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Moving the world: lessons from the port slowdowns

Recent impasse at the ports of LA and Long Beach illustrates the challenges of today’s global supply chain

Containers shipboard at the Port of LA
Containers sit shipboard at the Port of Los Angeles. (Photo/Lance Cunningham)

Today’s economy is globally interconnected in ways that could not have been imagined 30 years ago. The global “supply chain” – moving raw materials to factories, and finished products to market – is the backbone of the modern economy. What happens when there are breaks in the chain, as with the recent impasse at the Ports of Los Angeles and Long Beach (the No. 1 and 2 ports in the nation, respectively) illustrate the importance – and the challenges — of keeping the chain smoothly linked.

But the industry is also growing and changing rapidly, as evidenced by the robust attendance at the USC Marshall School of Business Center for Global Supply Chain Management industry night Feb. 27. Some 70 students were on hand to talk logistics with 50 representatives from 30 companies.

“There is a dramatic demand for global supply chain professionals,” said Nick Vyas, director of the center and an assistant professor of clinical data sciences and operations. We sat down with Vyas to get his views on the changing nature of the global supply chain.

How important is the global supply chain to our economy in LA?

“The ports of Los Angeles and Long Beach are central points in a major artery that provides goods and supplies to the entire country. The global supply chain plays a major role in the economy of LA, providing thousands of well-paying jobs at the ports, airports, distribution centers and warehouse complexes.”

Tell us about the so-called “super-ships,” and how they are impacting the global supply chain.

“The newer Ultra Large Container Ships, also known as a triple-E vessels – which carry over 18,000–21,000 TEU (20-foot equivalent units) – are considered ‘super-ships.’ These ships are three times as large in volume as the average ship that transported container cargo for years. This is changing the landscape of the industry by providing efficiency, while also creating a massive challenge for port infrastructure.”

In other words, existing port infrastructure isn’t up to the job?

“In terms of infrastructure, we are not where we should be. Container sizes have increased threefold, while operation and infrastructure – both soft and hard – is still running at the same pace. This will create ongoing delays and will impact the level of service immensely … The ports and terminals that are proactive at adopting the needed changes will benefit greatly, while others will miss the opportunities to partake in trade lanes affiliated with these triple-E vessels.”

To what extent have changes in volume factored into the recent labor slowdowns at the ports of Los Angeles and Long Beach?

“We have seen a dramatic reduction in volume due to the labor dispute. Primarily, these losses have occurred because shippers and suppliers have used various alternatives to bypass the LA/LB ports. Many Beneficial Cargo Owners (BCO), shippers and manufacturers have elected to use ports in Canada, the East Coast and the Gulf, as well as Mexico, instead.”

Will our local ports remain competitive once the Panama Canal widening is finished next year?

“The Panama Canal will provide a viable option to bypass West Coast ports, especially given historical trends with contract negotiations. The long-term impact of the Panama Cannel will be dependent on its ability to integrate the new locks fully and to manage the large vessel traffic efficiently and gracefully. To stay relevant, the LA/LB ports will have to find ways to create an ecosystem that is conducive to business by making cargo handling faster and more cost efficient.”

What challenges do the “just-in-time” business model present to the global supply chain industry?

“Just-in-time (JIT) is a great business model concept, which, if planned and executed correctly, can provide great supply chain efficiency as well as an improved bottom line. The JIT concept drives efficiency by synchronizing supply and demand and aligning inventory/raw material in the right location at the right time and quantity, thus reducing excess inventory cost. This works fine just as long as one doesn’t encounter any disruption issues along the supply chain network. Recent port issues or natural disasters like the tsunami in Japan really make the JIT network much more exposed and vulnerable than the model that is not completely JIT.”

How can professionals ready themselves for the future of this industry?

“Our economy has become truly global. We are all intertwined in the ways we source, manufacture, consume and share our resources. The way we manage the product and service flow has created a new sense of importance regarding the supply chain. Along with globalization, the evolution in the technology realm – from mobile technology, drones and 3D printing to robotics, autonomous vehicles and computing capabilities – will have a huge impact on society. This will create brand new opportunities for many, but will also make other jobs obsolete … Those with the proper tools and training will be prepared for future success in our globally connected world.”

The USC Marshall School of Business offers a 1 1/2-year master’s degree program in Global Supply Chain Management in conjunction with the USC Viterbi School of Engineering. The degree is offered in a three-semester, on-campus program, or a four-semester online format, geared toward those with three to five years of supply chain industry experience. 

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Moving the world: lessons from the port slowdowns

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