Last fall, news of increasing port congestion on the West Coast—a story usually limited to the pages of logistics trade journals—found its way above the fold of the nation's leading newspapers. By mid-October, as many as 40 container ships were anchored off the Southern California coast, creating dramatic images of a nation's imports held, literally, at bay.

Accusing fingers were pointed at ocean carriers for failing to anticipate last year's import surge and alter their sailing schedules to accommodate peak shipping volumes. Meanwhile, the ports of Los Angeles and Long Beach (LA/LB) were taken to task for having an insufficient number of dockworkers to handle the 12.8 million TEUs (twenty-foot equivalent units) that were projected to pass through their gates in 2004.

All the while, importers fumed. When Logistics Management surveyed readers in November, 58 percent of the respondents said they had been affected by the backup at West Coast ports. At the time, they were experiencing an average delivery delay of 6.5 days. (See Figure 1 on Page 47.) Sixty percent reported that their intermodal rates increased in the last quarter as capacity tightened, while 38 percent predicted that the combination of those factors would cause them to lose fourth-quarter sales. More significant for the port community was that 54 percent of the shippers who were experiencing delays were taking steps to lessen their dependence on their traditional ports of entry. (See Figure 2 on Page 48.)

Those responses validate a growing trend: For U.S. importers, port-of-entry diversions to the Pacific Northwest and shifts to East Coast all-water routes are turning into permanent solutions.

Port diversion is becoming a viable, long-term answer to congestion because two necessary pieces of the transportation puzzle are now falling into place. First, Gulf and East Coast ports are gearing up to handle double-digit growth in container volumes. And second, the Panama Canal—which in October and November saw a 7.1-percent tonnage increase over the same period in 2003—is slowly but steadily developing the ability to handle more traffic, despite recent backlogs.

Simply switching ports of entry, though, won't be enough to solve the problem, warns Brian Bowers, vice president and general manager of intermodal services for Schneider National. "To make this all work, shippers will need to change their perception of intermodal transportation from a reactive, back-up mode to a year-round mode to better manage their capacity in and out of these new ports of entry," he advises. If all those pieces don't snap together, Bowers and others contend, today's solutions could turn into tomorrow's bottlenecks.

The genesis of this migration can be traced back to the lengthy port lockouts of 2003, when ocean carriers and port operators were at odds with longshoremen over several labor issues. That's when many importers, fed up with increasing delivery uncertainties, began laying the foundation for shipping through the Panama Canal to the Gulf Coast and the Eastern seaboard.

"Everyone who could transition their East Coast cargo from West Coast discharge and mini-landbridge to East Coast all-water [service] did just that," recalls Keith Hitchcock, director of global ocean freight services for UPS. Even after the labor dispute had been resolved, many shippers continued to use all-water service, and those "long-sighted" companies, as Hitchcock puts it, are well-positioned to deal with today's congested conditions.

The list of the "long-sighted" reads like a Who's Who of the retail world. Just three examples: Wal-Mart recently established 1.3 million square feet of warehouse space near the Port of Savannah, Ga., and will soon open an $80 million distribution center (DC) near the Port of Houston; The Home Depot has 1.4 million square feet of space in Savannah; and Target opened a 1.5-million square-foot import facility near the Port of Hampton Roads, Va.

As more importers look eastward for port capacity, Southeastern and Gulf Coast ports are gearing up to accommodate their needs. Few port managers foresaw this turn of events, though. Continued...

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