News at Smith

Ports Search for Long-term Solutions

Feb 25, 2015

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SMITH BRAIN TRUST -- West Coast ports returned to full speed this week after a two-month labor dispute, leaving importers with a backlog of ships waiting to be unloaded. Professor Thomas Corsi, co-director of the Supply Chain Management Center at the University of Maryland’s Robert H. Smith School of Business, says companies burned by the slowdown will consider other options the next time around. “There is a labor risk at these ports, which creates uncertainty,” Corsi says. “Companies like to have contingencies for uncertainties.”

The next flare-up could come as soon as 2020, when the tentative labor agreement would expire. “Chances are, we'll see something similar in another five years. It would be good for ports and businesses to start thinking about that now,” Chloe Demrovsky tells USA Today. She is executive director of DRI International, a disaster planning organization that will hold its inaugural Collegiate Conference with the Supply Chain Management Center on April 10, 2015, in College Park, Md. (Register here)

Contingency Plans

Corsi says Canadian and Mexican ports will provide some contingencies for U.S. businesses, but how quickly these options emerge will depend on the level of infrastructure investment. “At this point in time, Canadian and Mexican ports are not able to handle the volume of traffic from Asia,” Corsi says.

More significant relief will likely come from the expansion of the Panama Canal, when a $5.25 billion project  wraps up later this year. “Using the expanded Panama Canal,” Corsi says, “larger ships can bypass the West Coast and carry goods directly to the Gulf and East Coasts.” Ports in Florida and elsewhere already are making big investments to get ready for the increased traffic.

Lagging Behind

Despite the progress, Corsi says the United States will continue to lag behind Asian and European ports in two important ways. The first is capacity. “U.S. ports can’t handle the biggest ships,” Corsi says. “The biggest ships are now operating from Asia to Europe. They can’t come here.”

Among the world’s top 20 busiest ports, the United States barely registers — with Los Angeles at No. 18 and Long Beach at No. 20. All the rest are from Asia or Europe, except Dubai, which ranks No. 9.
The other U.S. limitation is outdated technology. “Our ports are way behind the world in terms of mechanization and automation,” Corsi says.

At the most modern ports in places such as Singapore and Netherlands, cranes lift containers off ships and place them onto driverless vehicles that carry the cargo to storage stacks. “In the United States these vehicles are driven by longshoremen,” Corsi says.

Long-term Solutions

Automation would wipe out these jobs, which creates tension with the unions. “This strike was an effort by negotiators to take care of the workers and recognize their contributions,” Corsi says. “But at the same time, they can’t stop technology.” He says the solution would be a progressive labor movement that protects workers without sacrificing global competitiveness.

Beyond this, the country needs greater commitment to building infrastructure. Corsi says this requires a mixture of public and private investment. “For us to survive in the global economy,” he says, “our ports have to be more efficient than they currently are.”

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About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, specialty master's, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.