Avoiding port gridlock requires advance planning, 3PLs say

Some shippers that route goods primarily through the West Coast decided months ago to divert shipments to U.S. East Coast and Canadian Pacific Coast ports in advance of July 1 when the six-year International Longshore and Warehouse Union contract was set to expire.

Having already established business relationships with ocean carriers, truckers, railroads and logistics service providers in those locations, those shippers were in a good position to continue their cargo diversions when it became evident in August and September that the Southern California ports were becoming seriously congested.

“Existing relationships make planning easier,” Edwards said. Contract negotiations between the ILWU and Pacific Maritime Association continue, and the ILWU is working without a contract, but there have been no major work disruptions that can be traced directly to the negotiations.

Port congestion seen this year Southern California, and at other ports globally such as Rotterdam, Hamburg, Manila and New York-New Jersey, are due in part to carriers operating within vessel-sharing alliances and deploying larger and larger ships in the east-west trade lanes.

Carrier alliances are spreading out their vessel calls in some cases at four, five or even more terminals in the port complex, creating a logistical nightmare, truckers, equipment providers and shippers. Conditions in Los Angeles-Long Beach have been further aggravated further by chassis shortages and dislocations, disruptions on intermodal rail, a trucker shortage due to drivers leaving the industry, and longshore labor shortages.

Christopher Chase, business development manager at the Port of Los Angeles, said he can cite at least 17 different factors that are contributing in some way to the port congestion.

The chassis shortages and dislocations that have contributed to port congestion in New York-New Jersey as well as Los Angeles-Long  Beach, are expected to continue into 2015. The equipment-leasing companies that now control most of the chassis will need several more months to develop neutral, port-wide chassis pools that are expected to reduce the time needed to retrieve or drop off chassis.

Although most ocean carriers have sold their chassis fleets, carriers continue to be involved in chassis provision through liberal contract terms that allow retailers and other large shippers to hold on to the equipment for extra days, if not weeks, at their distribution centers.

Howard Finkel, executive vice president at China Ocean Shipping Company, said such excessive free time contributes to chassis shortages and affects others in the supply chain. “It is not free, and they don’t need it,” he said.

Finkel said that when service contract negotiations with customers begin next year, for contracts that frequently renew on May 1, he is going to instruct Cosco’s sales staff to stop offering extended free time for chassis at importers’ warehouses. “I am not going to be popular with the sales staff,” he said.

Big ships are another issue bottling up the ports. Ports and terminal operators must get used to handling large vessels because carriers will continue to increase the size of the ships they deploy at the major gateways, Finkel said. Most carriers are struggling financially, and the only way they can prevent further losses is to cut their operating costs. The per-unit savings inherent in these big ships are so compelling that carriers will not hesitate to deploy even larger vessels, he said.

However, these big ships place a tremendous strain on marine terminals. They take longer to work, and the cargo surges they generate result in congestion in the container yards and long truck lines at the terminal gates.

Container moves per vessel call in Los Angeles-Long Beach are typically topping 5,000 now. Chase said the big ships with capacities of 13,000 to 14,000 20-foot containers have generated as many as 15,000 container moves, 7,500 off of the vessel and 7,500 on, in a single vessel call.

These cargo surges are rippling through the supply chain. Edwards said importers should begin looking now at the size and configuration of their import distribution  centers and regional warehouses. “They will need more yard space and doors,” he said. If the facilities are under-sized, the level of service will deteriorate, he added.

Ports, terminal operators, truckers and equipment providers are also being hit with higher container volumes than they planned for this year. Volumes at Los Angeles and Long Beach were up a combined 8 percent in September and are up 5 percent year to date through September. This problem begins with faulty forecasts and is exacerbated by poor communication between cargo interests, carriers and service providers, Edwards said.

Schneider works with its customers to forecast their freight volumes and equipment needs four to five weeks out, and revisits those forecasts frequently to capture possible changes. Edwards said the use of information technology to track and trace equipment availability and location can help to balance supply with demand.

The port congestion problems are so severe and complex that there is no one solution, Edwards said, but it is also obvious that much better planning and cooperation by all members of the supply chain is needed. “We must stay close to the customer. Planning is the key,” he said.