Barry Horowitz is principal of CMS Consulting Services LLC, a Portland, Ore., provider of international trade, transportation and supply-chain management services. His 35 years in transportation and supply-chain logistics includes executive positions with shipping lines and integrated carriers, as well as Nike.
Q. U.S. ports are struggling with capacity constraints. Why did ports, terminal operators and railroads fail to prepare for the explosion of Asian imports that caused this congestion?
A. Everyone knew that the big 8,000-TEU ships were coming. This information was published years before the vessels were delivered. Carriers know early on each year how much volume they will carry because they sign agreements with shippers. Even if the contracts specify only a minimum volume commitment, carriers get a good idea what their percentage increase will be. Terminal operators and railroads know what their capacity is. The various parties may not be sharing this information with each other, but I can't believe this information is being ignored. The real answer is that the volume is outpacing the infrastructure's ability to grow. It takes a long time to expand the infrastructure, and there are huge restrictions based on environmental and community concerns.
Q. Is it feasible for the top 100 importers to accurately share with carriers their cargo volume projections, or do shippers purposely understate their forecasts for competitive reasons?
A. Carriers are getting the information they need because they are building bigger ships. There has been no shortage of vessel capacity. Service providers in the Far East also know what the volumes will be. A major reason for the congestion is that large importers are waiting until August, September and October to ship most of their cargo. If an importer waits until then to ship 60,000 containers a month, it's going to stress the infrastructure and transportation providers.
Q. Shippers continue to demand extended free time for storage of containers at marine terminals. What should shippers do to move containers through ports faster? What will convince carriers to quit offering extended free time?
A. If shippers really want to be a part of the solution, why do they continue to demand extended free time? They know that using marine terminals as warehouses contributes to congestion. I attended a shippers' conference recently and the issue of capacity came up. Everyone said, "We are partners with our providers," but if they really wanted to solve this problem, they wouldn't demand extended free time. Ocean carriers worry too much about losing accounts. They should do what the railroads do - reduce the free time to 72 hours and then charge enough demurrage, maybe $250 a day, to change behavior. They should also enforce detention charges for keeping the equipment out of productive use. Shippers say carriers should spread out their vessel calls so the ships don't bunch up at West Coast ports, but shippers won't change their purchase order process so that freight flows consistently from the factories. Everyone points the finger at someone else, but no one is willing to do what is necessary to end this nonsense.
Q. Can shippers do anything to help ocean carriers diversify their gateways by shipping more cargo through secondary ports such as Portland, thereby relieving stress on the larger ports?
A. Carriers don't want to ship through Portland because it's located eight hours up the Columbia River, but Portland is a day closer to Asia than Los Angeles. Furthermore, wouldn't this be better than spending a week or more waiting offshore in Southern California? There is plenty of intermodal rail capacity in the Pacific Northwest. One of the routes from Seattle and Tacoma actually passes through Portland before heading east. If shippers demanded service to Portland and other smaller ports, carriers would provide the service. Why don't carriers segregate boxes at origin points for U.S. Midwest destinations to an uncongested port like Portland rather than moving them through over-congested ports in Southern California?
Q. What can the longshore unions do to help boost productivity and reduce congestion at the ports?
A. The question is, how much risk are the employers willing to take? The ILWU will improve productivity, but it will leverage this concession to get as much out of employers as it can. The union has better negotiating skills than employers. The ILWU is prepared to take risk, to go to the edge, and it gets more than it probably thought employers are willing to give. The union will call the carriers' bluff, but will the carriers call the union's bluff?