Cargo challenges create opportunities

Cargo challenges create opportunities

I started work on the waterfront in 1965. I’ve seen the major changes in the maritime industry, from breakbulk cargo to containers and now to new and evolving automated terminals. I’ve witnessed container ships grow from 100 20-foot equivalent units to current vessels with more than 13,000 TEUs on board.

I experienced the 134-day strike in 1971-72, the 2002 lockout and today’s backlog of ships in the Los Angles-Long Beach port complex. In each case, the delays were created by major industry transformations: The 1971-72 strike was due to the container revolution; the 2002 lockout was the result of the advent of automation; and today’s congestion issues are related to the restructuring of the maritime cargo movement industry. This restructuring is causing congestion at ports around the nation and globally.

The current restructuring, based on much-needed cost savings for the industry, dates back to about 2008. The industry’s first solution was bigger ships. Large ships in 2007 were approximately 7,500 TEUs. Today, based on construction orders for new ships between now and 2016, sizes will range from 7,500 to 18,000 TEUs.

With newer, larger ships entering service, there is a surplus of containership capacity, which has depressed shipping rates and squeezed margins. In response, carriers have begun to form mega-alliances. Most of the world’s largest shipping lines now are part of a handful of alliances.

These alliances are spreading their cargo to numerous terminals, which is new to the industry. This makes it extremely difficult to consolidate cargo for rail and truck transport, so cargo must be shifted from terminal to terminal or sit for long periods on the docks.

In another cost-savings strategy, carriers have divested themselves from the truck chassis operations at container terminals, requiring the development of new chassis business solutions at Los Angeles-Long Beach and other trade gateways. The resulting chassis issue just deepens the congestion problem. Just recently, however, the major chassis operators in the San Pedro Bay complex have agreed to phase in a gray chassis pool concept starting Feb. 1, which should improve this situation markedly.

Chassis provisioning isn’t the sole source of today’s congestion. The lack of labor to serve these operations is also part of the problem. There is a shortage of skilled labor to handle larger vessels calling simultaneously at multiple terminals in the complex.

The labor shortage extends to the trucking sector, too. Truckers face long lines at terminal gates that reduce the number of trips they can make in a day and has made trucking a low-paying job. As a result, port truckers, locally and nationally, are leaving the business to find other ways to make a decent living.

So what are the solutions? There are a number of ideas to solve the congestion issue:

  • Create a gray or neutral chassis pool run by a non-profit organization to better administer the availability of chassis.
  • Implement a universal, technology-based portal system that oversees all movements of containers, chassis and other equipment in the Los Angeles-Long Beach complex.
  • Work with our alliance partners on a more efficient approach to use of terminals.
  • Create incentives for efficiencies at each container terminal.
  • Work with the state and federal government to invest in a cargo-movement incentive program.
  • PierPass, which was created to shift cargo truck trips from days to nights in order to avoid freeway congestion, has worked well for its intended reason. The program should be updated, however, to to realize greater operational efficiencies in the port complex.
  • Consider the wider use of inland distribution centers so our on-dock terminals are used more efficiently. We need to move cargo off our docks quickly and perhaps distribute them at another location.
  • Shipping lines should analyze cargo flow, stowage and information flow for efficiency improvements. 

Many of these solutions exist beyond the ports’ control, so we’re not just looking at technical problems with technical solutions. It’s in the broader interest to understand and address the challenges of a changing maritime industry. This means the ports, all of its supply chain partners, along with the state and federal government and our international partners, must work together and confront these challenges head-on.  

David Arian is vice president of the Los Angeles Harbor Commission, which oversees the Port of Los Angeles. A retired longshoreman, Arian previously served as international president of the International Longshore & Warehouse Union and was president of the ILWU Local 13 for three terms.

Comments

You touch on some excellent points here David, the most important being more of a collaborative approach rather than the complex silo based situation which naturally prevails in this habour. These suggestions will positively contribute to the present situation, it all comes down to people and process, very little investment is required short term. In the mid to longer terms however, these challenges will continue to present themselves for as long as the habour remains as fragmented as it is today, 15 terminals sharing less than 15 million TEU per year will naturally result in low efficiency and economy of scale. There needs to be a habour master-plan which will preserve SPB's position as the largest US gateway, through delivering a vastly improved service in terms of speed, efficiency and cost. Terminal consolidation is required, coupled with automation and as you also correctly mentioned, a new method of getting containers quickly away from the ports to inland consolidation depots. It might well take several years to come to fruition, but the longer we remain without a solid future plan, the longer the risks and pain will continue for. The time to plan is now.

The comments by andyslane below reminds me that not only isn't there a "harbor master plan", and there needs to be, there is no national port plan, everyone is on their own and chasing US Government $$ in a competitive mode. Great idea for normal business entities, but realistically ports are not usual businesses. Look closely how China has developed significant port and terminal operations with great capabilities as well as being efficient and effective. It's because they plan as a nation not as individual entities competing with each other. The US doesn't and we are seeing the results, or lack thereof, in terms of lack of efficiency and effectiveness. Anyone listening? any place to get leadership on this critical issue?