Chassis provider urges revamp of regional pools

Chassis provider urges revamp of regional pools

Variations of chassis pools now in use typically favor some users while disadvantaging others. Photo credit: Shutterstock.com.

TACOMA — Ports and rail hubs are struggling to find the chassis model that works best for their transportation communities, although a consensus is building that establishing a regional hub with a single management entity will best serve shippers and truckers.

“We must reconstruct the regional pool — a single grey pool system with a neutral manager focusing on service,” Jeffrey Lawerence, executive director and general counsel of the Ocean Carrier Equipment Management Association, told the annual meeting of the Agriculture Transportation Coalition (AgTC) last week.

Ports and rail hubs over the past decade have established variations of chassis pools designed to ensure an adequate supply of road-ready chassis at reasonable rental rates, suited to the unique intermodal environment in their locations. However, agricultural shippers and truckers who spoke at the AgTC meeting noted that each pool arrangement seems to allow exceptions that favor some users, while disadvantaging others.

“Members make decisions that are optimal for them, but suboptimal for the entire system,” Lawrence said.

Unexpected cargo surges, such as occurred last winter due to front-loading of imports ahead of new tariffs in the US-China trade war, or normal cargo surges that come during peak-shipping season demand, often strain chassis supplies both in key marine ports and inland rail terminals. Winter weather conditions in the Midwest or flooding due to heavy rains and hurricanes can shut down rail networks and cause chassis shortages.

Port and rail networks are so interconnected that a breakdown in one region reverberates in other parts of the US. Michael Symonanis, director of the global container logistics group at Louis Dreyfus Co., noted that three items are needed to move cargo: a truck, container, and chassis. “Remove or delay one, and the whole system suffers,” he said.

An artificial chassis shortage developed in Southern California last winter when import warehouses were so overwhelmed with front-loaded shipments that importers for weeks parked loaded import containers on chassis on the streets and in warehouse yards. That created a chassis shortage where none should have existed.

A common but costly practice that troubles many agricultural shippers is how ocean carriers will charge exceedingly low rates on a door move by requiring the use of a specific intermodal equipment provider’s (IEP’s) chassis. The bargains are subsidized by higher rates shippers pay an IEP when they take charge of the final delivery, known as merchant haulage.

“There are preferential ocean carrier rate incentives for carriage haulage versus merchant haulage, and this creates high merchant haulage rates,” said Dick Craig, vice president of business development at North American Chassis Pool Cooperative.

Those who defend the current model note that providing discounts to high volume or important customers while charging higher rates to infrequent or one-off customers is common business practice in the US.

But Karen Vellutini, vice president of sales and marketing at Devine Intermodal in Northern California, said it’s time for chassis providers to give incentives to keep ocean carriers in the chassis game. “If you keep giving ocean carriers sweetheart deals on your chassis, they’re not going to leave,” she said.

Ludovic Renou, president of CMA CGM America, said at the JOC Gulf Shippers Conference last month that truckers are responsible for providing chassis everywhere else in the world. But CMA CGM is also part of the current structure with an IEP alliance.

Bill Rooney, vice president of strategic development at Kuehne + Nagel, said a “chassis utility” model with a single administrator responsible for ensuring an adequate supply of well-maintained chassis is the overall goal to aim for, but each port or terminal must also adjust to local conditions.

Symonanis highlighted that observation by noting that in Memphis, there are five rail yards, each operated by a different railroad. Some require containers be stacked on the ground while others require the boxes be “wheeled” on chassis. The wheeled operations can cause delays for truckers who own their chassis because the containers must be “flipped’ to their chassis.

IEPs, for their part, are finding it difficult to attract and retain qualified mechanics to keep the chassis in good working order, but Val Noel, executive vice president and chief operating officer (COO) of TRAC Intermodal, said this should not be used as an excuse for failing to provide well-maintained equipment to pools. “We as an industry have to upgrade the quality of our fleet,” he said.

Each location has a pool of qualified port, carrier, rail, trucker, and IEP managers who can develop a system that works best for their region, but in many instances these managers are not communicating with each other, said Charles Wellins, president and COO of Flexi-Van Leasing. “We need subject matter experts in each area of the supply chain to communicate,” he said.

Gene Seroka, executive director of the Port of Los Angeles, said each port community should also use technology, process improvements, and innovation to improve cargo and chassis fluidity. He urged stakeholders to support adoption of a single electronic portal for processing and sharing information on shipments, continue to experiment with sensors attached to chassis, and work with the ports to have chassis removed from marine terminals to nearby stop-start yards. “We’ve seen it. It works,” he said.

Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter: @billmongelluzzo.