With three Barbie dolls sold every second of the day, Mattel Inc. can't afford to have its merchandise sit in port. The toy company has a strong incentive to move its shipments quickly through congested marine terminals and over busy freeways to its distribution centers.
That's why Mattel moves more than one-fourth of its import containers going through the ports of Los Angeles-Long Beach - its primary gateway - during off-peak hours, when terminals and freeways are least congested.
Terminal operators at the nation's busiest ports - Los Angeles and Long Beach on the West Coast and New York-New Jersey on the East Coast - are beginning to keep their gates open longer in an effort to reduce congestion and squeeze more capacity out of limited space.
However, they're running into a problem: Importers and exporters aren't willing to maintain similarly long hours at their own operations. As a result, terminals aren't seeing enough after-hours traffic to justify the cost of a night shift, which can run as high as $25,000.
"We never got support for second-shift gates. They were a dismal failure," said Doug Tilden, president of Marine Terminals Corp., which operates primarily on the West Coast.
Maher Terminals, the largest terminal operator at the Port of New York and New Jersey, this year added a second shift five days a week, but usage has been spotty. "The response is not as we had hoped," said Brian Maher, the company's chairman and chief executive.
Ports and terminal operators are under pressure to improve their productivity, reduce diesel emissions from idling trucks and relieve traffic jams on roadways. Extending gate hours, either through a second shift (6 p.m. to 2 a.m.) or an early morning "hoot owl" shift (3 a.m. to 8 a.m.) is the easiest, lowest-technology solution.
But if importers and exporters won't pay the extra cost of keeping their distribution centers open for a second or third shift, harbor truckers won't use the extended-hours gates. The truckers don't want to risk the liability of holding a container of costly merchandise overnight.
Total Terminals International, a joint venture of Marine Terminals and Hanjin Shipping Co., has run early-morning gates in Los Angeles-Long Beach for eight years. But if it weren't for the hundreds of containers that move during the shift to rail-switching yards, there wouldn't be enough local truck traffic to cover the added costs.
Some truckers will support an early-morning gate, but not for the full 3 a.m. to 8 a.m. period. Truckers often don't begin showing up until 5 a.m.
The average early-morning gate handles only about half as many truck moves as a normal daytime gate. The terminals' costs, meanwhile, are higher. Under the West Coast waterfront contract, longshoremen work only five hours for eight hours pay for the third shift, and the wages are paid at an overtime rate.
"We get half of the utilization at twice the cost," said Marine Terminals' Tilden, who discussed the issue last month at a seminar sponsored by the ports of Los Angeles and Long Beach and the Waterfront Coalition, a shipper organization.
The problem is growing in importance. Public port authorities are under pressure to reduce the impact of their operations on surrounding communities. Ports have taken steps such as reducing the number of days that importers and exporters are allowed to store containers in port without incurring demurrage penalties. But ports can't order importers and exporters to keep their distribution center open longer, or tell truckers when they must call at marine terminals,
Even so, they're encouraging the industry to act. Failure to do so, they say, invites legislation such as a new California law that allows marine terminals to be fined $250 for every truck that must idle for more than 30 minutes. The law has encouraged terminals to establish appointment systems for trucks.
"If we don't act, someone will act on our behalf," said Don Wylie, managing director of maritime services at the Port of Long Beach.
Importers and exporters who send their truckers to the harbor in the off-peak hours report good experiences. Don Snyder, manager of import and export logistics at Mattel, said using terminals at off-peak hours enables his company to deliver shipments to customers more quickly.
Containers arriving at Mattel's distribution facility the night before or early in the morning are available for unloading when the warehouse crew arrives at 7 a.m., said Margaret Berger, managing director of Mattel's City of Industry, Calif., distribution center. If the trucks waited to go to the harbor until the terminals open for their daytime shift at 8 a.m., the containers would not be delivered until 9 a.m. or later, she said.
RPM Transportation, a trucking company that performs harbor trucking for Mattel, said its drivers like to work early in the morning because they can squeeze at least one extra trip in each day. Most harbor truck drivers are paid by the trip instead of by the hour.
This arrangement also works out well for the trucking company that contracts with the drivers and for the importer that receives the containers, said Jeff Lyskoski, vice president of sales at RPM Transporta-tion. "The drivers get increased pay at no extra cost to the other parties," he said.
Shippers are the key to extended-hours gates. The Waterfront Coalition, which represents numerous large importers and retailers, is urging its members to support extended gates by committing enough traffic to off-peak hours to make the gates financially attractive to terminals.
In February, the coalition polled 1,500 importers and exporters that ship through Los Angeles-Long Beach. Twelve of the top 20 importers and two cargo consolidators committed 3,500 truck moves per week, said Robin Lanier, the coalition's executive director. While that would not be nearly enough to support night gates for all of the 13 terminals in the harbor, it was enough for two terminals to offer extended gates.
Southern California truckers say that for extended gates to work, they must be offered at all of the terminals and on the same days each week, so that truckers and distribution centers can synchronize schedules. They also say marine terminals must accept export loads and the return of empties as well as higher-volume import loads.
Advocates of extended-hours gates also say the idea must be supported by small and mid-size importers and their consolidators as well as by large importers. Lanier said the Waterfront Coalition will focus next on getting more non-vessel-operating common carriers to support extended gate hours in Los Angeles-Long Beach.
In New York-New Jersey, Maher Terminals has such a commanding share of the container volume that it could probably generate enough traffic to support its extended gate program even if other terminals do not join in. Brian Maher said the terminal remains committed to the program, and in recent weeks gate moves on the second shift have increased. "I believe, in the long term, it is absolutely essential that we have extended gates," he said.
Almost everyone in the supply chain agrees that it makes sense to keep terminals open longer. "It's a great concept," said Dick Jones, president of the Association of Bi-State Motor Carriers in New York-New Jersey. "It helps to utilize facilities that are using only 30 percent of their capacity."
Jones said shippers and truckers in New York-New Jersey are going through a learning curve on the issue, and that off-hours traffic will increase as the fall peak season gets under way and everyone becomes more familiar with the new schedules.
Tilden said Marine Terminals Corp.'s analysis of port capacity and projected growth in cargo volume in Los Angeles-Long Beach offers compelling evidence of the need to keep gates open longer. He said that if the ports continue daytime-only operation, cargo volume will overwhelm them in the next six or seven years. "By 2009-2010," he said, "this port complex will turn away 5 million containers per year."