West coast port issues remain a concern to 3PLs

The Current Status and Future Prospects of the Third Party Logistics Industry in North America: The 2016 3PL CEO Survey

The March issue of Supply Chain Management Review featured The 2016 3PL CEO Survey: Threats, Disruptions, and Opportunities, the annual survey conducted by Robert C. Lieb of the CEOs of fourteen of the largest third-party logistics (3PL) companies serving the North American marketplace. Launched in 1994, this marked the 23rd iteration of Lieb's survey. The SCMR article focused on the threats, disruptions and opportunities confronting 3PL CEO's as they grapple with e-commerce, new technologies such as 3D printing, West Coast port issues and the political uncertainty emanating from Washington. Yet, Lieb's study also included research into other areas. This marks the last of three columns featuring the rest of the survey here on SCMR.com. Bob Trebilcock, editorial director.

West Coast Port Issues (M/A)
In the first column, we discussed the financial outlook of the North American 3PL industry. Last week, we looked at mergers and acquisitions. In this final column, we look at the impact of West Cost Port issues.

In our 2015 survey we addressed the labor disputes involving West Coast ports and their impact on shippers, ocean carriers and 3PLs. At the time, we asked the 3PL CEOs if those problems had impacted any of their key customers and thirteen of fifteen said “yes.” Those customers had experienced long delays, re-routing of many shipments, shipments being stuck in ports, frequent shifts to air cargo at dramatically higher costs, longer transit times and many angry customers. All the CEOs reported their companies had taken steps to alleviate/prevent such problems for key customers.

They were then asked if they believed because of those problems some key customers were likely to significantly change their future supply chain patterns to rely less heavily upon those ports. Seven of fifteen CEOs said such changes were likely.

We followed up on that issue in our 2016 survey. Eleven of the fourteen respondents reported some of their key customers had changed their port strategies. Among the changes reported were:

• Many customers had diversified their port strategies and wee using more ports
• Six CEOs reported some customers began to specify moves through East Coast ports (two mentioned Panama Canal expansion as facilitating those shifts)
• Among the other changes cited were: some shift from ocean to air freight, movement of freight through Houston, shipping to the West Coast of Mexico and Canada, using Prince Rupert, Canada as a port of entry, shifting more sourcing and manufacturing to Mexico, and working with 3PLs to develop port contingency strategies.

It is now very clear that such disruptions and their related costs to shippers can lead to significant changes in supply chain planning in the shipper community and there are potentially longer-term impacts on ports, ocean carriers, and labor requirements at affected ports.

Robert C. Lieb, Ph.D. is a professor of Supply Chain Management at the D'Amore-McKim School of Business, Northeastern University. He can be reached at [email protected].

Author's note: 3PLs participating in the survey included Agility Logistics, APL Logistics, Cardinal Logistics, Coyote Logistics, DHL Supply Chain, DSC Logistics, MIQ Logistics, Nippon Express, Transplace, UPS Supply Chain Solutions, Werner Logistics, XPO, Yusen Logistics, (Confidential). *

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