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As the canal expands, so will supply chain

On a recent visit to the Panama Canal I witnessed ship after ship, loaded with 40-foot containers of goods stacked ten high and fourteen wide, make their way through the locks on their way from the Atlantic to the Pacific. The sheer size of the ships was impressive and the simple and efficient workings of the canal and locks ingenious. So much cargo was on the move that it’s hard to envision that, when the Canal expansion is completed in 2014, ships more than twice the size of these behemoths will carry even more goods across the Isthmus of Panama.

The canal itself is an engineering marvel, particularly when one realizes it was completed almost 100 years ago. Its impact on the global supply chain at the time was unprecedented. When the Panama Canal opened, it shortened the cycle for ships leaving the eastern US for the western US by days, decreasing transportation costs tremendously, saving time and reducing the risks of a longer sea voyage. The new shortcut made it easier to move goods between Asia, Europe and the US, increasing the time to get goods to consumers and greatly influencing world markets.

When the canal originally opened in 1914, about 1,000 ships passed through it each year; by 2008 that number had increased to more than 14,700. And the ships themselves have changed over the years, many of them designed specifically to carry as much cargo as possible through the narrow locks of the Canal. When the Canal’s expansion is completed in 2014, even larger ships will carry goods through on a regular basis, causing more ripples in the supply chain, not just in terms of goods, but services as well. Many ports that currently handle the processing of goods after they have made their way through the canal will now have to enlarge and deepen their channels to accommodate these larger ships. Shipping is likely to shift to those ports that are most accessible, which means that on-shore logistics, including shipping by truck, rail and air, will shift as well.

Some experts speculate that the expansion of the Panama Canal will have no less of an impact on the world supply chain as the original opening of the gates almost a century ago. We are witnessing history in the making, and only time will show the real global impact of this shift.