MetroFreight

1.1f <p>Evolving models of port cooperation on the US West Coast</p>

Project Number

1.1f

Project Summary

Evolving models of port cooperation on the US West Coast

Project Status

Complete

Project Report

Year

2015

Topic Area

Sustainable Urban Freight

P.I. Name & Address

Professor of the Practice of Policy and Engineering, Sol Price School of Public Polilcy
University of Southern California
3620 S. Vermont Ave.
KAP 213
Los Angeles, CA 90089-2531
United States
knatz@usc.edu

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Recent evolutions in the ways ports cooperate are a direct result of changes in the operations of the businesses they serve.  Traditionally, ports have cooperated to seek funding, share costs and address common hinterland infrastructure issues. Changes in global trading patterns and the growing dominance of ocean carrier alliances in east- west trade lanes have increased competition within the US port sector.  Ports proximate to each other that serve  large markets are subject to potential cargo volume losses as container line alliances shift cargo from one port to another, seeking improved efficiencies coupled with lower costs.    In addition, the expansion of the Panama and Suez canals provides opportunities for some US east coast and gulf ports to capture an increased share of the Asian trade that traditionally would move through the US west coast ports.

 

The purpose of this research project is twofold: 1) to examine the forces that motivated competing ports on the US west coast to cooperate and 2) to identify how those models of cooperation are evolving due to market pressures.   The Los Angeles/Long Beach and Seattle/Tacoma port regions provide numerous examples of cooperative efforts over the past few decades. In addition, there are recent examples of cooperative efforts that involved all the major container ports on the west coast working together on issues such as a “Beat the Canal” strategy.   Independently, however, both port regions are taking dramatically different approaches to addressing their competitive and business issues. 

 

A case study analysis of both the San Pedro Bay and Puget Sound Ports will examine the specific mechanisms being used today by the ports to promote cooperative efforts directly targeted at retaining their market share.    Unlike previous joint collaborations, many which are well documented,  efforts to collaborate for the purpose of retaining or increasing  business by competing ports have not been well examined or documented.  That may be because efforts involving joint marketing are more challenging and often did not yield the desired results.

 

Joint marketing among competing ports has been an anathema among the port industry.   Yet today the strategies being undertaken by the San Pedro Bay and Puget Sound ports, involving both horizontal and vertical elements of the supply chain, are, in essence, joint marketing. In the case of the Puget Sound Ports the creation of the Northwest Alliance is a merger of cargo operations by the creation of a third entity in an effort to arrest their decline in market share.     The San Pedro Bay Ports, primarily faced with reputational risks due to congestion are using a vertical integration strategy, to retain and grow market share.   How far ports advance down a pathway that involves joint marketing and a regional business strategy with their competitor is linked to the port’s own perception of its market power. When the power of its customers is perceived as stronger than the port’s market power, an environment to consider greater collaboration with one’s competitors is created.   The intensity of the competitive forces facing the US west coast ports, coupled with political concern for the economic vitality of the port region, is leading to new models of collaboration among ports that go well beyond the planning and development collaborations of the past to focus on business and marketing strategies.

 

While this research is focused on the US west coast ports, the market power of the ocean carrier alliances is driving change in the port sector worldwide.   How cooperative efforts evolve among the US west coast ports will be examined in the context of changes occurring in other world port regions where ports in proximity face similar competitive challenges.