During our class session on June 27th, we began to discuss the importance of why project managers need to understand strategy. The ongoing Panama Canal expansion came to mind as an example of a project that is having a monumental effect on the strategy of a wide variety of organizations. The Internet is full of articles discussing the project overruns for the expansion itself, along with discussions surrounding the port expansions around the globe.
The expansion, set to open in April of 2016, ran overschedule and over budget. In early 2014, with the project about 75 percent complete, work on the project stopped for two weeks. The reason for the stoppage was a disagreement between the Canal Authority and the construction firms over who should page for the $1.6 billion cost overrun. Of course, some last minute financing pulled the project out of a nosedive during the final stretch.
Think about the long-range goal setting and scheduling that went into the expansion project. Not to mention the multiple projects within the project and numerous phases to implement and tweak along the way. According to the consortium of European construction firms, the cost overrun was due to “surprises that we could not have foreseen”. Cost adjustments were required due to rare soil conditions and a higher-than-expected earthquake potential along the canal.
From an outsider’s prospective, isn’t it hard to imagine that the talented and experienced construction firms involved were “surprised” by such factors? Why didn’t the Canal Authority share these concerns with the construction firms from the beginning? It’s the explanation for the overruns that baffles me. Labor issues or material shortages are more understandable.
As the canal project was underway in Panama, project managers at ports throughout the United States were adjusting their firm’s strategy. A deeper and wider canal means larger ships carrying more containers must be able to be offloaded at the ports. Each port faces unique challenges to increase their capacity for the new ships. There is no doubt that the organization’s mission and strategies evolved.
While the east coast and southern U.S. ports are increasing capacity to accept larger ships, they are also planning on an influx of direct Asian shipments. It is expected that 25 percent of the shipments coming through the west coast could shift to the east coast. Other industry perspective’s are that southern ports do not have the distribution capacity to handle the increased shipments from the west.
I am not a shipping or supply chain expert. I find the Panama Canal expansion fascinating due to the sheer size of the project itself and the domino effect it will have on the supply chain across the globe. Efficient, effective and strategic project management plays a central role in high profile projects such as this.
Are any classmates more familiar with the project and the potential shift it may cause in the supply chain? How has your firm’s project strategy changed?
For more background, simply Google “panama canal expansion”. Some links included: