Category Archives: Logistics

What Will the Panama Canal Do For Your Supply Chain?

The 48 mile-long international waterway known as the Panama Canal allows ships to pass between the Atlantic Ocean and Pacific Ocean, saving about 8,000 miles from a journey around the southern tip of South America. A project is underway to build new locks as well as wider and deeper channels that is expected to double the canal’s capacity. This will allow megaships to move through the Canal. What will be the impact on your supply chain?

Although the French had attempted construction of a canal in the 1880s, the Panama Canal was successfully built from 1904 to 1914. The division of the country of Panama into two parts by the U.S. territory of the Canal Zone caused tension throughout the twentieth century. In 1977, a treaty agreed to return 60% of the Canal Zone to Panama in 1979 and the reminder in 1999. Though traffic continues to increase through the canal, many oil supertankers, huge container ships and aircraft carriers can not fit through the canal. There’s even a class of ships known as “Panamax,” those built to the maximum capacity of the Panama canal and its locks. the Panama Canal expansion project will allow ships double the size of current Panamax (“Post-Panamax”) to pass through the canal, dramatically increasing the amount of goods that can pass through the canal.

The expansion project is a little off target and will not be completed until April 2015. What does this expansion mean? The Panama Canal will then accommodate post-Panamax vessels that carry 12,600 containers, compared to today’s ships carrying 4,500 containers. But now the Panama Canal is also losing business. Maersk Line, the world’s biggest container shipping company, will stop using the Panama Canal to move goods from Asia to the U.S. East Coast. Instead, Maersk Line will begin sending vessels through the Suez Canal, which can accommodate ships carrying as many as 9,000 20-foot boxes at a time, instead of using two 4,500-box-vessels through Panama Canal

Shipping containers through the Canal on these larger ships could reduce costs by as much as $75 to $100 per container per voyage, which adds up quickly! When such ships are able to pass through the Panama Canal, business will consequently pick up along both the U.S. Eastern and Gulf coast ports because the ships can take an “all-water” route from Asia to the U.S. East or Gulf coast—bypassing West coast ports and the roads and railways now used to transport goods across the U.S. However, these ships require depths of up to 50 feet of water to navigate. As a result, port authorities along the U.S. Eastern seaboard and Gulf coast are spending hundreds of millions of dollars to dredge the bottoms of their bays and river bottoms to deepen harbors to accommodate the larger ships.

The major Atlantic container ports are New York/New Jersey, Virginia, Savannah, and Charleston. Containerships and containerized cargo comprise the bulk of vessel calls and most of the vessel value at these seaports along the eastern seaboard.

There are concerns regarding whether U.S. West coast port operators will see a drop in volume. Those in the LA/Long Beach port complex worry that many importers will bypass their ports with ships coming from Asia, and will head through the Canal directly to East coast or Gulf coast ports instead. The majority of in-bound Asian shipments currently go to LA/Long Beach, and then moved by rail and sometimes truck to the Midwest and East coast. However, there would be a significant cost savings to the shipper if they could ship directly to a Gulf coast or Eastern port and eliminate the additional cost of transporting goods by railway. That’s not to imply, however, that the West coast’s loss is the East coast’s gain. The problem on the East coast is that the ports simply aren’t deep enough to accommodate the post-Panamax ships. Consequently, seaports up and down the Atlantic coast are racing to dig deeper harbors. Currently Norfolk, Va. is the only East coast seaport with the required depth of 50 feet. Other port authorities (including New York, Charleston, S.C., and Miami) are scrambling for federal permits and hundreds of millions of taxpayer dollars to dredge the bottoms of their bays and river bottoms to deepen harbors.

Progressive Railroading has been covering the East Coast ports plus the connecting railroads. As the $5.25 billion Panama Canal expansion nears its 2015 completion to allow supersize, Post-Panamax cargo ships to pass through on their way to markets farther north, eastern U.S. ports and a number of railroads are gearing up for an anticipated increase in international intermodal traffic in the coming years. East and Gulf Coast port authorities are developing and deepening their harbors in preparation for the influx of giant ships, and eastern railroads are building or expanding on-dock rail facilities, building intermodal centers or advancing other plans to accommodate an expected increase in freight traffic.

Among railroads anticipating a bump in intermodal traffic after the bigger canal opens is Florida East Coast Railway L.L.C. (FEC), the only rail provider to south Florida’s ports. Based in Jacksonville, Fla., the 351-mile regional is working with PortMiami and Port Everglades to build on-dock rail facilities as part of their expansion programs, which FEC execs view as a big part of the railroad’s strategy to grow intermodal traffic. “By summer 2014, we’ll have the on-dock rail facility fully operational, which means that from PortMiami we can hit 70 percent of the American population in a matter of days,” says PortMiami Director Bill Johnson. “It will allow us to double stack containers directly to Jacksonville in under nine hours, and connect to Norfolk Southern Railway (NS) and CSX directly to the heartland of America.”

