Strengthening your supply chain one link at a time.
At St. Onge Company, we are continuously developing distribution network strategies for clients that often times include a significant import ocean container aspect to them. When the strategy we are recommending shifts the stocking policies of SKUs from DCs with disparate geographies (for example, Los Angeles to Atlanta) or adding DCs to the network, the next logical question clients ask is “Should my company change the port of entry to a closer proximity to the DC?” As always, it depends on various factors to consider:
Total Landed Cost Considerations
Even though the ocean container pricing has been VOLATILE (to say the least) during the COVID pandemic, the cost to land a container from the Far East into Atlanta via the port of Long Beach (using a mini-land bridge via rail) versus the all-water option via the Panama Canal (using over-the-road drayage) is still marginally different in total cost. The “puts and takes” tend to even out, i.e. the cheaper water portion of the Far East to the US west coast being offset by the cost of the ~2,000 mile rail journey to Atlanta. Thus, even with the absolute cost of shipping ocean containers rising significantly, the costs of each leg has risen proportionately so that it is still relatively cost neutral whether on east coast port or west coast port is used to gain entry into the USA. As a side note, Gulf of Mexico ports tend to be slightly higher by a few hundred dollars in total landed cost per container than either coast.
Time-in-Transit Considerations
Our clients usually comfirm that time-in-transit is THE key differentiator in the decision making process. The reality of using the Panama Canal to either US coast, will incur net penalty of 10 to 18 days (mean of 2 weeks) versus using the mini-land bridge option to traverse the USA. For clients with high COG$, that means tying up too much working capital for in-transit inventory to wait the extra days. For clients that want to turn their inventory quickly or have poor deployment systems, those extra days for the all-water route are not a viable option.
Sailing Schedule Considerations
Our clients usually agree that sailing schedules is the second most important factor in the decision making process. Meaning, how often do the big container ships hit each port from each country of origin. The busiest ports, by almost every measure, are LA/Long Beach, CA and Port Elizabeth (NY/NJ), and they will typically have more frequent arrivals from almost every origin country than other deep-water ports, offering a high level of accessibility. Secondary ports like Oakland, CA; Miami, FL; Savannah, GA; Houston, TX; Charleston, SC; Norfolk, VA; Seattle, WA; tend to have infrequent arrivals or are ignored altogether by some ocean carriers making them difficult to utilize except under very specific conditions. Especially in these secondary ports with infrequent sailings, your container getting “bumped” due to capacity of the vessel happens too frequently and causes huge disruptions to the supply chain that incur too much risk to make them a viable option for some clients.
West Coast Specific Port Considerations versus Long Beach (LA)
Gulf of Mexico Specific Port Considerations versus Long Beach (LA)
East Coast Specific Port Considerations versus NY/NJ
Simply put, there is no single answer to the value of the moving your port of entry in light of shifting stocking locations in the US. It truly depends on the particulars of your supply chain—product cost, customer service expectations, necessary sailing frequencies and port reliability. Understanding those needs will ensure your supply chain can always meet or exceed them.
—Craig Vorse, St. Onge Company
