U.S. Logistics & Ports At A Breaking Point With Kent Gourdin – RFP 63 Transcript
Gordon Lamphere (00:06): Hi, I’m Gordon Lamphere, and welcome to The Real Finds Podcast, the podcast where we have real conversations with key entrepreneurs, activists, and researchers shaping the real estate industry and, as a result, our world. On today’s podcast, we’ll be speaking with Kent Gourdin. Kent is a professor and director of the Global Logistics and Transportation program at the College of Charleston. On the podcast, we discuss the future of global logistics and trade, and mechanisms real estate investors and logistics occupiers can use to take full advantage of the Trump trade disruption. It’s well worth a listen. Kent, thanks for hopping on the podcast today.
Kent Gourdin (00:47): Thanks for having me. I’m grateful to be here.
From Pan Am and the Air Force to the Classroom
Gordon Lamphere (00:50): First, what got you into the world of transportation, ports, and logistics? How did you get your start?
Kent Gourdin (00:59): It actually goes back to my childhood. My dad flew for Pan American, so that’s how I initially got into it. Then I got interested in trucking for some reason. I don’t know why, but I was convinced I wanted to be a truck driver, and I think my dad was really afraid I was going to do that. Then Uncle Sam called, and I ended up going into the Air Force, which later sent me back to school to get my degree, which turned out to be in transportation management at the University of Tennessee. After that, I was in it. I had numerous transportation jobs in the Air Force. I was actually telling somebody yesterday that I went into the Air Force because they were going to draft me, and twenty years later I was standing at my retirement ceremony wondering how the heck I got there. Then I went into teaching transportation and logistics, and I’ve been in it, literally and figuratively, ever since.
The Big Picture: Early Days of the Tariff Disruption
Gordon Lamphere (02:22): I’ve got a couple of friends who started in logistics in the Air Force and the US Army, and I’d say nobody does it better. One of my favorite logistics stories is about a group of Germans in World War II who captured some packages sent to US soldiers and found a cake inside that hadn’t spoiled. It had made it from someone’s mother’s kitchen in Kansas to the front lines, and they said, “This war is over. This isn’t a reality we’re going to be able to compete with.” So let’s dive into the private sector: ports, planes, and property. How are transportation and logistics playing out right now? We’re in this crazy world of tariffs and trade disputes. What are you seeing from a big-picture perspective?
Kent Gourdin (03:36): It’s really early days yet, isn’t it? I think there’s a lot we have yet to see about the wider impact of the tariffs. Transportation is such an integral part of the whole supply chain, especially the maritime sector, which includes ports. And yet, as a people, we don’t really see it very much. It’s outside our frame of reference. Even in a port city like Charleston, it just goes on around us. One contributor to that, I think, is that the US has basically no presence in the blue water shipping business. It’s all foreign, so we don’t pay any attention to it. But once you notice it, say in Charleston, it finally registers: What’s that big ship doing in the harbor? What’s in all those boxes? My answer is everything.
So I think at some point we’re going to see a really significant drop in demand for transportation, because the goods just aren’t going to be there. Unfortunately, I think that’s what happened in the pandemic. It didn’t really register with people what the supply chain was, or how much we depended on it, until we didn’t have it. That’s a long-winded answer to your question, but I think we haven’t seen anything yet.
Why the US Has No Blue Water Fleet: The Jones Act
Gordon Lamphere (05:44): There’s a funny part of the human condition: nobody really cares where their food comes from, or whether there’s enough toilet paper in the cabinet, until it’s not on the shelves anymore. I want to dive into something you mentioned, which is that we don’t really have a blue water merchant marine as a large sector of the US economy anymore. I’m probably more knowledgeable about this than our average listener, because I got my degree in maritime law from Tulane, and I have a lot of friends in various parts of the maritime logistics community. Could you explain for our listeners why that’s the case? Many people would say the US has a long naval tradition and a tradition of merchant mariners. So why doesn’t the US really have much of a blue water fleet?
Kent Gourdin (06:55): I’ve thought about that a lot. It’s not a new problem. We dealt with it even before World War II, when we realized after Pearl Harbor that we didn’t have enough ships to do anything. But we had the shipyards, which we don’t now, but that’s another story. So we built the capacity. We built what came to be called Liberty ships, which were in a way terrible, but we produced them quickly. When the Second World War ended, we still had a fair number of them around that could be used for commercial purposes.