Railroad giant CSX’s infrastructure preparation includes the National Gateway initiative to create a more efficient double-stack route between mid-Atlantic ports and the Midwest markets. And a cornerstone of the double-stack corridor is their Northwest Ohio Terminal near North Baltimore, Ohio.

A major undertaking is the Port Authority of New York and New Jersey (PANYNJ) Bayonne Bridge project to raise the structure’s navigational clearance from 151 feet to 215 feet — enough to accommodate the larger ships.

Norfolk Southern’s program includes the Heartland Corridor project, a $200 million public-private venture among NS, federal and state governments to enable double-stack international freight capabilities by increasing clearances through some 30 tunnels between Hampton Roads, Va., and the Midwest.

Jim Fulcher’s blog on the Supply Chain Community discussed many aspects of expanding the Panama Canal, from the actual expansion project itself, to larger supply chain concerns, such as evaluating port performance and the connectivity of ports in Central America, and working to determine what impact use of larger ships and more water routes will have on reducing companies’ carbon dioxide footprint. There also are significant concerns regarding whether U.S. West coast port operators will see a drop in volume, and if East coast seaports will be able to deepen their ports sufficiently to accommodate the larger ships.

He brings up an article that ran in AirCargoWorld, which explains that, according to recent analysis by commercial real estate firm Colliers International, an expanded Panama Canal will result in a smaller number of North American air cargo centers. Colliers’ report, “CapEx or Capsize,” states air cargo’s role in global trade will be defined by the tug-of-war between energy/infrastructure costs and e-commerce growth in the first post-Panamax decade (2015-2025).

 

Supply Chain Pros Say Data LossIs Greatest Risk

Data loss is the greatest concern for supply chain professionals, according to a poll of nearly 500 IT and risk-management professionals conducted by Forrester Research on behalf of BitSight. The results, released earlier this month, indicate that when global supply chain pros work with third-party vendors, 63 percent fear the loss and theft of confidential data more than any other risk.

In a press release, BitSight co-founder and chief technology officer Stephen Boyer said the supply chain has become a cyber-security minefield for the business world.

Algorithm Will Tell All UPS Trucks Where to Go

A UPS driver has, on average, 120 stops to make each day. But what’s the most efficient route that driver can take?

The company is hoping its Orion (On-Road Integrated Optimization and Navigation) computer platform will solve this issue for its 55,000 US routes using an algorithm that examines travel costs, distance, and other factors to spit out not necessarily the optimal route, but the most reliably good one, the Wall Street Journal reports.

“Customers and drivers like consistency,” a UPS senior director of process management tells the Journal. “Orion has to know when to give up a penny to make the results more stable.”

This efficiency has become paramount as UPS struggles to compete with FedEx, boost earnings growth, and figure out a way to optimize the many residential stops it now makes.

Rough Patches
The deployment of Orion isn’t always so smooth, though. That is where Mr. Levis comes in. As project manager, he is responsible for getting people and machines to work together. During the earlier stages of writing the Orion algorithm, it was Orion that had to learn to accommodate people.

“The project was nearly killed in 2007, because it kept spitting out answers that we couldn’t implement,” Mr. Levis recalls. The earliest versions of Orion focused on getting the best mathematical results, with insufficient regard for the interests of the driver or the customer, who value some level of routine. For example, regular business customers who receive packages on a daily basis don’t want UPS to show up at 10 a.m. one day, and 5 p.m. the next. And a customer who is expecting a shipment of frozen food needs delivery as soon as possible, even if efficiency demands that someone gets priority.

To get the project back on track, UPS chief scientist Ranga Nuggehalli turned to Bob Santilli, a senior project manager, asking him to describe a perfect route. Several weeks later, Mr. Santilli came back with the results of his effort, which produced a model plan of stops for drivers on a route in Lancaster, Pa. The engineering team extracted proprietary rules from the Santilli route and built them into Orion.

Here’s how an Orion-driven workday would go: A UPS driver would start by checking out her delivery information acquisition device (DIAD) to see the route Orion has chosen, which the system updates and recalculates based on factors like incoming orders and customer requests for specific delivery times – soon, it may even be able to do that while a driver is on the route.

The system hasn’t caught on with everyone – one driver, for instance, tells the Journal the system calculates routes with more left turns and backing up, which UPS drivers are discouraged from doing. But Orion engineers have been on training ride-alongs with drivers to see how the logic of the system is failing in real-world situations and are correcting the system based on those findings.

