Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
Besides the region's civic and port leaders, perhaps no one in the wide swath of Central and South Florida has more at stake with the opening of the expanded Panama Canal than does Jim Hertwig.
Hertwig is the president and CEO of Jacksonville-based Florida East Coast Railway (FEC), the regional freight railroad whose network extends along a 351-mile corridor from Jacksonville to Miami. FEC has a stranglehold on rail service across Florida and, perhaps more importantly for the company's future, a virtual monopoly on traffic at the Port of Miami, Port Everglades in Fort Lauderdale, and the Port of Palm Beach.
FEC's pole position will look more valuable than ever come the late summer of 2014, when the Port of Miami is scheduled to complete a $150 million project to dredge its harbor from the current depth of 42 feet to the 50-foot depth needed to handle the huge "post-Panamax" ships that will transit the widened and deepened canal when it opens at about the same time.
The project got a huge boost in early March when Florida Gov. Rick Scott directed the state's department of transportation to allocate $77 million to the work. The dredging coincides with the building of a tunnel that will reconnect the port to FEC's rail yard and take trucks off of local surface roads linking the port and the railroad.
In mid-July, FEC broke ground on an on-dock rail terminal at Miami. It will operate its first train there by the end of the first quarter of 2012, according to Hertwig. A similar project at Port Everglades will go live in the second half of 2013, he said.
Because Miami is the closest U.S. port to the canal, local and regional interests hope the deepening of its harbor and FEC's launch of on-dock rail service will make Miami the first and primary port of call for the larger ships expected to transit the Isthmus. Local officials also hope that 2014 will herald a re-drawing of the nation's international distribution map, as ships that in the past would have called at West Coast ports and moved goods eastward by rail or truck begin using Miami as a gateway to ship freight to closer-in Eastern U.S. destinations, where much of the nation's populace resides.
It may also herald a bonanza for FEC, which will be the go-to railroad to move containers off-loaded at the South Florida ports and headed both within the state and to points further north and west. "We will be able to serve markets like Atlanta and Charlotte in two days, and Memphis and Nashville in three days," said Hertwig, whose railroad delivers freight in 10 hours from Jacksonville and Miami.
Trade flow imbalance
The shifts in distribution patterns may be most deeply felt within Florida itself. Between 12 million and 13 million people reside in the state's Central and Southern regions, the largest East Coast population center outside of the New York metropolitan area. Because of its large retiree and tourist population, however, the region is heavily skewed toward consumption, with relatively little production.
Many of the goods bound for Central and Southern Florida are produced either in South Georgia or Northern Florida around Jacksonville, and must then traverse—usually by truck at a significant cost—the lengthy peninsula down to the southern part of the state or be diverted west toward its center. What's more, there are few backhaul opportunities due to the lack of manufacturing in the region.
The imbalance of container traffic is striking, according to various sources. Hertwig said that for every four loads headed south there is only one moving north. Charles W. Clowdis, managing director-transportation advisory services for consultancy IHS Global Insight, said the ratio is closer to five-to-one in favor of southbound loads.
Florida port interests believe that deepening Miami's harbor to handle post-Panamax vessels will open up the state's Southern and Central regions to an avalanche of Asian imports that can be whisked across Florida and surrounding states, thus remedying the existing directional imbalance.
Plans for an inland port
In preparation for the potential change, private-sector interests have joined to develop Florida's first inland port designed to link the seaports, via road and rail, with a centralized warehouse and distribution cluster that will serve population centers throughout Florida and the Southeast United States. The 2,300-acre facility, located in southwest St. Lucie County about 90 miles from the Port of Miami and 50 miles from Port Everglades, will cost about $2 billion and take about 15 years to complete.
The first phase will be finished in 2014 to coincide with the expanded canal's opening and the completion of Miami's dredging project.
The inland port "will create an entirely new industrial model for Florida, ultimately providing a connection to direct on-dock rail service at Florida's key seaports, along with easy access to all major highways," said John Carver, who heads the ports, airports, and global infrastructure practice for Chicago-based real estate and logistics services giant Jones Lang LaSalle, which has been named the port's exclusive project advisor.
According to JLL data, there are 12 inland ports in operation across the United States. Each port shares several common characteristics, namely proximity to at least 3 million residents living within a 200-mile radius; a direct connection to a seaport via one of the four major "Class I" railroads; designated status as a Foreign Trade Zone; and access to an abundant supply of surrounding industrial real estate.
Florida, whose container ports handle about 2.8 million twenty-foot equivalent units (TEUs) annually, is perhaps the most glaring hole in the inland port network, Carver said. "It's the only state in the country with this kind of volume that doesn't have a dedicated facility like this," he said.
The big winner, Carver said, could be FEC, which although not a Class I carrier, is positioned to provide all the on-dock rail capability to serve the inland port. "The key is access to the on-dock terminal capacity, and FEC has a lock on that," he said.
Economic activity in the logistics industry expanded in November, continuing a steady growth pattern that began earlier this year and signaling a return to seasonality after several years of fluctuating conditions, according to the latest Logistics Managers’ Index report (LMI), released today.
The November LMI registered 58.4, down slightly from October’s reading of 58.9, which was the highest level in two years. The LMI is a monthly gauge of business conditions across warehousing and logistics markets; a reading above 50 indicates growth and a reading below 50 indicates contraction.
“The overall index has been very consistent in the past three months, with readings of 58.6, 58.9, and 58.4,” LMI analyst Zac Rogers, associate professor of supply chain management at Colorado State University, wrote in the November LMI report. “This plateau is slightly higher than a similar plateau of consistency earlier in the year when May to August saw four readings between 55.3 and 56.4. Seasonally speaking, it is consistent that this later year run of readings would be the highest all year.”
