PORTNERSHIP - Global Trade Magazine
  March 1st, 2012 | Written by

PORTNERSHIP

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You’ll find a sense of partnership in most of the nation’s ports. All you have to do is ask.

A kink in the global supply chain stranding three containers on a dock may not seem like a big deal to your average consumer. But Don Volivar is no average consumer

“It was a very big deal,” says Volivar, warehouse manager at OA Logistics’ distribution facility at the Port of Savannah, Georgia. OA Logistics serves as the supply chain management arm of JLA Home, a global virtually integrated company based in California that specializes in importing and distributing home furnishings.

The three containers of high-end furniture arrived from China on-time for expedited handling until they hit a clearance snag—a series of “unavoidable unforeseeables” that kept the shipment on the dock an entire day, unable to move on to their consignee in New York City.

Volivar picked up the phone and called the port directly. Everything changed in a moment, and revealed a change in the new customer-service orientation of U.S. ports.

“The containers were off-loaded in the afternoon and left the terminal shortly afterward,” says Volivar. “The people at the port arranged the drayage for us and, honestly, we couldn’t have pulled it off without the port’s help. They really came through for us in a pinch. This wasn’t the first time they saved the day, and I’m sure it won’t be the last.”

Back in the day, a port was just a harbor where ships loaded and offloaded cargo. But those days are gone. Shifting trade lanes, global economic variables and consumer demand have turned the most competitive U.S. ports— – both large and small— – into genuine business partners with the shippers who have wide varieties of cargo to distribute all over the country.

In many cases, that transformation—of ports into partners with a well-honed customer-service mentality—is being driven by regional government agencies. The relationship between JLA Home and the – Georgia Port Authority is one such example.

“We researched ports up and down the East Coast and saw that Savannah had the pro-business attitude we were looking for,” says Volivar. OA Logistics is located just four miles from the port’s 1,200-acre Garden City container facility, a bustling hub of activity that can manage upwards of 10,000 containers annually for several large companies, including Bed, Bath & Beyond, J.C. Penney, and Costco.

The property occupied by the OA Logistics was developed in conjunction with the Savannah Economic Development Authority (SEDA), which not only provided tax incentives and employee recruitment assistance to JLA , but worked hand-in-hand with the Georgia Port Authority (GPA), – the Port of Savannah’s parent. The GPA routinely provides JLA and the port’s other distribution- center customers critical, ongoing data on available ocean carrier and rail services, highway connections and drayage providers, terminal operations, customs clearance, documentation processing. GPA even hosts a marketing staff well-versed in supporting its business clients, assisting with export and import opportunities.

JLA’s distribution operation is just one of more than a score of similar facilities in close proximity to the port, which serves as a major trans-regional distribution hub for a bloc of 26 states that are home to 75 percent of the country’s entire population. Currently, distribution facilities near the port’s main container facility cover more than 15 million square feet of storage space and generate in excess of 500,000 TEUs annually for such global giants as IKEA, Lowes, Hasbro, Coby Electronics, Mitsui-Soko (USA), Bass Pro Shops, Heineken, Petco, ABRO Industries, Pier 1, and Wal-Mart.

The GPA’s geographic location and what it calls its “pro-active customer-service approach” to marketing its customers have melded with large-scale plans to deepen its harbor facilities in preparation for the next generation of mega-containerships and its close relationship with the Panama Canal Authority have made the port “a real partner for us,” says Volivar.

You’ll find a similar sense of partnership in most of the nation’s ports. All you have to do is ask.

“Shippers are focused on efficiency, reliability, flexibility and cost-effectiveness in their supply chains,” says Tong Zhu, managing director of the Port of Tacoma’s Commercial Group. The result: ports have become adaptable and serious about creating “long-term” relationships.

port-of-tacoma
Port of Tacoma’s Commercial Group

The magnets to attract business to Tacoma, she says, include readily accessible highway and rail connections, 15 transload warehouse facilities; over 2.8 million square feet of storage space within three miles of the port;, three on-dock and one near-dock intermodal rail facilities; and a Foreign Trade Zone. In addition, Tacoma boasts 400 acres of land available for industrial and commercial development –a rare commodity for most ports serving large metropolitan business centers– and close proximity to the markets of northeastern Asia, most importantly South Korea, the U.S.A.’s newest free trade partner.

To already deep port channels ( 51 feet), the port in November added , a $32 million wharf extension at Washington United Terminals, where Korea-based Hyundai Merchant Marine vessels call. The project added 600 feet to the terminal’s existing 2,000-foot berth to support two “super post-Panamax” container cranes the terminal deployed in January 2009.

