JIT AND ITS CONSEQUENCES FOR PORTS

When we first grew comfortable with supply chain logistics management concepts we learned to live with the concept of the supply-push chain whereby the rate of the supply of goods was set by the manufacturer in advance, based on expected demand, with the logistics provider ensuring a just-in-time supply of components. What this meant was that exporters and importers were trying to minimize the time of transportation thereby reducing the cost of finance by keeping inventory as low as possible. Compared with historical trends, this had no real impact on ports in terms of congestion, which was generally seen as a waterside issue.

Then along comes the switch to the information age and the capability for real time communications along the whole of the supply chain, and we see a shift to a new concept: the demand-pull logistics chain. Now the rate of manufacture is determined on a real-time basis by the rate of demand, that is it is consumer driven and not wholesale driven. While this model is more efficient, it requires perfect integration of all logistics operations within a single process.

The consequences for port operations are that warehousing inventory is reducing, and ports are clearly part of the logistics supply chain in that they can serve, wittingly or unwittingly, as a temporary storage facility allowing individual pick-up and delivery to the retailer. As volume of traffic interchange at the port increases due to a combination of increased volumes, seasonal peaks and larger ships, we see increasing congestion on the landside area of the port, particularly at the stack and at the gate.

The answer? The industry needs to better plan and manage its container dwell-time at ports and make better use of IT systems to avoid gate congestion. Los Angeles seems to have begun to learn this lesson.

. Ben Hackett is managing director of Global Insight Inc. (www. globalinsight. com)