Beyond Inventory: The Growing Risk of Geographic Chokepoints

The COVID-19 pandemic forced a paradigm shift in supply chain management, prompting a renewed focus on inventory strategies. While the debate between just-in-time (JIT) and just-in-case (JIC) inventory has dominated discussions, there's another critical factor that often goes overlooked: geographic chokepoints.

Geographic Chokepoints: A Growing Concern

Geographic chokepoints, such as mountain passes, bridges, or narrow waterways, can significantly disrupt supply chains when incidents occur. The recent I-15 hazmat fire near Baker, California, serves as a stark reminder of this risk. The incident resulted in a 48-hour closure of a major artery between California and Las Vegas, causing widespread disruptions and economic losses. As a student of Logistics, I have always had this concern and see very little about this being discussed in the circles of discussion I run in. The real butterfly effect for my specific community is the following Las Vegas is a city built around consumption everything comes in either daily or weekly by Rail - Air or Truck to keep the Vegas consumption engine machine going and keep both our community of +/-2.3 Million Residents well-stocked, but also our 43+ Million Visitors that come to spend time with each year satisfied. Having insight into this reality via FEMA training it can keep you up at night as the implications are immense for my community and many others around the country on the inland side of these Chokepoints. What happens if the trucks stop for more than 72 hours? Supply Chain Chaos is brought to you by Just In Time Logistics. Now with the long-standing subscription to JIT, many communities don't have enough inventory storage and let alone grocery stores with more than 72- Hours of product on hand my argument for this article is that brands should consider making the deliberate move either pass these chokepoints or consider bring online additional warehouse space with in its networks to account for these distributions.

A Trend of Disruptions

The I-15 incident is not an isolated case. Over the past few years, we've witnessed numerous disruptions at chokepoints across the country, including:

• I-15 Cajon Pass: Wildfire torches cars, leading to a three-day closure.
• I-15 Stateline: Flooding forces closure of lanes.
• Donner Pass: Rockfall blocks the roadway, causing a two-week closure.
• I-80 Donner Summit: Snowstorms lead to multiple closures.
• I-40 Quartzsite: Semi-truck crash causes several-hour closures.
• I-10 Chiriaco Summit: Chemical tanker truck explosion results in a day-long closure.

The Evolving Risk Landscape

These incidents highlight the increasing vulnerability of supply chains to disruptions caused by geographic chokepoints. Factors such as climate change, increased traffic volumes, and aging infrastructure are exacerbating this risk.

While the traditional focus has been on optimizing inventory levels, businesses must also consider the potential impact of geographic chokepoints on their operations. A well-planned inventory strategy can help mitigate the effects of disruptions, but it cannot eliminate them entirely.

Beyond the Immediate Impact

The disruptions caused by geographic chokepoints can have far-reaching consequences. Delays in shipments can lead to missed deadlines, lost sales, and damage to customer relationships. Additionally, the economic impact can extend beyond the affected businesses to entire regions and industries.

To mitigate these risks, businesses must adopt a proactive approach that goes beyond simply managing inventory levels. By understanding the potential vulnerabilities of their supply chains and implementing effective mitigation strategies, companies can enhance their resilience and protect their bottom line.

Expanding Your Horizons: The Case for Inland Logistics Hub Cities

The vulnerability of supply chains to geographic chokepoints has become increasingly evident in recent years. As businesses seek to mitigate these risks, one promising solution is to consider relocating operations or establishing additional facilities in inland regions.

The Benefits of Inland Logistics Hubs

• Reduced Risk: Inland locations are generally less susceptible to disruptions caused by natural disasters, traffic congestion, and geopolitical events.
• Diversification: By establishing inland hubs, businesses can diversify their transportation routes and reduce their reliance on getting inventory through a single chokepoint.
• Cost Savings: In some cases, inland locations may offer lower operating costs due to lower land prices, reduced congestion, and further 1 & 2-day delivery distances.
• Backhaul Opportunities: Inland hubs can serve as strategic locations for backhaul logistics, reducing empty miles and improving overall transportation efficiency.

Case Study: Las Vegas and Reno

The Trans-Sierra Region, including Las Vegas and Reno Markets, offers several advantages as potential inland logistics hubs:

• Proximity to Major Markets: Both cities are within a reasonable distance of major population centers in California and the Pacific Northwest.
• Infrastructure Improvements: Recent investments in transportation infrastructure, such as the Interstate 15 widening project, have enhanced connectivity to the region.
• Business-Friendly Environment: Nevada's favorable tax environment and supportive business climate make it an attractive location for companies.
• Diversified Economy: The region's growing economy, driven by industries such as technology, gaming, and tourism, provides a stable market for logistics services.

Deadheading: A Unique Market Strategy for Inland Markets

Deadheading refers to the practice of transporting empty trucks or trailers back to their origin points. By matching backhaul shipments with return routes, businesses can optimize their transportation operations and minimize empty miles. Finding heavy consumption-based markets like Las Vegas companies and distribution companies can find more of these backhaul opportunities due to the nature of our markets having more consumption than production.

Beyond the Trans-Sierra Region

While the Trans-Sierra Region offers several advantages as an inland logistics hub, other regions across the United States may also be suitable for businesses seeking to mitigate the risks of geographic chokepoints.

• Midwest: Cities like Chicago, Indianapolis, and Detroit offer excellent connectivity to major markets and a diverse industrial base.
• Southeast: Atlanta, Memphis, and Charlotte are well-positioned to serve the growing Southeast market.
• Southwest: Bullhead City/Kingman, Phoenix, Dallas, and Houston provide access to a large and growing population.

Considerations for Businesses

When evaluating potential inland locations, businesses should consider the following factors:

• Proximity to Markets: Assess the distance and transportation time to key markets.
• Infrastructure: Evaluate the availability and quality of transportation infrastructure, including highways, railways, and airports.
• Labor Market: Consider the availability and cost of skilled labor.
• Economic Environment: Evaluate the region's economic outlook, tax incentives, and business climate.
• Land Availability and Costs: Assess the availability and cost of land for industrial development.

Conclusion

As the risks associated with geographic chokepoints continue to grow, businesses must adopt a proactive approach to ensure the resilience of their supply chains. By establishing inland logistics hubs and implementing effective mitigation strategies, companies can reduce their vulnerability to disruptions, enhance their competitiveness, and protect their bottom line. The ChainLinks - Retail Logistics team is here to help advise you through these site selection choices and help make the most sense of this new world we are living in. Contact my team today to get advice or just talk through these implications and how this will affect your individual supply chain. We are not just your National Retail Advisors we are your New Link between Retail & Logistics

Robert Scholes - Broker NewMarket Commercial Real Estate Advisors, a Chain Links Company - [email protected] C: 702-355-0180