For as long as I can remember, the ports of Los Angeles and Long Beach have led the list of the busiest ports in the United States. But times have changed. In the last four months of 2022, the Port of New York and New Jersey claimed the top spot, as it experienced 27 straight months of record volume.
Does the shift in port volumes mean supply chain managers need to take a fresh look at their physical networks? Should shippers be routing via New York and New Jersey, or perhaps the Port of Virginia? Or perhaps they should be sidestepping the ports altogether by reshoring volume to North America? Maybe it’s time to consider Mexico?
According to a recent analysis from the Department of Commerce’s Bureau of Industry and Security, trade between the United States and Mexico is growing: “In 2021, U.S. exports to Mexico were $276.5 billion, a 30.7% ($65.0 billion) increase from 2020; U.S. imports from Mexico were $384.7 billion, an 18.3% ($59.5 billion) increase; and the trade deficit with Mexico was $108.2 billion, a 4.8% ($5.5 billion) decrease. In 2021, Mexico is the No. 1 trading partner in terms of trading value, followed by Canada and China.” This seems to indicate that for some companies, contracting their supply chain to North America could be a viable option.
Meanwhile, international dislocations are rampant—with the war in the Ukraine being one of the most visible examples. According to a World Bank Blog, “The war in Ukraine is causing worldwide disruptions to trade and investment, affecting auto makers in Europe, hoteliers in Georgia and the Maldives, as well as impacting consumers of food and fuel globally. Although the world’s poor—who spend a large part of their incomes on life’s necessities—are the most vulnerable, no country, region, or industry is left untouched by these disruptions.”
All of these factors show that we live in volatile times, more volatile with each day. Supply chain dynamics are complex. We must manage more than ports, more than trade. There are uncertainty vectors all around us, and supply chain managers must address them all.
Supply chain leaders need to be more agile. The OODA Loop—observe, orient, decide, act—is a decision-making process developed and published by military strategist and U.S. Air Force Colonel John Boyd decades ago. The structured process helps develop and deploy strategies more quickly. While the framework was developed for combat operations, it can also be used to help companies improve agility, create competitive advantage, and keep pace with a rapidly evolving environment.
The stages of OODA can be summarized in this way:
- Observe: Gather as much current information from as wide a range of sources as realistically possible.
- Orient: Analyze the information to understand the current environment and describe the needed vector.
- Decide: Develop the plan for action.
- Act: Implement the changes.
- Then do it all again.
OODA in the real world
Recent events provide a rich portfolio of illustrations of the OODA loop in action. Take, for example, the U.S. Department of Commerce’s decision in October to issue export controls restricting China’s access to advanced computer chips and chip-making technology. The goal was to limit China’s ability to acquire sensitive technologies with military applications.
Alan Estevez is the Under Secretary of Commerce for the Bureau of Industry and Security (BIS) and has been heavily involved in these actions. Estevez spent most of his career as a civilian in the Department of Defense with his last position being Principal Deputy Under Secretary of Defense (Acquisition, Technology, & Logistics). He knows a thing or two about supply chain and absorbed the lessons of OODA during the coalition involvements in Southwest Asia.
“The threat environment is always changing,” Estevez explained in a press release about the new export controls, “And we are updating our policies today to make sure we’re addressing the challenges posed by the [People’s Republic of China] while we continue our outreach and coordination with allies and partners.”
This iterative approach of observing the threat environment in order to reorient policy and take swift actions certainly has roots in OODA.
The Commerce Department also moved on Russian interests in response to the war in Ukraine, while escalating pressure on China. In an editorial, Deputy Secretary of Commerce Don Graves writes: “Central to this effort have been the unprecedented ‘export controls’ we put in place at the U.S. Department of Commerce. One of their greatest areas of impact on the Russian defense industry is its resulting tech shortage. Export controls have hampered Russia’s ability to sustain, repair, and resupply its weaponry.”
Estevez and the Commerce Department understand the need for agility and OODA. Were the United Kingdom (U.K.) and the European Union (EU) able to apply the OODA framework to Brexit and move with agility? It’s a challenge shared by both parties, and they need to jointly observe, orient, decide, and act. But at the end of 2022, Bloomberg reported, “Six years on from the U.K.’s decision to leave the European Union, Brexit is still proving the biggest headache for British businesses, ranking even higher than Russia’s war in Ukraine, COVID, or rising energy costs.” After six years, there is no shared perspective between the EU and the U.K. There is no consensus. Final decisions, implementation, and closure remain elusive.
The Department of Commerce in the United States, the United Kingdom and the European Union have lacked agility in responding to Brexit. Rather than the nimble movement of an attack aircraft moving through the OODA sequence, the United Kingdom and the European Union are adjusting course with the agility of a lumbering container ship.
And speaking of container ships, let’s return to the ports of Los Angeles and Long Beach, where another OODA cycle is in play. In January of 2022, the container ship logjam peaked with 109 ships waiting for a berth. Although the backup is now gone, problems remain, and companies have made significant changes as a result. The Los Angeles Times reports, “U.S. retailers and manufacturers—hurt by the logjam and worried about a potential dockworkers strike—figured out workarounds that sent their cargo containers to ports on the East and Gulf coasts, which have been investing heavily for years to grab shipping business away from Southern California.”
The competing Eastern and Gulf ports observed, oriented, decided, and launched actions. The Port of New York and New Jersey has seized share, and the ports of Houston, Savannah, South Carolina, and Virginia all broke volume records in 2022 as well. OODA is in play, coast to coast.It’s not just at the ports. We live in a rapidly evolving world. Our supply chains must evolve with it. Speed up your clock. Embrace OODA and accelerate.