But I think we hamstrung our industry by requiring that a US-registered vessel be built in the United States, be operated by US crews, and comply with all US laws, including Coast Guard and OSHA rules, which over the years made it prohibitive to operate what we call US-flag vessels. It’s too expensive, and over the years it drove up the cost of using them. So by the mid-nineties, we were down to Sea-Land, which, ironically, was the pioneer of containerized shipping. It was the last one, it failed, and the remnants were taken over by foreign-flag carriers.
Gordon Lamphere (09:01): Why did the US feel the Jones Act was the right move, in your opinion, rather than a free-market approach?
Kent Gourdin (09:12): At the time, it probably made sense. I think it was passed in 1920 as part of a larger transportation act. It was originally intended to protect coastal shipping from foreign competitors, and for some reason it’s hung on all these years, with similar protections applied to the airline industry, trucking, and rail as well. The pressure to repeal it has been around almost since it passed, but it’s still in place. Where we see it is in trade to the Caribbean, Hawaii, the Pacific Island territories, and Alaska. It really shows up in the higher cost of everything those markets receive, because it has to move on a US-flag carrier.
I should qualify that. We do have some blue water carriers, like Matson, Pasha, and Crowley, but they serve markets that are legally protected from foreign competition. One of the rationales for repealing the Jones Act would be to let foreign competitors in that could supposedly serve these markets at lower cost. But it just hasn’t gained any headway.
Gordon Lamphere (11:06): When we talk about repeal, one of the largest concerns I’ve heard is that if we repealed it, we’d have no blue water merchant mariners. Do you think that’s a real risk of repeal, or is it overblown by some of the protectionist organizations opposed to repealing the Jones Act?
Kent Gourdin (11:33): Did you say mariners?
Gordon Lamphere (11:38): By mariners, I meant we would have no blue water shipping capacity whatsoever.
Kent Gourdin (11:48): Understand that what we have in those companies I mentioned is pretty small. Their vessels are small. I know Matson runs a service that includes parts of Asia, but it’s basically a loop that’s part of a Hawaii service, and I assume Guam and some other places, that comes back through ports in China and then to the West Coast. These aren’t the 12,000- or 18,000-TEU vessels the big carriers use. So the economics of running those carriers in more extensive, arguably more highly demanded services are, I think, kind of weak.
Time-Sensitive Logistics and the Return of Inventory
Gordon Lamphere (12:51): Something that is highly demanded is time-sensitive supply chains, and we’ve seen the positive and negative impacts. All of us have probably ordered an Amazon package that showed up the same day, or at least within 24 hours. And if we’ve run businesses, we’ve probably also had supply chain issues where that same-day expectation caused a lack of resiliency. What are you seeing, at a big-picture level, in how the rise of time-sensitive logistics is playing out, particularly with the trade disputes?
Kent Gourdin (13:42): I think you’re absolutely right. As customers, we just want it, and the faster the better. But that has its costs. I’m not really sure we can say how it’s going to pan out. There’s a lot of talk in this vein about drones and other types of delivery systems, but they have their own problems. Maybe it’s something we’ll have to get used to. Do we really need to get it on Sunday just because we can? We tend not to be very receptive to that question. It’s, “We ordered it, we need it now.”
But it is a problem, and one way to deal with it, without necessarily getting into real estate yet, is to start storing goods closer to the markets rather than relying on transportation. That’s one way to buffer things: take up some of the uncertainty in transportation with, I hate to say the word, inventory.
The Real Estate Side: Charleston vs. Savannah
Gordon Lamphere (15:25): Let’s dive into real estate, since we’ve brought it up. What are you starting to see in terms of the hidden impacts of the trade dispute on the real estate world?
Kent Gourdin (15:42): One of the truths about the real estate side of transportation is that it involves long-term decisions. For years in Charleston, we focused on getting goods into the port and out. It wasn’t about keeping them here. Savannah did the opposite. Early on, they got into the business of serving the big retailers and setting up distribution centers in and around Savannah to accommodate them. Over time, I think we in Charleston have embraced that strategy a bit. We see it with Volvo locating here, with Walmart’s distribution center here now, with others coming, and with the investment in inland ports. We’re still seeing the value of those resources, and of course they all involve real estate.
In a way, transportation can be much more short-term focused than real estate. But they’re so closely tied together that, longer term, we may see more implications for the role of inventory in the supply chain, the inventory we were basically trying to get rid of.
