Ahead of the curve

Ahead of the curve

Last week I had the opportunity to do something I haven't done in 12 years covering international trade and logistics. I visited a seaport that has been perhaps the biggest success story among U.S. ports in recent years - Savannah.

The reasons for Savannah's success have widely reported. Beginning around the time Executive Director Douglas Marchand arrived in the mid-1990s, the port embarked on what for a seaport was a radical shift in strategy. It directed its marketing muscle at shippers, not ocean carriers. The results were soon apparent. Starting with Pier 1 Imports and Home Depot, the port has managed to attract 12 major shippers, including Wal-Mart, Kmart and Hugo Boss, to establish import distribution centers near the port. Carriers, naturally, followed their customers.

Fortuitously for the Georgia Ports Authority, the mid-1990s was when things started getting rough on the West Coast. The 1996 West Coast longshore contract negotiation was the first in which the associated slowdowns and other disruption came onto the radar screen of logistics directors, and if they missed the action in 1996, it was repeated in negotiations three years later. In addition, the legendary Union Pacific rail meltdown occurred in 1997.

These developments culminated with the 10-day shutdown in the fall of 2002, which established in the mind of shippers the all-water Panama Canal route as a viable alternative to Los Angeles-Long Beach. Savannah as a result has grown much faster than the nation's ports as a whole. Since 1993, Savannah's volume has tripled to just over 1.5 million last year. U.S. TEU volume as a whole grew just under 100 percent during that same period.

But last week it wasn't Savannah's previous growth that most struck me. It was the manner in which the port is planning for future growth. When one considers the U.S. international intermodal system, planning is not something that comes immediately to mind. The rail system is choking on the surge in containerized imports from Asia. The investment the railroads are making is to accommodate current growth. Not so with Savannah. The port this year estimates it will handle 1.65 million TEUs. Its capacity is approximately 3 million TEUs. Yet the GPA is expanding like there's no tomorrow. Within the next 18 months, a new section of terminal space, the relocation of rail facilities and "densification" efforts to increase average TEU-per-acre throughput will expand the port's capacity to some 5 million TEUs.

The port admits it will not grow by that amount in the next 18 months. But that's the point. The idea is to stay well ahead of the curve. "What a lot of ports are finding is that when the demand hits, in order to create space it take a minimum of 18-24 months, so you have to put yourself ahead of that curve by creating space," said Byron X. Hock, director of trade development at the GPA.

The GPA does not appear to be building against a theoretical inflow of future containers. The next major crop of post-Panamax ships entering the trans-Pacific trade next year will spring loose smaller ships for all-water services. The Panama Canal will soon be installing extensive lighting, allowing it to move toward a 24-hour-a-day operation, which will allow many more container ships to transit the waterway. The port also sees plenty of organic growth opportunity. Hock said 65 percent of the containers currently headed into Georgia from Asia still get there via West Coast ports. The point is this: With congestion quickly becoming the biggest issue in U.S. freight transportation, it's refreshing to see a situation in which systemic gridlock is unlikely to occur - by design.

Peter Tirschwell is vice president and editorial director of Commonwealth Business Media's Magazine Division. He can be reached at (973) 848-7158, or via e-mail at ptirschwell@joc.com.