Separately, Rogers said the end-of-year growth reflects the return to a healthy holiday peak, which started when inventory levels expanded in late summer and early fall as retailers began stocking up to meet consumer demand. Pandemic-driven shifts in consumer buying behavior, inflation, and economic uncertainty contributed to volatile peak season conditions over the past four years, with the LMI swinging from record-high growth in late 2020 and 2021 to slower growth in 2022 and contraction in 2023.
“The LMI contracted at this time a year ago, so basically [there was] no peak season,” Rogers said, citing inflation as a drag on demand. “To have a normal November … [really] for the first time in five years, justifies what we’ve seen all these companies doing—building up inventory in a sustainable, seasonal way.
“Based on what we’re seeing, a lot of supply chains called it right and were ready for healthy holiday season, so far.”
The LMI has remained in the mid to high 50s range since January—with the exception of April, when the index dipped to 52.9—signaling strong and consistent demand for warehousing and transportation services.
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
"After several years of mitigating inflation, disruption, supply shocks, conflicts, and uncertainty, we are currently in a relative period of calm," John Paitek, vice president, GEP, said in a release. "But it is very much the calm before the coming storm. This report provides procurement and supply chain leaders with a prescriptive guide to weathering the gale force headwinds of protectionism, tariffs, trade wars, regulatory pressures, uncertainty, and the AI revolution that we will face in 2025."
A report from the company released today offers predictions and strategies for the upcoming year, organized into six major predictions in GEP’s “Outlook 2025: Procurement & Supply Chain” report.
Advanced AI agents will play a key role in demand forecasting, risk monitoring, and supply chain optimization, shifting procurement's mandate from tactical to strategic. Companies should invest in the technology now to to streamline processes and enhance decision-making.
Expanded value metrics will drive decisions, as success will be measured by resilience, sustainability, and compliance… not just cost efficiency. Companies should communicate value beyond cost savings to stakeholders, and develop new KPIs.
Increasing regulatory demands will necessitate heightened supply chain transparency and accountability. So companies should strengthen supplier audits, adopt ESG tracking tools, and integrate compliance into strategic procurement decisions.
Widening tariffs and trade restrictions will force companies to reassess total cost of ownership (TCO) metrics to include geopolitical and environmental risks, as nearshoring and friendshoring attempt to balance resilience with cost.
Rising energy costs and regulatory demands will accelerate the shift to sustainable operations, pushing companies to invest in renewable energy and redesign supply chains to align with ESG commitments.
New tariffs could drive prices higher, just as inflation has come under control and interest rates are returning to near-zero levels. That means companies must continue to secure cost savings as their primary responsibility.
Freight transportation sector analysts with US Bank say they expect change on the horizon in that market for 2025, due to possible tariffs imposed by a new White House administration, the return of East and Gulf coast port strikes, and expanding freight fraud.
“All three of these merit scrutiny, and that is our promise as we roll into the new year,” the company said in a statement today.
First, US Bank said a new administration will occupy the White House and will control the House and Senate for the first time since 2016. With an announced mandate on tariffs, taxes and trade from his electoral victory, President-Elect Trump’s anticipated actions are almost certain to impact the supply chain, the bank said.
Second, a strike by longshoreman at East Coast and Gulf ports was suspended in October, but the can was only kicked until mid-January. Shipper alarm bells are already ringing, and with peak season in full swing, the West coast ports are roaring, having absorbed containers bound for the East. However, that status may not be sustainable in the event of a prolonged strike in January, US Bank said.
And third, analyst are tracking the proliferation of freight fraud, and its reverberations across the supply chain. No longer the realm of petty criminals, freight fraudsters have become increasingly sophisticated, and the financial toll of their activities in the loss of goods, and data, is expected to be in the billions, the bank estimates.
The move delivers on its August announcement of a fleet renewal plan that will allow the company to proceed on its path to decarbonization, according to a statement from Anda Cristescu, Head of Chartering & Newbuilding at Maersk.
The first vessels will be delivered in 2028, and the last delivery will take place in 2030, enabling a total capacity to haul 300,000 twenty foot equivalent units (TEU) using lower emissions fuel. The new vessels will be built in sizes from 9,000 to 17,000 TEU each, allowing them to fill various roles and functions within the company’s future network.
In the meantime, the company will also proceed with its plan to charter a range of methanol and liquified gas dual-fuel vessels totaling 500,000 TEU capacity, replacing existing capacity. Maersk has now finalized these charter contracts across several tonnage providers, the company said.
The shipyards now contracted to build the vessels are: Yangzijiang Shipbuilding and New Times Shipbuilding—both in China—and Hanwha Ocean in South Korea.
Specifically, 48% of respondents identified rising tariffs and trade barriers as their top concern, followed by supply chain disruptions at 45% and geopolitical instability at 41%. Moreover, tariffs and trade barriers ranked as the priority issue regardless of company size, as respondents at companies with less than 250 employees, 251-500, 501-1,000, 1,001-50,000 and 50,000+ employees all cited it as the most significant issue they are currently facing.
“Evolving tariffs and trade policies are one of a number of complex issues requiring organizations to build more resilience into their supply chains through compliance, technology and strategic planning,” Jackson Wood, Director, Industry Strategy at Descartes, said in a release. “With the potential for the incoming U.S. administration to impose new and additional tariffs on a wide variety of goods and countries of origin, U.S. importers may need to significantly re-engineer their sourcing strategies to mitigate potentially higher costs.”