Gordon Lamphere (17:42): Absolutely. Typically, when we work with corporations or businesses dealing with supply chain issues, a warehousing decision is at an absolute minimum a five-year decision. So in this current world, it’s very hard for them to make a five-year plan based on minute-to-minute, tweet-based decisions coming out of the White House, which could be a 280-character declaration. Beyond the minute-to-minute, what evolution are you seeing at places like Charleston, which affects the market in the Southeast and the US as a whole, in how companies bring in and distribute inventory?
Kent Gourdin (18:55): I think the notion of inventory as bad was overstated. Even years ago, it was more that inventory isn’t bad, you just don’t want very much of it. You want what you really need to achieve your overall objective, which is customer satisfaction, and that goes beyond inventory, warehousing, or transportation. What happened, especially during the pandemic, and what we’re now seeing reprised, is the realization that we probably just need to have more inventory and not consider it excess. It’s consistent with the world as it is now. You have to have some way of keeping your customers happy. It’s just unfortunate that all of this is happening so quickly that, as you said, it’s hard for anybody to know what to do.
Resilience Over Lean
Gordon Lamphere (20:27): Do you think there’s a general trend toward resiliency over lean supply chains? Pre-2020, everyone was saying lean, lean, lean. It felt like we were on the Atkins diet. Then in 2020, a number of suppliers were stuck saying, “My gosh, what am I going to do? The Port of LA is jammed, and I don’t have any of my product.” We’ve gone out to the market with clients and found multiple additional places for them to store goods, and they’ve said, “Maybe it’s not the worst thing in the world to carry an extra 20 or 25 percent of overhead, because I know I can deliver and make that profit, particularly when the market is volatile.” Are you seeing that trend in Charleston as well? Or is it just us in Chicago, further down the supply chain, where people are a little more afraid?
Kent Gourdin (21:37): It’s interesting the way you put that. I think it’s both. People are afraid, but there’s also a recognition that you have to look at the big picture in terms of your customers. As we’ve talked about, this is a big change across the board. Logistics is a tool, part of the equation, and warehousing and transportation are part of logistics. It’s really about appreciating the trade-offs that have to be considered to keep customers happy and, to a certain extent, insulated from all of this.
I realize we’re trying to do this while keeping costs, and by implication prices, down. But at some point, Gordon, the customer is part of this too. It goes back to what we said about the lack of appreciation for the whole supply chain. At some point it’s, “Sorry, but we can’t absorb the whole cost of this in the supply chain.” Prices are going to go up. That’s a problem for Washington, not really for us, but we have to deal with it, which is the story of logistics, isn’t it? And customers, to a certain extent, as well.
Electrification and Automation at the Ports
Gordon Lamphere (23:35): I think the story of business is often tied to folks in Washington making some dumb moves, regardless of party. One thing we’ve seen is a push out of Washington, and from a number of organizations, for more electrified vehicles at ports. I have very strong opinions both ways on that, and we’ve talked to people operating out of the Port of LA about the challenges of electrification. I know the Port of LA, being in California, has a very different political climate and push for electrification than the ports in the Southeast. What are you seeing in terms of energy, electric vehicles, and electrification at the ports?
Kent Gourdin (24:36): I have to say, and this is just me talking, I haven’t seen a big push for it yet. The front-end load on that whole thing is pretty horrendous, isn’t it? And it’s really across the port, but especially the trucks. I think it’s perhaps best illustrated in LA, where California has this draconian rule, and it’s pretty conceivable you’ll have trucks dying in line because they can’t get charged up. That infrastructure issue is a big problem anywhere, really.
As for the cranes and other handling equipment at the port, I’ve seen some of that at other ports, but it tends to be terminal-specific, because in most places the ports are strictly landlords. They don’t do anything. All the work is done by terminal operating companies that put in whatever handling equipment they want, electric or otherwise. Charleston is a little different, because we’re an operating port. Here, the port itself does all the work.
