ARL Network’s Container Transport Services operates from a cramped trailer in a gritty industrial section of South Kearny, N.J., in the shadow of the Pulaski Skyway. The surrounding scenery is recognizable to Sopranos viewers.
The trailer has a battered look, but the computers, phones and bottom four feet of paneling are new. All were replaced after Hurricane Sandy’s storm surge last October. Like many other port drayage companies, Container Transport Services is still feeling the hurricane’s after-effects.
“Before Sandy, we had 60 owner-operators,” co-owner Carl Frederick said. “Now we’re down to 38.” Twelve drivers cashed post-Sandy insurance checks for their flooded trucks and exited the business. Ten others were casualties of CSA 2010, the Federal Motor Carrier Safety Administration’s toughened standards for drivers and equipment.
Now the company is weathering a different kind of storm. Two months of operational delays are straining the capacity and finances of drayage operators throughout the Port of New York and New Jersey. Frederick said he’s never seen anything quite like it. “We kept thinking it would get better. But it’s gone on and on,” he said.
Container Transport Services and companies like it are the backbone of port drayage in New York-New Jersey, where more than 85 percent of containers are hauled to and from distribution centers or other destinations by truck. An estimated 70 percent of the port’s drayage drivers are owner-operators.
Frederick’s company is an agent for ARL Network of Coraopolis, Pa., and is known primarily by the ARL name. The headquarters company handles back-office functions such as accounts receivable, insurance and interchange agreements. The port drayage operation is non-asset-based. It owns no trucks or chassis, and relies exclusively on independent drivers.
Owner-operators are increasingly difficult to hire. Frederick recently spent $1,200 on a help-wanted ad in a Spanish-language publication that produced no results. This summer’s delays at terminals haven’t helped. Last month, two of his remaining drivers, fed up with daily problems at the piers, said they would haul only to off-dock ramps.
“I can’t blame them,” Frederick said. He’s compensated drivers who have had to sit in line for hours, but the delays have been costly to drivers as well as to the company.
Reduced capacity has cut into business. Frederick said the company’s $3.9 million in gross revenue during the first half of 2013 was down 37 percent from a year earlier. The company’s staff has been trimmed from seven to five.
Frederick, 63, has spent most of his life in port drayage. He entered the business 34 years ago as a dispatcher, earned a master’s in business at Fairleigh Dickinson while working at Atlantic Coast Express, and went out on his own in 2000 with partner Michael McIndoe.
They haul primarily for ship lines. Though ocean carriers’ negotiated rates tend to be below those of cargo owners or intermediaries, the work is steadier. Frederick said typical rates are $275 for local moves or $500 for out-of-town trips, plus accessorials such as fuel and chassis charges. Competition has kept base rates virtually flat for 20 years, although accessorial costs have risen, he said.
The company rents chassis, paying $14.75 for standard equipment, and charges customers $25. The markup doesn’t fully cover the added administrative costs of chassis rental, Frederick said. After most ship lines transferred responsibility for chassis to truck lines, the company had to hire a staffer to keep up with chassis billing.
How does a port drayage contractor survive in this environment? Frederick said it requires close attention to costs, efficient scheduling of drivers, willingness to work long hours and the ability to improvise.
Efficient dispatching is key. At ARL/Container Transport Services, this role falls mainly to John Alzate, a burly, energetic man with close-cropped hair and a talent for multitasking.
On a recent morning he switched between Spanish and English as he cradled a telephone to his ear, scrolled his Blackberry, kept an eye on two computer screens, bantered with a truck driver awaiting assignment,and asked Frederick where they could locate chassis.
Delays at the piers have aggravated chassis shortages. Drivers arriving at terminals without chassis face the probability of a long wait while dockworkers locate a usable chassis or fix one that needs repairs. Some trucking companies have been hoarding chassis, paying daily rental and storage costs to ensure they’ll have access to equipment.
Drayage operators begin their workday before terminal gates open at 6 a.m. They’ve organized their dispatching the previous afternoon after checking containers’ pickup and delivery status, origins and destinations, and chassis requirements and availability.
“We schedule import pickups based on the amount of free time a container has left at the terminal,” Frederick said. Boxes approaching their free-time expiration get priority. “For exports, we check the terminals’ lists of ships that are open and accepting cargo. We don’t want to deliver the box too early and incur charges.”
This summer, efficient scheduling has been easier said than done. Gridlocked terminal gates have made it difficult or impossible to pick up loads before their four days of free-time storage expires. To avoid demurrage charges that start at $175 a day, drayage companies have had to seek case-by-case extensions of free time.
To help drivers combine trips and minimize wasted miles, Frederick and his team work to match container drops and pickups. “If we can schedule a drop for one customer and a pickup for another customer 20 miles away, we’ll try to schedule the drop for 8 a.m. and the pickup for 11,” he said. “We can do this about 20 percent of the time — if we’re lucky.”
This kind of coordination is necessary to maximize the productivity of drivers and equipment, and to give drivers and drayage companies a fighting chance at earning a profit in a difficult business.
Frederick sees changes ahead for port trucking, although exactly how they’ll play out is hard to predict. He said terminals eventually will be nudged closer to round-the-clock service, that chassis supply models will continue to evolve, and that truckers may have to acquire more of their own equipment and hire more company employees as drivers.
Somehow, he said, the industry will figure it out. “The business is organic,” Frederick said. “It will adapt to market changes and will evolve with the technological improvements. Business models will change. But somebody has to bring that container to the warehouse for that last few miles.”