While the delays at the U.S. West Coast ports continue, causing importers like Lululemon Athletica to delay store shipments by up to 10 days, other shippers are heading to Canada’s West Coast ports, such as Prince Rupert where cargo traffic headed for the U.S. has increased 11 percent so far this year. As highlighted in a Wall Street Journal article last week:
Congestion, labor tensions and tax concerns at U.S. ports have also spurred some shippers to look north.
Canada’s two big Pacific ports have a natural geographic advantage: relative proximity. Prince Rupert, for instance, is the closest North American port to Asia due to the curvature of the Earth, and is more than 68 hours closer to Shanghai by boat than Los Angeles, according to its port authority [emphasis mine]. It also boasts one of the world’s deepest natural ice-free harbors.
Building on that advantage, Canada’s government has spent 1.4 billion Canadian dollars (US$1.22 billion) over the past decade to improve rail and road access and boost inspection capacity at West Coast ports…Canadian railroad companies have also moved to capitalize on those infrastructure investments. Canadian National Railway Co., the only railway that serves Prince Rupert and one of three major railroads serving Port Metro Vancouver, has spent C$3 billion since 2010 to cut travel times along its western corridor, and has added new container terminals in Joliet, Ill., and Chippewa Falls, Wis., to receive Midwest-bound goods. Canadian National’s container business “has grown quietly and steadily” since 2010, said JJ Ruest, the railroad’s chief marketing officer.
The Canadian ports, however, have had some difficulty handling the surge in demand. As the WSJ article reports, “In one example of that surge in demand, a container terminal operator at Port Metro Vancouver in August told its customers it didn’t have enough railcars to ship Asian goods to the U.S. Midwest and suspended service for a week.”
The bottom line: History keeps repeating itself at the U.S. West Coast ports. There was the infamous 11-day shutdown in 2002, and just two years ago, 800 clerical workers at the ports of Los Angeles and Long Beach went on strike, shutting down the ports for eight days and costing the region’s economy about $8 billion. As I said at the time, when you stand back and think about it from a supply chain risk management perspective, being in a situation where just 800 clerks can shut down the main entry point for about 40 percent of U.S. imports and cost the region about $1 billion per day is not good. If you’re not exploring alternative ports of entry (whether via Canada, Mexico, or the East Coast), then you’re missing out on opportunities to reduce your risk for a supply chain disruption and/or to achieve lead time and cost reductions too.