LeanCor

For more information on the Panama Canal Expansion please visit:

Panama Canal Authority

DC Velocity Magazine

Panama Guide

 

Posted by LeanCor Supply Chain Group

LeanCor Supply Chain Group is a trusted supply chain partner that specializes in lean principles to deliver operational improvement. LeanCor’s three integrated divisions – LeanCor Training and Education, LeanCor Consulting, and LeanCor Logistics – help organizations eliminate waste, drive down costs, and build a culture of continuous improvement.

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