It’s very impactful, that’s the word I’m looking for, to observe a port that’s totally automated. I take my students to Rotterdam every year, and we tour one of the automated terminals there. It’s eerie, quite honestly, the extent to which automation
Kent Gourdin (26:58): is being used. But it’s not without its implications. It’s kind of slow, because it’s automated, so you can’t have automated vehicles whizzing around unchecked, and I know there are safety steps taken. Just as an aside, there’s been an automated terminal in Rotterdam since the Sea-Land years in the nineties, and the lack of ability to flex the system for different conditions really hampered it a bit. Weather slows it down in places where snow and ice can accumulate. So I think there’s still a lot of appeal to the internal combustion ports we have now, barring advances in the electrical infrastructure for them. But that was a long-winded answer to your question.
Gordon Lamphere (28:17): You mentioned some of the challenges with automation, and I’m curious if you could dig into that. I talk to so many people further down the line from our ports, or our airports, I should say. We deal with a lot of clients around Chicago, Midway, and the Milwaukee area, and they see automation very much as the future. Are you seeing that push in the American Southeast? I know there have been all sorts of negotiations with the longshoremen, and there’s certainly a huge US labor relations element. Do you see a more automated future, or for the next decade are we going to see much of what we’ve seen for fifty years?
Kent Gourdin (29:15): The labor side is interesting. The negotiations that were just concluded here with the ILA run for six years, I think. And I think there’s a realization that automation is somewhat inevitable. The case in point is fifty years ago, when we went through the same thing with containerization. It was the same kind of structural upheaval, within the ports and the whole maritime industry, to capture the economies containerization offered. It was the same issue with jobs, and with the tremendous investment in new ships and new land and sea transportation resources to move containers, because it was all unique to the maritime industry. I think electrification, or natural gas, or whatever the alternative fuel turns out to be, will be the same thing. It will come.
It’ll probably be forestalled as long as it can be. But I think the longshoremen were kind of smart this time around. They weren’t trying to push against something that wasn’t going to happen any sooner than, maybe not even within, six years, because it’s another huge redefinition of the entire ocean transportation system. And I think it’s really the same with trucks. In my opinion, you just can’t have long-distance electric trucking, unless you do a kind of Pony Express approach, where a load goes however far
Kent Gourdin (31:41): to a depot, changes out the tractor and maybe the driver, and goes on. You can’t have trucks charging en route. It just doesn’t make economic sense.
Gordon Lamphere (32:00): With the foreseeable state of batteries, it doesn’t seem to make a lot of sense. It makes a lot more sense at a port, where you can have a charging station a couple of feet away, versus a long-haul truck. Anybody who’s driven across the American West knows that sometimes it’s two hundred miles to the next gas station. It’s very hard to imagine doing that with an electric truck in any economically efficient way.
What People Get Wrong About Transportation
One thing we always like to ask our experts before we get to our final four: what do investors, business owners, or anyone in the general public listening get most wrong about the transportation industry? I know there are a lot of misconceptions.
Kent Gourdin (33:07): That’s a great question. I think you can see it in popular stereotypes, like the perception that big trucks are dangerous and cause a lot of accidents, which I think is statistically not true. They may be in accidents, but often those are caused by us, sorry. It’s the same with ships, as we talked about: it’s not our problem, really. A lot of perceptions are just shaped by the way the world has been.
Recently, I saw a truck on the interstate with a sign on its side saying the vehicle was basically self-driving, and right below that, that there was a driver present, but the truck was being driven autonomously. My first thought was, “Wow, that’s something we’re going to have to get used to.” There’s going to be more of that coming, and we’ll have to get used to the fact that we can’t, for example, cut off vehicles or stop suddenly in front of an eighteen-wheeler. Who does that? Well, a lot of people, if you watch the internet. It’s a change in how we see things. There’s a lot of misunderstanding about transportation. You see it even when we fly as passengers. People get
Kent Gourdin (35:30): frustrated with TSA, and I think, “You can check me however many ways you want,” because I think we’re better off for it. Sometimes we’re our own worst enemy, but I don’t guess you want to get into that.
The Final Four: A New Normal in Ten Years
Gordon Lamphere (35:48): I’m not going to pontificate on the human condition. But one condition we have on this podcast is our final four: four questions we ask in every episode. We find they’re very insightful ways to get to know you better, learn more about your industry, and dive into the state of the world in general. One of my favorite questions is: ten years out, what do you think will have changed the most about supply chains, logistics, trade, and the transportation industry in general?
