The New Panama Canal

by Ayal Latz

A version of the below article originally appeared in the May 2016 issue of Response Magazine

It has been almost a decade of planning and construction, but the Panama Canal expansion is nearly complete.   Originally scheduled to open in 2014 during the famous waterway’s 100th anniversary celebration, the Canal is set to bring tremendous opportunity for the logistics businesses located in the eastern part of the US.

The $5.25 billion canal expansion was approved by Panamanian voters in 2006 and will be adding a third set of locks along with a deepening and widening of the canal. The change allows for larger ships, which means more containers can pass through the waterway. This is turn will help increase efficiency and reduce freight costs associated with cargo moving to East Coast Ports.   Now, East Coast ports can be competitive with the West Coast ports from a shipping cost perspective.

This creates shipping options in a very dynamic environment.  And with that comes many new warehousing and distribution options and opportunities.

Traditional thought had products produced in Asia shipping to West Coast ports because it is the shortest distance.  However, this mindset has been steadily shifting eastward as Marketers come to the realization that the vast majority of their customers are better serviced from the East Coast.  By paying a relatively small premium on inbound shipping to the East Coast ports results in much greater savings on outbound shipping from the distribution center to the end customer.   But now with the canal expansion dramatically improving the economics via larger ships carrying more freight, the benefits of locating your distribution on the East Coast grow even larger.

Additional benefits of shipping east include:

  • More port choices. From Boston to Savannah to Miami and the Gulf Coast.  Shippers can evaluate multiple scenarios.  And many East Coast ports have been activity improving their capabilities to handle the larger ships.
  • Less congestion, faster unloading and customs clearance. Each port will have its own dynamics on these issues.
  • Lower costs for port fees, off-loading, drayage and storage. Some locations on the East Coast, like Savannah, will have significant advantages over West Coast ports.
  • Faster package shipping times and lower overall freight costs to the majority of the US population from East Coast warehouses.
  • Lower reliance on cross-country trucking and rail shipments. Increased highway congestion, higher safety requirements and a shortage of truck drivers will make long haul transportation more expensive.  This can be mitigated by placing the goods in a more strategically located distribution centers on the East Coast.
  • Many marketers are still feeling the sting of the recent labor disputes which shut down West Coast ports. Having additional options in other parts of the country can provide a measure of security for your business.
  • Avoid California taxation and regulation. Georgia has been rated consistently as having one of the best business climates in the nation.  Why continue to expose your business to California?

Now is the time to consider alternative methods to your shipping and distribution strategies.   New options are soon to open up.  The shipping landscape will be altered significantly.   Will you reap the advantages of these new opportunities?

And this expansion could be just the beginning.   There is already talk of a new expansion project costing $17 billion with an additional 4th set of locks and further widening and deepening of the canal.   The east is where it’s at…..

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