It’s a well-established axiom in the intermodal world that the drayage carrier, forever doomed to be squeezed by other, larger and more powerful interests in the system, has always been the low man on the totem pole. But this could be the year all that changes.
A number of drayage carriers I spoke with at this month’s IANA Operations Seminar in Oak Brook, Illinois, said they have never seen a situation quite like what they’re experiencing now. In early April, far from peak season on the calendar, they had more business than they could handle. Spot prices are shooting up, and beneficial cargo owners in port areas are asking for capacity first and price second.
The problem isn’t on the demand side of the equation. Activity levels at the ports are up modestly, but certainly nothing out of the ordinary. No, this is a supply problem, flowing out of the pure dysfunction characterizing so much of today’s North American port system.
The arrival of mega-ships has created enormous peaking problems for ports and cartage. Drayage carriers are experiencing huge spikes in demand as these large ships are unloaded, then encountering long lines at the gate when they try to get onto the terminal. These frenetic periods are followed by periods of dead quiet after the mega-ship departs.
The on-then-off nature of the demand for cartage destroys opportunities for street turns, thereby raising the percentage of unproductive empty miles. Equipment turn times are stretching out, reducing productivity of the chassis fleet and creating an equipment shortage in that arena. Compounding this burden is the raft of issues created by ocean carriers’ exit from the chassis supply business and the complexity of the evolving models that purport to fill the vacuum.
It’s gotten so bad that I’ve heard about instances where, after a couple of hours in line at the port, the drayage carrier has called the shipper to demand to be compensated for the waiting time. If the shipper isn’t prepared to pony up, the truck is re-dispatched to handle another load at another nearby terminal that can get the truck in and out more promptly.
The bottom line is that it’s becoming impossible for the drayage driver to earn a decent living, because drives can’t get the turns needed each day to make the owner-operator economics work.
In the past, it was generally thought that the local cartage driving job was in some respects easier to fill than the long-haul driver’s seat because of the superior quality of life offered by the local “home every night” trucking job.
But things are different now. When presented with the grinding, day-in, day-out difficulties of local port cartage, drivers have options. They can shift to domestic intermodal drayage, thereby avoiding the current port difficulties and the chaotic chassis situation. Or, given the overall tightness of the driver supply, there is no shortage of short-haul, regional or long-haul driving jobs that may offer a more reasonable trade-off of pay vs. lifestyle than does the current port cartage position.
The result is a shortage of cartage capacity and a potentially seismic shift in the balance of power between drayage carrier and customer. Among the changes that could result:
Drayage costs will increase in general. If the current situation persists, today’s increases in spot prices will be followed by rising contract base rates.
Port terminals that can’t get trucks onto and off the property in a timely fashion will find that their containers will be subject to surcharges from the drayman.
BCOs that require “stay with” loading or unloading rather than “drop and hook” will find it much more expensive to tie up that valuable driver for hours, assuming they can get a cartage carrier to handle the move at all.
— BCOs and ocean carriers with rock-bottom contract rates will find it more difficult to get the capacity they need. Instead, they may find their drayage carrier saying, “You need to move 10 units? Gee, we’d love to help you, but we’ve only got two trucks available.”
All of these changes will take time, and the transition could be painful for carriers and BCOs accustomed to being able to access all the dray capacity they need, when they need it. Add in the uncertainty of labor disruptions, and it could be a long, hot summer indeed at our ports.
Lawrence Gross is president of Gross Transportation Consulting in Mahwah, New Jersey, and a partner at FTR Transportation Intelligence. A veteran with 34 years in the transportation business, he covers freight transportation, concentrating on the intermodal and trucking sectors from a transportation and equipment perspective. He is a frequent speaker at industry events. Contact him at firstname.lastname@example.org.