Weak link in the supply chain: West Coast ports

Many large U.S. companies have their products manufactured in China — no surprise there. But “the huge surge of goods arriving on our shores from China and elsewhere in Asia could easily overwhelm the infrastructure that receives and distributes them,” writes veteran consultant George Stalk.

Stalk — in his book “Five Future Strategies You Need Right Now” (Harvard, 2008) — calls this phenomenon the “China riptide” and makes this prediction:

The West Coast ports of the U.S. will reach their combined container unloading & loading capacity as early as 2010.

One researcher calls the ports “the choke valve” of global commerce.

The first serious indication of of trouble was a 2002 lockout of dockworkers that “snarled the nation’s supply chain, and cost the economy billions of dollars,” The Wall Street Journal reported. Then, in 2004, “operations at the ports of Los Angeles/Long Beach nearly ground to a halt” because they couldn’t keep up with the surge of arriving containers. “Almost 100 ships lay at anchor waiting for berths, and then languished for days before they could be unloaded,” Stalk writes.

The problem will only get worse, because the amount of goods arriving in containers from Asia, especially China … is growing so fast — at 9 to 12% a year — that even the world’s fleet of monster container ships cannot keep up with the increase.

Labor slowdowns at West Coast docks had supply chain managers worried again this year, the Journal reported recently (26 July 2008), until a labor contract was ratified.

The Journal said a study by Stephen Cohen, a professor of regional planning at the University of California at Berkeley, called the West Coast ports “the choke valve in the flow of commerce that defines a globalized economy.”

The evolution of a just-in-time global-supply chain, he wrote, has resulted in “a shipping system capable of operating at huge scale and stop-watch scheduling but at the cost of concrete inflexibility.” Trying to reroute cargo, at least in the short term, is simply too difficult and costly for many shippers, he said.

Related: Just In Case: The 9/11 terrorist attacks shattered many supply chain managers’ devotion to the strategy known as just-in-time (JIT) inventory.

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