Michael Stark watches as a carton containing home furnishings is unloaded from a marine container at the Pacer transload facility in Carson, Calif. The carton is placed on a conveyor rack and, in less than a minute, is loaded into a 53-foot domestic container destined for the eastern half of the country.
“It never touches concrete,” said Stark, president of Pacer Distribution Services.
The transloading of merchandise from marine containers to domestic containers and trailers isn’t a new phenomenon in supply chain logistics, but for a variety of reasons, its use by retailers and direct importers is increasing faster than imports in general, especially in Southern California.
Chicago-based railcar provider TTX estimates transload volume in Southern California increased 6.6 percent in 2012 over a year earlier. “The growth was driven by modest growth in import volumes at the ports of LA and Long Beach, plus increasing market share from either IPI (inland point intermodal) or truck volumes,” said Peter Wolff, TTX’s director of market development.
As a share of containerized imports in Los Angeles-Long Beach, TTX estimates transloading reached 31.9 percent in 2012, up from 30.3 percent in 2011, Wolff said.
While transload volumes rose 6.6 percent in 2012, total containerized imports through Los Angeles-Long Beach increased only 2 percent over 2011.
Transloading volumes are affected by developments in the transportation industry, so they can accelerate or decelerate from year to year. If railroads increase IPI rates for moving containers intact
to inland destinations, for example, retailers normally increase their use of transloading.
Generally, the contents of three marine containers can be transloaded into two 53-foot containers, so there is an immediate savings in transportation costs.
Still, the long-term trend has been for transload traffic to increase at twice the rate of containers that move intact from Southern California, said John Doherty, CEO of the Alameda Corridor Transportation Authority. Transloading grew 5 percent a year on average from 2000 to 2012, compared with 2.5 percent-per-year growth for intact containers.
Overall, almost 46 percent of the containers that leave Southern California by rail were transloaded first, up from 33 percent 10 years ago, Doherty said.
Pacer doesn’t believe the recent spurt in transloading is due to any macroeconomic factors such as rail IPI rates or the price of fuel. Rather, it’s due to a maturing of the sector as more small and midsize retailers and direct importers incorporate transloading into their supply chains, said Jeff Lindner, Pacer’s vice president of sales.
Since the beginning of transloading, the core constituency of the sector has been large retailers and importers with multiple distribution centers across the country. These larger companies stop their imported containers from Asia on the West Coast and transload the merchandise into domestic containers destined for their DCs.
Small and midsize shippers that had moved all of their containers intact to one import distribution center recently have begun to open additional DCs. They are delaying allocation of their inventory until it reaches a West Coast port, and then they transload the cargo and ship the domestic containers to the DCs where they’re needed.
Lindner cited two examples of how delayed allocation can reduce supply chain costs and increase the velocity of shipments. An importer that had shipped all of its imports through the West Coast to its import DC in, say, Columbus, Ohio, only to ship 40 percent of the merchandise back to its stores on the West Coast, can stop the containers in Southern California, strip out the local cargo and ship the remainder to the eastern half of the country.
A second example involves an importer that designates merchandise for Dallas before the shipment leaves Asia, only to discover the product is selling better in Chicago. By delaying allocation until the container arrives in Los Angeles-Long Beach, the shipment is sent directly to Chicago. “They ship to the right DC the first time,” Lindner said.
Importers that have never transloaded may say, correctly, that their internal processes aren’t set up to handle transloading, Lindner said. Pacer can step in with its analytical tools to develop a transportation plan to direct the shipments to the proper locations, he said. Transloading may be combined with consolidation to combine diverse shipments from various origins in Asia into a domestic container, and the consolidated container is shipped to the destination.
The data collection and related information technology tools required to manage transloaded shipments are more sophisticated and less costly than in the past, according to Jon DeCesare, president of WCL Consulting in Long Beach. Freight can now be sent precisely to where it’s needed, when it’s needed. “It is demand-focused,” he said.
Pacer expects its business to grow as more small and midsize importers overcome the apprehension of adjusting their processes to include transloading where it makes sense. Pacer seeks out potential clients and serves as a “change element” to help the companies change their culture.
Los Angeles-Long Beach is by far the nation’s largest transload center, but to keep growing, the ports and their terminal operators must remove the bottlenecks that occur in the harbor, Stark said. Although container volumes aren’t back to the record year of 2006, slow truck turn times and congestion at some terminals plague the port complex.
The ports, trucking and marine terminal industries are working together to find a solution, and Stark said it might come in the form of an “adaptive appointment system” in which truckers can make appointments and change appointments as needed in responding to traffic conditions and other vagaries of harbor transportation.
Stark compares the situation in Los Angeles-Long Beach harbor to a primitive air traffic control system in which arriving aircraft are instructed to circle the airport for three hours waiting for a slot to open up.