Shippers Condition Index: Ongoing Tough Market

It is tough for shippers.  But it is tough for carriers also.  The SCI is negative as it has been all year, and it is not improving much.  And with the port slowdown/strike looming things could stay bad for a while.

Shippers Condition Index Points to Ongoing Tough Market Conditions for Shippers – Supply Chain 24/7.

U.S. WC Ports: Dockworkers Cease Contract Negotiations

There is a serious image problem arising for the West coast ports that could easily lead to a long secular decline despite their advantages for overseas shippers.  If we can’t have regular reliable service, firms will simply go elsewhere.  And supply chains, once configured, are hard to change– lots of inertia.

Port picture.

U.S. West Coast Ports Face New Crisis as Dockworkers Cease Contract Negotiations – Supply Chain 24/7.

How can the negotiations be restarted?  Last time there was a big strike, ‘W’ Bush invoked the Taft-Hartley law to force a 90-day cooling off period with more negotiations.  90 days would take us beyond the Christmas shipping system, and the crgo flow would likely be a bit lower.

More serious I think for the LA/LB and West Coast ports is the loss of supply chain business to middle America, especially to Chicago. About 25% of import container cargo goes to Chicago for distribution.  If these supply chains start using the East Coast or South ports, Chicago will become a second stop rather than a first, and lose its advantage as a distribution point.  That would mean loss of businesses and a possible reduction in size of the logistics cluster in the region.   3PLs don’t need to be anywhere in particular– they are information hubs, mainly– and they would prefer to be closer to the action.

We believe that the West Coast-Chicago intermodal link, the largest in terms of traffic, can suffer significant traffic loss if problems continue.  It’s bad enough, the delays introduced in the Chicago area alone, which we’ve written about.   If supply chains start to abandon the link, and with the Panama Canal coming online, they might, lost of players will suffer.

Ocean carriers investing in the mega container ships will not be able to use them on the Asia to US run.  There will be a need for smaller size container ships, which many are phasing out.  This will affect their capital investment plans.

Railroads have been focusing investment on the container route, though we can argue that they have not invested quite enough.  Those investments at least in part would be wasted. And they would have to shift to beefing up other routes capacity, which would require a new round of capital.

Truckers in the Chicago area, especially drayage operators, would lose a lot of the transloading and last mile traffic.  Their capacity would be very hard to shift to the other ports.

Let’s see how it goes.  Any comments?

Logistics Hubs as Drivers of Innovation

In Spain, MIT has combined the ideas of innovation and logistics clusters to create ways of collaborating between supply chain partners.  This would be an ideal role for the ITI here at USF to play.

  Logistics Hubs as Drivers of Innovation | Supply Chain @ MIT.

We’d be interested in comments on how we should go about sowing the seeds.

We already have an entrepreneurship incubator, and we have engaged and enterprising logistics faculty and students who are eager to make a difference in how logistics is done here in Chicagoland.  We want to partner with others who have visions on how to make this area the go-to center for distribution and shipment of goods.