John Denslinger explores the vital role of the Panama Canal and offers purchasing professionals five technology-driven ways of boosting supply chain resilience.
Perhaps the greatest engineering marvel of last century was the Panama Canal. Its completion in 1914 immediately transformed global trade routes in the Western Hemisphere. For years this man-made waterway connecting the Atlantic and Pacific Oceans operated with little attention. Severe drought conditions changed all that from late 2022 through 2024 when the Canal Zone Authority was forced to restrict the number of vessels/day, the allowed draft of entering vessels and the prioritization of queued vessels. That unfortunate disruption highlighted once again the Canal’s strategic importance to US commerce.
Strategically, the Canal is a critical east-west maritime artery and a legitimate US national security and economic concern. It’s governed by the Permanent Neutrality Treaty between Panama and the US. The treaty spells out three key expectations: (1) efficient canal operations; (2) transit fees that are ‘just, reasonable, equitable and consistent with international law’; and (3) neutrality of the canal. While more could be said about America’s security concerns over China’s Belt and Road influence in the Canal Zone, suffice it to say Panamanian authorities recently reaffirmed its neutrality commitment assuring uninterrupted global trade.
To many US companies, the Canal is a vital supply chain link. Statistically, the Panama Canal only services six per cent of global maritime trade and 73 per cent of that trade volume is US inbound or outbound. Forty per cent of all US container traffic passes through the Canal transporting an estimated $270B in cargo (data per Sobel Network Shipping). Container cargo dominates eastward trade while crude oil, refined products, LNG and LPG from US East and Gulf coasts dominates westward trade.
One thing seems obvious, the world’s canals are navigation pinch-points prone to unforeseen disruption. Knowing that, companies need greater supply chain resilience countering possible delays and closures. Here are a few countermeasures worth implementing : (1) route diversification bridging both marine and land options; (2) proactive booking; (3) nearshoring and reshoring manufacturing; (4) increased on-hand inventory; (5) demand visibility tools; and most importantly (6) leverage AI and other advanced technologies.
The importance of advanced technology can’t be overstated. It plays a crucial role in supply chain resilience offering new tools to detect, respond and mitigate the impact of disruptions. Now is the time to enhance your arsenal with:
• Business-wide real-time visibility of in-transit goods—IoT and blockchain provide continuous monitoring that identifies and responds promptly to disruptions
• Business-wide predictive analytics for risk management—AI and machine learning algorithms forecast potential disruptions and prescribe proactive options
• Enhanced decision-making—AI generates data-driven insight for faster, more informed action during crisis situations
• Inventory control resilience—AI in concert with IoT manages the delicate balance between carry cost and stock-outs while optimizing sales and customer satisfaction
• Supplier partnerships—AI and blockchain facilitates communications and collaboration across the entire supply chain for quick reaction to perceived disruption
The Panama Canal is definitely a vital commerce link, but it can be a supply chain kink when delays and closure occurs. Eliminate the kink by building resilience. Build world class resilience with advanced technology.
