Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
If vocal cadence is evidence of a person's demeanor, J. Christopher Lytle, executive director of the giant Port of Long Beach, is a calm customer. Lytle's even-handed replies to a reporter's phone queries about his port's relevance suggest the temperament of a man not likely to lose his head even if everyone else around him does.
That's a good thing, because Lytle is running the 102-year-old port, the nation's second busiest, at a time of unprecedented change in North America's competitive seafaring landscape. To the north, the Port of Prince Rupert in British Columbia has positioned itself as the fastest way to deliver goods from Asian manufacturing centers to consuming markets in the U.S. Midwest and mid-South. Prince Rupert officials claim that goods arriving there can reach Chicago three days faster than if they were routed through Long Beach.
To further enhance Prince Rupert's geographic advantages, Canadian National Railway Inc., which provides rail service linking the port to the U.S. heartland, has been aggressively cutting freight rates on service to Chicago and Memphis, according to David Howland, vice president of land services for third-party logistics giant APL Logistics.
To the south on Mexico's Pacific Coast lies the Port of Lázaro Cárdenas, located within hailing distance of Houston and Kansas City. Lázaro Cárdenas holds itself out as a cost-effective alternative to Long Beach and its big sister, the adjacent Port of Los Angeles, especially in serving the vast Texas market. Lázaro Cárdenas's lone container terminal handled 1.2 million twenty-foot equivalent unit containers, or TEUs, in 2012 and currently has enough capacity to process 2.2 million TEUs a year. The port plans to build a second container terminal that will increase overall TEU capacity to 3.4 million by 2015 and 6.5 million by 2020.
Though Lázaro Cárdenas is closer in rail miles to key Texas points than is Long Beach, the substandard track conditions in Mexico have always been a drag on transit times. However, due to track improvements by Kansas City Southern, the exclusive rail provider between the port and the U.S., transit times to Texas through the center of Mexico are now about the same as they are from Long Beach, according to Howland. Shippers and beneficial cargo owners (BCOs) using Lázaro Cárdenas realize savings from the shorter distance in rail miles as well as the lower operating costs at the Mexican port, he said.
Further south and to the east of Lázaro Cárdenas is the well-publicized Panama Canal expansion project, set for completion in 2015. The widened and deepened passage will accommodate the "megaships"—vessels capable of carrying up to 12,500 TEUs—seen as the future workhorses of global trade. It has also fueled a multiyear debate as to whether an all-water route through the canal to the East and Gulf coasts will be more cost-effective for U.S. importers than having their goods offloaded on the West Coast and trucked or railed inland.
Jones Lang LaSalle, a Chicago-based logistics and industrial services giant, caused a stir in mid-2009 when it predicted the canal's expansion would result in West Coast ports' losing up to 25 percent of their existing traffic base to eastern rivals over the next few decades. The firm still stands by that projection, said John Carver, director of port, airport and global infrastructure, in a February interview.
Besides the growing competition from Canada and Mexico, there are the "doing business" issues like cost, congestion, and labor that Lytle wakes up to every day. Shippers and carriers have grown accustomed to the expensive and crowded conditions that are part of life in Southern California. They've also coped with three labor-related disturbances at Long Beach in the past decade, the latest being an eight-day strike late last year by a clerical workers unit that curtailed operations at Long Beach and effectively shuttered Los Angeles after union dockworkers honored the picket lines.
Carver said users of the twin ports face a myriad of obstacles that seem to coalesce into one big and constant headache. As a result, they have been searching for alternatives, he said.
Cathy Burrow, global transportation manager for Kansas City-based Hallmark Cards, said Hallmark today uses Long Beach and Los Angeles for about 60 percent of its waterborne imports from Asia. The other 40 percent transits through the Panama Canal to the East and Gulf coasts. About 10 years ago, 90 percent of Hallmark's imports entered through the West Coast. Hallmark imports about 10,000 TEUs a year.
Burrow said Hallmark diversified its import gateways because the many challenges at the Southern California ports threatened the reliability of the company's supply chain. "We knew we had to create more consistent leadtimes for our inventory in order to do a better job of managing it," she said.
Burrow said she has toured Lázaro Cárdenas, but as of now, Hallmark doesn't ship through the port. "It's on our watch list," she said.
DEFENDING THE CASTLE
In a mid-February interview with DC Velocity, Lytle said that Prince Rupert and Lázaro Cárdenas represent "critical threats" to Long Beach and acknowledged that shippers and beneficial cargo owners have more choices than ever before. Yet he believes Long Beach remains the prime location for those seeking to get international cargoes from Asia to their destinations in a cost-effective manner.
In Lytle's view, no other North American port provides shippers and BCOs with so many options to get their goods to multiple U.S. markets. "You need a gateway that gives you the ability to get to other inland destinations," he said. In a jab at Prince Rupert, Lytle added, "there's a lot more to goods movement than the ocean transit times and to get to Chicago."
