Developing a Port Strategy in Industrial Site Selection

Defining ports’ role in site selection

Logistical considerations have long been a part of corporate site selection decisions. Proximity to robust transportation infrastructure such as interstates, rail lines, intermodal centers and ports to efficiently move raw materials and finished goods is a fundamental piece of the puzzle. The lingering effects of the COVID-19 pandemic and the subsequent realignment of global supply chains have only increased the importance of a company’s reliance on its transportation network. There is perhaps no greater scrutinized link in the supply chain than that of a port as it is easy to conjure up the images of container ships and oil tankers floating just off the coast due to backlogs at the terminal. But how, exactly, does a port fit into a company’s site selection decision, and do decision-makers give ports the weight they deserve in the site selection process? Site Selection Group, a full-service location advisory, economic incentives and industrial real estate services firm, proactively monitors port trends that might impact our clients’ projects.

Most active U.S. ports influence site location decisions

According to the United Nations Conference on Trade and Development, over 80% of international freight is transported by ship. Quite simply, maritime shipping and seaports are the backbone of the global supply chain. A port is a maritime facility that is utilized in the loading and unloading of cargo, including agricultural inputs and products, raw materials, finished goods, vehicles and more. Ports measure their performance in a variety of ways, perhaps the most well-known being monthly and annual volume, assessed by tracking the movement of twenty-foot equivalent (TEU) units. A TEU is a shipping container that is approximately 20 feet long. For additional insight into the history of the shipping container and the impact it has had on the international shipping industry, check out “The Box” by Marc Levinson.

Top 10 Busiest Container Ports in the U.S.

The ten ports listed above are certainly not the only ports considered in logistics models and operating costs analyses during the site selection process; however, heavily port-dependent projects should consider one of the top container ports in the nation as part of their analysis. Site Selection Group incorporates both large and small ports into logistics models and can help companies determine which ports, and subsequently which regions, make the most economical sense to include in the site selection process. By incorporating port sensitivity modeling early in the process, companies can protect themselves downstream and reduce their development schedule by ensuring they are looking for sites in the proper region.

Reshoring impacts on U.S. ports

The realignment of global supply chains has caused some companies to evaluate whether the popular just-in-time model of lean supply chain methodology should be transitioned to just-in-case, especially within industries that provide critical products and services to the nation’s health and security (e.g., biopharmaceuticals, defense, semiconductors, etc.) The ripple effects that this will have on U.S. ports are still working itself out, but companies that experienced the notorious backlog at some of the nation’s busiest ports are carefully examining whether to diversify their risk by routing their container volume, or at least a portion of it, through less congested and more efficient ports. Site Selection Group is consistently hearing from companies and clients that they want to reduce the reliance on ports that have long held sway over international shipping due to congestion caused by inefficient operations, rising costs and labor disputes. Minimizing future exposure to such risks is a critical part of their site selection decision.

Inland ports offer a viable intermodal solution

An inland port is an intermodal facility that offers the benefits of a coastal marine terminal, without having to be located along the coast or any other major waterway. As an example, the South Carolina Ports Authority owns and operates two inland port facilities: one in Greer and one in Dillon. Dedicated Class I rail lines move containers to and from the inland ports each day from coastal terminals in Charleston, offering numerous benefits to customers and port-sensitive site selection projects, including lower transportation costs and a reduced carbon footprint over truck pick-up at a seaport.

Intermodal facilities help companies further inland

Intermodal freight transportation utilizes multiple methods of transportation in the movement of a shipping container. It is an exchange point wherein a shipping container “changes hands” between methods of transportation. Common examples include inland ports and rail carrier intermodal yards. For companies and projects that depend on rail transportation to carry freight, but may not require on-site rail service or proximity to the coast, intermodal facilities present an alternative to locating near a seaport.

Cost model to test supply chain sensitivities

While logistics is not the only consideration in a site selection decision, it should be carefully evaluated and measured alongside other critical factors such as real estate requirements, tax climate and labor needs. Site Selection Group routinely assists clients with modeling the financial pros and cons of locating near a seaport vs. an intermodal facility. There is no one-size-fits-all solution for complex manufacturing and distribution site location projects. Data points such as commodities shipped, import/export needs, the volume of containers (monthly and annually), origin and destination will all assist in properly modeling logistics costs. For port-sensitive projects, the analysis of this cost data can quickly help narrow the focus of a geographic search, reducing the overall project schedule and hastening the day of operational launch.