The epic-length labor contract negotiations between U.S. dockworkers and management on the West Coast took its toll among shippers of perishable commodities last season, but the supply chains of other industries were also severely disrupted. Automobile manufacturers, for example, were frantically searching for ways to ship and source vitally needed parts, while trying to explain delays to dealers and customers.
Honda had to slow down production in plants located in Indiana, Ohio, and parts of Canada due to shortages of electronics, transmissions, and other components reliant on just-in-time delivery. Supply chain managers for the car-maker described the crisis as “a fluid situation” due to slowdowns at the nation’s largest ports in San Pedro Bay.
Toyota’s managers said it had “adjusted overtime at some manufacturing plants in North America” by cutting some hours. Meanwhile, Nissan – which relies on local suppliers – had to reconfigure its entire supply chain.
Finally, some auto manufacturers just broke down and shipped by air…a far more costly option. Industry analysts say this is a short-term fix, however, and point to other less expensive mitigation strategies.
What will supply chain managers ever do? Consider the deep-water Mexican port of Lazaro Cardenas. APM Global Terminal Network certainly has. As a member of the Danish A.P. Moller-Maersk, family, APM is poised to welcome the new generation of mega-vessels, and that may mean fewer inbound ocean carrier calls to U.S. West Coast ports.
Having recently signed a 32-year concession for the design, construction and operation of a new super terminal, APM’s project will represent an overall investment of $900 million. The first phase of the construction of Terminal 2 (TEC2) will include 2,461 feet of quay, five ship-to-shore (STS) cranes, 22 automatic stacking cranes and two railway cranes.
The first 984 feet of quay will be ready by early summer, which will be followed by the installation of the container handling equipment. The completed terminal, which will add 1.2 million twenty-foot equivalent units (TEUs) of annual throughput capacity, is projected to become operational in the first half 2016.
Kansas City Southern, which exclusively provides rail service at Lázaro Cárdenas, expects to see sustainable double-digit revenue growth at the port when the new APM Terminals facility is opened.
And it is important to note that a key component of the project will be an intermodal transport corridor linking the Lazaro Cardenas marine terminal with APM Terminals’ own intermodal facility in Mexico City. This will provide U.S. shippers with access to the commercial, industrial and population center of Mexico City and beyond. Furthermore, rail will reduce emissions and provide more secure transportation for container loads.
Currently, both General Motors and Ford move autos and auto parts on a variety of modes but both rail has been steadily gaining share and is staged to surge, say company spokesmen.
The ports of Los Angeles and Long Beach are not only threatened by Mexico’s Lazaro. Supply Chain managers are also looking at alternatives offered by Manzanillo, where SSA Marine and Hutchison Port Holding are expanding their operations. Late last year, Hutchison finished the second phase of its $193 million container terminal upgrade at the port, which included a new dock and yard, as well as the installation of seven super-post-Panamax cranes and 18 yard cranes.
Granted, cross border congestion and Customs-clearance continue to be worrisome for the auto industry, but finding solutions for those issues are high on the agenda for Mexico’s decision makers. Finally, Mexico is starting to concentrate on developing its network of short-sea shipping and barge transport as part of its national transportation policy…something this country has yet to do.