Sunday, January 29, 2012

Infrastructure improvements and the need for speed

One thing should be clear to the voting public and political aristocracy (and is probably not).  In the Age of Globalization and complex distribution chains - - the adequacy of public infrastructure is going to matter more.  Where the word "more" is not linear - - "more" is exponential. 

The current issue of the Economist highlights this in California Ports: The fickle Asian container.  Improvements to the Panama Canal will change the speed and efficiency equation in such a way that it provides opportunity to the East and Gulf coasts and produces risk at West coast port operations.  The article states the following:

"The risk comes from the Panama Canal, which the Panamanians are digging wider and deeper.  In an inexorable shipbuilding trend, each generation of freighters is larger than the previous one.  So the canal today accommodates only ships that carry up to about 5,000 containers, whereas large freighters already carry 12,000, and the largest carry even more.  This is why it is currently best to move a box form Guangdong Providence to New York by floating it to Los Angeles or Long Beach, then putting it on a train.  But the digging in Panama is about to change the calculations."

Improvements to the canal (and dredging projects in the port cities of Miami, Savannah, and Charleston) have created a new matrix that makes the "unload in LA and ship to NY" slower.  This is the important part - - innovation in products such as the iPhone and innovation in the Apple production/supply chain need to be matched by innovations in the supporting infrastructure.  From automated loading/unloading port facilities, to faster rail networks, to deep and modern ports - - the future should be rather obvious.  You cannot invest and innovate only on the product side of the equation.  To remain competitive on a global scale, a country also requires investment and innovation in infrastructure.  Where some of the infrastructure is public infrastructure.

The future belongs to the swift and creative - - where the swift and creative are good at working around bottlenecks and cutting regions and countries out of the logistics picture.

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