CEO David Abney has said that once the system is fully implemented by 2017, it should save up to $400 million a year.

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Top Ten Concerns For Global Pharmaceutical Supply Chain Analyzed

The global pharmaceutical supply chain can now boast its own Top Ten list, ala comedian David Letterman. That’s because following nine months of extensive research on the topic, a report delineating and explaining the industry’s top concerns has been released.
According to Natalie Privett, an Assistant Professor of Management and Policy at the Robert F. Wagner School of Public School at NYU and one of the report’s authors, a two-part methodology was implemented to create “The top ten global health supply chain issues: Perspectives from the field.” The initial phase consisted of telephone interviews with 22 professionals with varying involvements in the worldwide pharmaceutical supply chain. The group included manufacturers, a person who works for an insurer, importers and exporters, in-country people employed by non-profits or governmental entities and an individual who toils in logistics on a global level, she says.

Based on information gleaned from those interviews, a survey asking respondents to rank 17 supply chain issues based on their relevance to the successful delivery of pharmaceuticals to patients worldwide was created. It was distributed to professionals working in the global health pharmaceutical delivery (GHPD) supply chain who were members of the Association of Public Health Logisticians.

Locally Installed Software Is Dead

KCJones

If you haven’t noticed yet, there’s less actual software installed on local computers and more being accessed through online connections to remote computers, or at least to remote storage systems. This transition makes a lot of sense for a lot of reasons and those of us in the supply chain are likely to be prime beneficiaries of the trend.

Picking an email system like gmail or even Yahoo mail is an obvious choice because of the nature of email – the content moves from one computer to another over the Internet. When online connections were more temporary, expensive, and less reliable it made sense to use a local application like Microsoft Outlook to handle the sending and receiving of the mail as well as editing the messages. But those limitations are long gone for most of us.

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You Too Can Be An EDI Service Provider

There’s been a lot of action in the EDI VAN industry in recent years. If you know what I am talking about, you are concerned. If you don’t know, consider yourself lucky. My client is in the former group and posed an interesting question to me.

 

He is privately-held (and my non-disclosure agreement says I will be shot if I talk about him too much). He has a food buying group that is heavily dependent on EDI, plus a bunch of other things like community newspapers that he wants to be more heavily involved with EDI. He already owns a couple of computer-related companies, so his question “should we start our own VAN?” was not off the wall.

Lions and tigers and logistics, oh my! How do you move a circus?

Some circus fans come for the elephants, the giraffes, the trapeze acts.
Some come to look at the train.
Circus Train: Long Island City
Circus Train: Long Island City
We have been writing about circus trains for a long time:   Circus Trains: The Second Greatest Show on Earth
“Rail and circus go together like peanut butter and jelly,” said John Williams, director of rail operations for Florida East Coast Railway, which is moving the Ringling Bros. and Barnum & Bailey Circus circus from Miami to Jacksonville on Tuesday, as it makes its way to its next stop in Nashville.
“It’s an historic event,” he said. “Rail fans come and take pictures of the trains as they pass by. Florida East Coast has been doing this for at least 32 years, but transporting the circus equipment and animals and people has been around since the railraod.”
Circus Train: Long Island City
Circus Train: Long Island City
Maintaining that history is no easy task, Williams said. Staying on schedule is of the utmost importance: To be one minute late is unacceptable: “There’s no buffer,” he said.
That means doing as much as possible to eliminate delays, which occur more often than with regular freight.
Making it work means connecting key elements early on.
“If there are any issues, we have to check,” Williams said. “Sometimes it runs late, but we still need to get them across our lines.”
It takes four people to run the operation: a two-man crew on the locomotive (the conductor and the engineer), a supervisor and a utility man who follows the train on the road in case they need help.
That’s more than what Florida East Coast usually needs: Freight trains are only manned with two people.
When the crew arrives in Jacksonville, they’ll swap out with a new crew, and within 30 minutes the circus will be on the road via CSX to Nashville.
It takes 36 coach cars for the passengers, 21 equipment cars and 4 designated animal cars to pack in everything that fits under the big top.
The animal cars are specially designed to be larger than a normal freight car, so it can fit the lions (rolled into the car in cages) and elephants (walked onto the car).
The animal cars are climate controlled and loaded with water tanks, eliminating the need to stop.
For Williams, the joy of the move is something he said he looks forward to every year — with a particular joy when it’s done.
 “I always feel good when the train master calls when they get there,” he said, “and he tells me they are on time and everything went well.”

 

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