The East Coast/West Coast picture clarifies … or does it? East Coast/West Coast picture clarifies...
Transcript of The East Coast/West Coast picture clarifies … or does it? East Coast/West Coast picture clarifies...
The East Coast/West Coast pictureclarifies … or does it?
Dr. Rob LeachmanUniversity of California at Berkeley
TPM ConferenceMarch 3, 2014
The Status Quo
The lion’s share of imports from Asia to Continental USA follow one of three types of supply chains:
• Push
• Push-Pull 3[4][5] Corners
• Push-Pull all-at-San-Pedro-Bay
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Push Supply-Chain Strategy
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Push-Pull Supply Chain – All at San Pedro Bay
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Potential port of entry
Regional distribution center
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Push-Pull Supply Chain – Four Corners
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Cheap, Moderate and Expensive Imports
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0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
0.0 ‐4.0
4.0 ‐8.0
8.0 ‐12.0
12.0 ‐16.0
16.0 ‐20.0
20.0 ‐24.0
24.0 ‐28.0
28.0 ‐32.0
32.0 ‐36.0
36.0 ‐40.0
40.0 ‐44.0
44.0 ‐48.0
48.0 ‐52.0
52.0 ‐56.0
> 56.0
Percen
tage
of Total TEU
s
Declared Value ($ per cu. ft.)
Value Distribution of 2005 Asia ‐USA Waterborne Containerized Imports
25%InexpensiveImports
50%Moderate-valueImports
25%ExpensiveImports
Source: WTA, PIERS, PMA
Each Kind of Supply Chain is Best for Some Goods
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Push Push-Pull 3, 4 or 5 Corners
Push-Pull All at San Pedro Bay
Nation-wide distribution of inexpensive goods and one-time-sale goods by large retailers (~13.5%)
Nation-wide distribution of moderate-value goods by large retailers (~27%)
Nation-wide distribution of expensive goods imported by large OEMs (~13.5%)
Small and regional importers (~46%)
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0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
0.0 ‐4.0
4.0 ‐8.0
8.0 ‐12.0
12.0 ‐16.0
16.0 ‐20.0
20.0 ‐24.0
24.0 ‐28.0
28.0 ‐32.0
32.0 ‐36.0
36.0 ‐40.0
40.0 ‐44.0
44.0 ‐48.0
48.0 ‐52.0
52.0 ‐56.0
> 56.0
Percen
tage
of Total TEU
s
Declared Value ($ per cu. ft.)
Value Distribution of Asia ‐ USA Containerized Imports, 2005 Actual vs. After 15% Increase in Values
19%InexpensiveImports
49%Moderate-valueImports
32%ExpensiveImports
But the mix of chains is evolving
OK, So What Effect Will the Canal Expansion Have?
• West Coast Store-Door, IPI and All-Water are services are sold by the Lines as separate services.
• Importers set up their supply chains based on prices for these services and consideration of their inventory economics.
• So the effect of the Canal expansion is really a question of what will happen to the differential between all-water and West-Coast-port-of-entry rates.
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A What-If Analysis• 2010 – 2011 season confidential rates
• 2005 distribution of declared values and importer shares
• 2008 distribution of purchasing power
• For each of top 83 importers, choose supply chains minimizing total inventory + transportation costs
• For 19 “generic proxy” importers, choose least-cost Push supply chain
• Total up the imports by port and by Coast …March 3, 2014
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A What-If Analysis (cont.)
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20%
25%
30%
35%
40%
45%
50%
55%
60%
65%
70%
75%
80%
0.85 0.875 0.9 0.925 0.95 0.975 1 1.025 1.05 1.075 1.1 1.125 1.15
Share of Con
tainerized
Trans‐Pacific A
sia ‐U
SA Im
ports
Normalized All‐Water Rates (2010‐2011 = 100%)
Predicted Shares of Trans‐Pacific Asia ‐ USA Imports as a Function of the Differential in All‐Water vs. West Coast Rates
West Coast Share
All‐Water Share
A What-If Analysis (cont.)
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0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0.5
0.85 0.875 0.9 0.925 0.95 0.975 1 1.025 1.05 1.075 1.1 1.125 1.15
Share of Con
tainerized
Trans‐Pacific A
sia ‐U
SA Im
ports
Normalized All‐Water Rates (2010‐2011 = 100%)
Predicted Shares of Trans‐Pacific Asia ‐ USA Imports as a Function of the Differential in All‐Water vs. West Coast Rates
All_Water
WC_IPI
USA_WC_TL53
WC_Local
So What’s Going to Happen?
• “Forecasting is hard. Especially about the future.”
• A 10% rate differential one way or the other would make a huge difference:– If All-water rates go down 10% relative to WC rates, then
Panama Canal volume will be up 31% while West Coast ports will be down 14%
– If All-water rates go up 10%, then Panama Canal volume will be down 20% while West Coast ports will be up 9%
• If the (relative) rates do move, I predict two or three years of turbulence before a new equilibrium is reached.
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