News of those changes have paid off: despite a moribund U.S. economy, export container volumes through Tacoma climbed about 15 percent last year, with nearly three quarters of the exports originating in Washington state.

Like her counterparts elsewhere, Zhu says, Tacoma gets huge lift from local government, working “closely with the Economic Development Board (EDB) for Tacoma-Pierce County on a variety of projects and initiatives to ensure that our region has a competitive business climate.”

Consider Americold’s new 196,000- million- square- foot cold- storage facility at the port. Less than one mile from the port’s six container terminals, the Atlanta-based company’s new refrigerated warehouse is also less than two blocks from the I-5 Corridor, which runs north and south— linking San Diego, California and Vancouver, B.C., and offering easy access to both the Union Pacific switching yard and the municipal railroad, Tacoma Beltline.

The new facility “serves the trade lanes for seafood, agriculture and food manufacturing companies moving product on the trade lanes between points across the U.S. and Canada,” says Rich Kappmeier, senior vice president of Americold’s Western Region. The move to Tacoma, he says, was an “excellent strategic fit” within the company’s existing North American cold storage network.

Port of Los Angeles
Port of Los Angeles – Leading the “beat the Canal” bate for transpacific traffic

In Southern California, the Port of Los Angeles is balancing two opportunities likely to attract business to the region and, at the same time, help L.A./Long Beach maintain its position as the country’s No. 1 container port: the ratification of the Korea-U.S. Free Trade Agreement (KORUS) and the on-going $5.3 billion expansion of the Panama Canal.

Southern California’s economy, says Jim MacLellan, director of marketing at the Port of Los Angeles, “will benefit more than any part of the U.S.” from the free trade pact.”

South Korea “is already the Los Angeles Customs District’s third- largest trading partner and [the agreement] will accelerate our already “double- digit” bilateral trade growth rate,” he says. The Los Angeles Customs District, one of the largest in the U.S., encompasses the trade activity generated by the ports of Los Angeles, Long Beach, Port Hueneme, and Los Angeles World Airports.

Even before the trade deal, California , sent a “diverse range of export products to Korea,” says MacLellan, with agriculture, food products and wine topping the growth list thanks to elimination of Korean duties on citrus and wine as high as 25 percent. Partnership doesn’t end with infrastructure and service: The Port of L.A. worked closely with the local office of the Korea Trade-Investment Promotion Agency to broaden the coalition backing the agreement and educate local businesses on the perceived benefits of the trade pact. In a tough political environment, that politicking helped close the deal.

Despite the potential KORUS windfall, the ongoing expansion of the Panama Canal presents the port and other U.S. West Coast load centers with a monumental challenge.

Within a few years, shippers will have the option of moving their goods from Asia “all-water” through the canal to U.S. Gulf and East Coast ports instead of loading and off-loading at Los Angeles, for example, and then moving their cargo to U.S. inland and eastern market points via rail. The expansion project—many call it “The Ultimate Game Changer,”— aims at doubling the capacity of the Panama Canal by 2014, and will allow larger “New Panamax” ships with much greater container capacity to transit its widened locks. Forecasters say the canal’s cargo volume will grow at an average of three percent per year over the next 20 years, doubling 2005’s tonnage by the year 2025.

Fighting against the tide, U.S. West Coast ports have formed a “Beat the Canal” alliance with labor unions, economic development agencies and others to craft a plan to compete with their Gulf and East Coast rivals. Improving local port infrastructure is a key element of the unprecedented partnership with the Port of Los Angeles alone working on expansion plans at several major container terminals and improving access to key highway and rail arteries connecting the port with nearby intermodal facilities and regional distribution centers.

Port of Los Angeles – Like South korea’s second Seoul

But, whatever the case, questions remain. The future of intermodal rail rates for discretionary cargoes moving via the Southern California gateway to the major U.S. markets; the future price of bunker fuel; the level of rate increases applied by the Panama Canal to re-coup its $5.25 billion investment in the expansion project; and the demographic consequences of a growing consumer base in the Southeast U.S.

While the answers to those questions remain speculative, one thing is certain. Other ports are following what one observer has called the Georgia Port Authority “gold standard” by expanding their service profiles to attract cargo and establish long-term relationships with the shippers that are playing an ever-increasing role in forging the links of their own individual global supply chains.

Simply put, market penetration is the key, and the port that can offer the most effective tools will get the business. The reality is that while it’s the ocean carriers that decide to send their ships on an all-water route from Asia to the U.S. East or Gulf Coasts via the Panama Canal, it’s the shipper who decides the port of call. The ball is in the shippers’ court and they’re always ready to play.

 

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