Kent Gourdin (36:30): It’s interesting to ask that question now, isn’t it? I think in ten years it’s going to be a new normal, and “normal” is the operative word. A lot of what we’re going through now will get sorted out, like it always seems to. I think global trade will be back to being more where it should be, I’ll put it that way. In a way, looking from here, anything would be better than what it is today. The reality is that we need global trade. It’s really unfortunate to take steps to impede it, especially against countries we think of as our friends, and I hope this will somehow pass and common sense will prevail.
Gordon Lamphere (37:39): When I was at Tulane, I had a conversation with one of my professors, who was a major trade negotiator during the Kennedy administration. He was older and had seen seventy years of trade over his lifetime. What I found interesting is that he said global trade will always be there. The networks will wax and wane. Maybe it’ll be trade with ninety countries instead of a hundred and twenty. But there’s no way you can operate entirely within your own hemisphere. You need to get coffee from Africa or Latin America, and you can only get vanilla or cinnamon from so many places. So there will always be global trade. It might not be with every country in the world, but I can’t imagine us going back to a world where we operate on a national, sixteenth-century mercantile level.
Advice for Young Professionals: Find Your Passion and Stay Flexible
One of the things we also like to do is step back in time. We don’t need to go back to the sixteenth century, but maybe to the beginning of your career. We have a lot of younger listeners, and by younger I mean anyone under thirty. If you could give them one minute of advice, what would it be?
Kent Gourdin (39:09): I’d say find a career you’re passionate about. It really doesn’t matter what it is. I consider myself so fortunate to have found that in transportation and logistics, and to have been able to take the twists and turns life presented, which sometimes looked like roadblocks, like going into the military and then retiring from it, both “What am I going to do now?” moments. It was always that love of transportation and logistics that saw me through and led me to where I am now. Regardless of what it is for any individual, I think that’s really the key to success: find something you love, and be flexible about the opportunities that present themselves.
Book Recommendation: Door to Door
Gordon Lamphere (40:16): It’s wonderful to be passionate about our careers. One thing I’m passionate about, even if I have to listen instead of picking up a physical copy, is books. I think books are a great way to shape our minds and gain knowledge we wouldn’t ordinarily get, and for our investors and developers in particular, thinking differently about the world is essential to success. Is there a book we should pick up?
Kent Gourdin (40:54): Wait a second. I have my freshmen read a book about transportation, and they love it, everybody loves it, because it’s not a textbook. It’s called Door to Door. The author escapes me off the top of my head, but it really looks at transportation as a whole. Admittedly, it’s pre-pandemic, but I think it still resonates. For somebody interested in a quick read to understand transportation at a macro level, I think it would be a go-to.
Who Should Be Our Next Guest?
Gordon Lamphere (41:41): We’ll put that in the comments below. There’s one thing I’ll make a hard point on: we never let anyone get away without answering the final question of our final four. Who’s the next person we should bring on? We’ve seen that people in the arena tend to have great insight into the best people to talk to.
Kent Gourdin (42:14): Wow. In any field, I guess?
Gordon Lamphere (42:17): It could be any field you’d recommend.
Kent Gourdin (42:21): Well, she might hate me for this.
Gordon Lamphere (42:27): That’s fine. I started off in brokerage. I don’t mind being hated.
Kent Gourdin (42:32): I have a former student who went through my logistics program and then went into commercial real estate, and she’s done an outstanding job. At one point, she made a comment to me about having defected to the dark side. I told her, “Look, I still claim you as a logistics person,” because of everything we’ve spent the past half hour talking about. She’s got a leg in both fields, so I think she’d be a great one. But you don’t have to tell her I told you so.
How to Reach Kent Gourdin
Gordon Lamphere (43:27): We’re going to demand that name from you, maybe off camera. Before we finish, if somebody wants to reach out to you, what’s the best way to do that?
Kent Gourdin (43:41): Especially as we head into summer, the best way is email. It’s my last name plus my first initial, K, at cofc.edu, for College of Charleston: [email protected].
Gordon Lamphere (44:00): Thank you so much for hopping on the podcast today. We’d love to have you on again in the future.
Kent Gourdin (44:04): I’d look forward to it. Thanks so much for having me.
Gordon Lamphere (44:07): Thanks again to Kent. We appreciate his insights. If you enjoyed the podcast, please give us a like, a five-star rating, and a review. Your comments, interactions, and subscriptions truly matter and help us continue to bring on quality guests. You can follow us on YouTube, Spotify, or wherever you get your podcasts. I’m Gordon Lamphere with The Real Finds Podcast. Thank you for listening.
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