Container lines’ rapid exit from intermodal chassis ownership is spawning several equipment supply models that emphasize flexibility and a larger role for lessors and truckers.
The percentage of U.S. chassis owned by container lines fell from 51 percent in 2009 to 32 percent last year and is expected to fall to 20 percent by the end of 2013, consultant Steve Rubin told the JOC’s 13th annual TPM Conference this month.
Since Maersk Line transferred its chassis to Direct ChassisLink four years ago, 13 of the 20 largest container lines in the U.S. market have sold all or some of their chassis, said Rubin, principal at InterPro Advisory and co-author of a recent Transportation Research Board report on the chassis market.
Motor carriers are struggling to make sense of a market in which they’re being called upon to rent or lease chassis that ship lines traditionally supplied for free. Several chassis supply models are emerging.
The Port of Virginia’s pioneering Hampton Roads Chassis Pool, created in 2004 to centralize management of the port’s chassis fleet, has evolved to allow ocean carriers to transfer ownership of their equipment to others, and to allow direct billing of truckers who can pre-approve their invoices online.
Another pioneer was Consolidated Chassis Management, which operates six regional pools with one-fourth of the nation’s approximately 500,000 international chassis. When CCM was founded in 2004 by container lines in the Ocean Carrier Equipment Management Association, the initial goal was to cut costs by pooling equipment. Now that ship lines are reducing their exposure to chassis, CCM is opening its pools to other equipment providers.
In April, CCM’s Memphis-based Mid-South pool will test changes designed to expand the list of potential suppliers.
Motor carriers paying for chassis will be allowed to select their own chassis providers on an “operationally seamless” basis, even at ramps where containers are stored on chassis, said Michael B. Wilson, senior vice president of business operations at Hamburg Sud and chairman of CCM.
Meanwhile, a new debit-credit arrangement will allow chassis providers to be credited for equipment they supply to the co-op pool and debited when they use it. Contributors will be rewarded with a credit toward use of their chassis every time any of them are used by a third party.
It’s part of a multifaceted effort to allow lessors, motor carriers and other chassis suppliers to fill the supply gap that container lines are leaving, while preserving the efficiencies of a pool and ensuring equipment availability. “We also wanted to ensure a ‘multiple supplier’ structure existed so that a monopoly-type environment could be avoided,” Wilson said.
With multiple leasing companies providing chassis to CCM, customers will have a choice of suppliers while still enjoying the multiple locations, standardized maintenance and balanced supply that a “gray” pool offers.
The next step in CCM’s evolution will be to provide parties other than ship lines with a voice in the pools’ governance, Wilson said. CCM has asked the Federal Maritime Commission to allow lessors to join the co-op’s board. The commission agreed last year to allow shippers, truckers and others to contribute to CCM’s co-op pools.
Another major development was the formation last year of North American Chassis Pool Cooperative by 11 motor carriers in the American Trucking Associations. NACPC is acquiring ocean carriers’ chassis and contributing them back into CCM’s “gray chassis” pools.
The trucker co-op acquired 1,300 chassis previously owned by China Ocean Shipping Co. and put them into CCM’s Memphis-Nashville pool. Dave Manning, president of Nashville-based TCW and Tennessee Express and chairman of NACPC, said motor carriers want a voice in chassis supply.
A top goal is improving chassis quality, long a sore spot with truckers. NACPC hopes to develop to the point at which it can supply chassis with radial tires, automatic tire inflation, LED lights and self-adjusting brakes. “Once we achieve density in a market, that’s when we will start the modernization part, with the radial tires and all the rest,” Manning told a TPM audience.
The next big development in intermodal chassis may be a proposed gray fleet for chassis operating for Los Angeles and Long Beach, the nation’s two busiest container ports. About 110,000 chassis operate in and around the ports.
Chris Lytle, executive director of the Port of Long Beach, said the ports hope to issue a request for proposals and get responses within six months. He said the ports want to identify what’s worked best elsewhere and apply it to their ports.
Allowing free interchange of chassis would eliminate thousands of unproductive trips a day by truckers, put terminals’ chassis storage yard to better use and improve equipment utilization, Lytle said.
About 10 percent of terminals’ acreage is devoted to chassis storage, Lytle said. “And these are not chassis that rotate all the time,” he said. “There are chassis out there that haven’t turned a wheel in months, or seasons, or, in some cases, years.”
No one is happy with the status quo, Lytle said. “We did some basic polling, and it was interesting to find that there’s not a single stakeholder … that says, ‘We’ve thought about this and let’s leave it the status quo,’ ” he said. “Everybody wants to get it changed, and that leaves us in a pretty good position to effect change.”
As chassis supply models evolve, cargo interests are watching closely. Marc Winocur, senior manager of international transportation at Target, said chassis costs have always been embedded in carrier rates, although not as a line item.
As carriers divest themselves of their chassis and negotiate contracts with Target, Winocur said he wants “to make sure that we’re clear” on how that transfer of expense will be reflected in rates.