A collection of resources and commentary providing an introduction to supply chain management and related systems for students, practitioners, and anyone else interested in learning more about how to design, manufacture, transport, store, deliver, and manage products.
Wednesday, September 4, 2013
A Canal for the Global Supply Chain
The Isthmus of Panama and its geographic location have
always been among the topics of interest for the supply chain and logistics connoisseurs. It is one of the most important connections
between the Pacific and Atlantic Oceans.
Each year, over 13,000 vessels from all over the world transit through
the Canal with more than 195 million tons of cargo. This narrow, man-made pass provides the only
alternative to the sometimes dangerous route going around the tip of South
America. The Canal earns Panama over
$500 million per year in fees.
A study by INTRACORP for the Panama Canal Authority (2006) projected
an increasing trend and strong positioning in the future, with a combined
growth of at least 6% throughout the years 2015 – 2025. According to this study, activities that
depend on the Canal for transportation will grow at an even greater rate
because of the increasing importance of Panama as a logistics center. It is not surprising to say that the Panama
Canal authorities continuously evaluate future development for the country. They strive to evolve and adapt to the
changing surrounding environment to heighten the country’s important role in
the global supply chain. The expansion
project is proof of this.
In 2007, an expansion project to build a third set of locks
began. In light of the new design for
larger ships, the Panamanian government approved the construction of two new
locks, one each on the Atlantic and Pacific sides. The project is set to be completed by 2015 and
a growth of at least 3% per year in cargo is expected.
Most of the studies talk about growth and sustainability for
this mighty mega-construction; however, there has been some debate about the
Canal’s scalability and ability to maintain its position. Competitors are other factor to
consider. Chinese industrialist Wang
Jing has been stirring things up with his idea to invest in a new canal in
Nicaragua. This could be a threat for Panama’s
economy as the Canal is one of the country’s main sources of revenue; however,
unlike Nicaragua, Panama’s privileged geographic location excludes it of being
shook by major natural disasters, especially in the Canal area. Still, nothing is certain and we could end up
with two routes connecting the Pacific and Atlantic oceans. If that were to be the case, what could the
future look like for Panama? Can the thinnest country in Central America keep
up with the ever-changing conditions in this Global Supply Chain?
By Elisa Taymes
Sabonge R., Sanchez R. The Panama Canal in the Economy for Latin America and the Caribbean. United Nations Publications. 2009