Periodically over the past several years I’ve heard conversation about the Panama Canal expansion project. Of course, in my mind’s eye, that expansion was “way off in the future ” but time being what it is, it’s actually just around the corner. The project will be completed in 2016.

My friend and fellow analyst Vinnie Merchandani posted a link on Facebook to a short piece he wrote explaining just how much more traffic the upgraded canal will take. I did some research to find out for myself as well. In short strokes, the new lanes added to the canal will be able to handle most of today’s supersized container ships, which triple the capacity of the old ones. Further, since a new lane is being added, overall capacity will double.

In light of the west coast dock workers’ strike earlier this year, which caused an early run-up of inventory by most companies I’ve talked to and the extra costs associated with bringing goods to the east coast of the US via the Suez Canal, this is great news for retailers.

In fact, it’s Vinnie’s position that this expansion will have almost as great an impact on shipping efficiencies as the original canal’s opening in 1914. I can’t argue the logic.

Apparently tankers built to go through the Panama Canal are called “Panamaxes. ” The Old Panamax was capable of handling 4,500 TEU’s (twenty food equivalent units). The new Panamax freighters will handle 13,000 TEU’s.

As Mr. Merchandani points out, the states of Florida, Georgia, and South Carolina have been making investments in their ports to handle expected new traffic. Here in Miami, to facilitate truck traffic to and from the port, the city built a tunnel that bypasses the downtown. This is good news for everyone who drives in Miami. Our roads are already hyper-congested. This will improve, rather than exacerbate a difficult situation. Today, Port Everglades in Fort Lauderdale actually handles more traffic than we do in Miami. We expect this situation to change.

This is really good news for retailers. We’ve had more than one dock worker strike supply chain shock in the past decade, and even on a good day West Coast ports are full to capacity, especially the Port of Los Angeles. This slows down the time it takes to process a container through the port. The opportunity to bring these new Panamax tankers to the east coast is a win for everyone.

Under ordinary circumstances, the transition will be slow. The Panama Canal Authority predicts the volume of cargo will increase by an average of 3% per year, doubling by 2025. I suspect that any kind of supply chain shock will expedite those timeframes.

It’s worthy to note that the Canal expansion project has its critics, with some expressing concern over it encouraging even greater trade imbalances with China, and others claiming that the expansion hasn’t addressed the Canal’s biggest bottleneck, called the “Culebra Cut, ” which is not wide enough for large ships to pass each other. My own opinion is that anything giving the Western Hemisphere additional options to get people and products from the west coast to the east coast is a good thing. Single points of failure are a problem in both computer systems and in supply chains. The west coast and its intermodal links have effectively acted as a single point of failure for the East Coast of the US for many years.

The Wikipedia article on the expansion project is fascinating and I strongly recommend anyone with geek tendencies to give it a read.

Bottom line, I think this will be a good thing.