Long Beach has 96 weekly ship calls—about 19 of those being containerships—and operates 60 train departures a week. It is also surrounded by a population of between 25 million and 40 million, and one of the world's great distribution rings: the so-called "Inland Empire" directly east of Los Angeles. The Inland Empire is home to 1.7 billion square feet of warehouse and distribution center space, and currently has a 2-percent vacancy rate.
Lytle said the port is in the second year of a multibillion dollar program to upgrade its facilities. It is spending $1 billion to expand and improve its on-dock rail capabilities. It is nearly two years into a nine-year, $1.2 billion project known as the "Middle Harbor" container terminal, designed to renovate and combine two aging container terminals into one modern facility. Last April, Hong Kong-based ship line Orient Overseas Container Line (OOCL) signed a 40-year, $4.6 billion lease to be the terminal's sole occupant. It is the largest deal of its kind in seaport history, according to the port. The terminal will also have the most sophisticated IT system ever installed at any port, according to Lytle.
Lytle said the U.S. supply chain is undergoing a subtle yet profound change that bodes well for both Southern California ports. About three-quarters of all containerized imports entering Long Beach are bound for points outside the region. However, fewer containers are being loaded on intermodal trains at the port for direct transit to markets like Chicago. Instead, more shipments are being trucked to a DC in the Inland Empire, where they are eventually transferred from a 40-foot ocean container to a 53-foot domestic box for delivery to a local DC, and then onward distribution to the store or the customer.
As this trend intensifies, it will be a boon to a port like Long Beach that enjoys direct access to a leading distribution network, Lytle said.
Howland said Long Beach and Los Angeles benefit from the economies of scale afforded by their geography. It is very cost-effective to build full truckloads at the ports, deliver goods locally in the Southern California region, and continue on with cargo to interior points in the U.S. Southwest and Midwest, Howland said. The ability to commingle local and regional shipments is a value proposition that's "very hard for any other port to match," he said.
As for competition from an expanded Panama Canal, Lytle seems unconcerned. Every week, Long Beach handles ships with a 13,500-TEU carrying capacity, vessels too wide to transit through even an expanded canal. "People ask me all the time if we're afraid of the canal taking our business," he said. "The answer is no."
Will a new ag export run bear fruit?
Five of the seven biggest steamship lines and a large western railroad are in talks to tap into underutilized capacity at the nation's two busiest ports in an effort to expand global markets for U.S. agricultural exports.
The proposed initiative involves hauling intermodal containers to the ports of Los Angeles and Long Beach from California's Central Valley, a 450-mile swath of fertile land extending from Redding in the north to Bakersfield in the south. At the ports, the containers of agricultural products would be loaded aboard containerships for the trip across the Pacific.
The move from the Central Valley to the ports would actually be the second leg of a round-trip starting at the ports' docks. Containers carrying import merchandise into Los Angeles and Long Beach would be transferred to a "loop train" for the northbound moves up the coast, with the train stopping at various intermodal ramps to unload the cargo. Large retailers, produce growers and packers, and the railroad would synchronize their schedules so the railroad could accept containerized shipments of agricultural products for the return move to the docks.
Informal discussions with the ship lines and the railroad began about seven months ago and took on a more serious tone at the start of the year, according to Curtis D. Spencer, president and CEO of Webster, Texas-based IMS Worldwide Inc., a consulting company that specializes in supply chain, industrial real estate, and foreign trade zone management. Spencer and his firm are coordinating the initiative.
Spencer would not identify the railroad. Nor would he disclose the names of the ship lines, though he said they are five of the world's top seven carriers based on containers transported. There have been no pricing or capacity commitments made at this point, Spencer said. However, at least two unidentified shippers that combined account for 20,000 import "lifts" have expressed strong interest in the service, he said.
A lift is defined as a trailer or container being lifted onto or off of a railcar. One intermodal movement can consist of multiple lifts depending on how many transportation modes handle a piece of equipment.
The initiative would capitalize on attractive pricing for westbound container movements off the southern California coast, according to Spencer. He said about half of the containers leaving the ports for Asian destinations depart empty. Most of the equipment sailing westbound heads for Asian ports to be loaded with import cargoes returning to the U.S.
Because of the demand imbalance, westbound container space is priced inexpensively, according to Spencer. He estimated it is cheaper to load an export container at Los Angeles or Long Beach than at Oakland and Seattle/Tacoma, ports that have a better balance between imports and exports.
Spencer said the so-called "match-back" process at the heart of the initiative appeals to ocean carriers because it helps offset container repositioning costs that can run into the hundreds of millions of dollars. If properly executed, the project will allow empty containers to be placed near an area with revenue-producing cargo instead of returning empty to the ports, he said.
According to Spencer, the project will save the ports money by reducing the number of empty containers in their environs and will give exporters access to equipment at a local container yard rather than at a port 150 to 450 miles away. Additionally, the program will benefit the environment because truckers won't have to burn fuel driving empty miles returning the containers to port.
The fact that the program is being considered speaks to the growing popularity of converting export traffic historically moved in bulk shipments to containerized loads, which are easier and less expensive to handle.
Container imports at U.S. ports are seeing another busy month as retailers and manufacturers hustle to get their orders into the country ahead of a potential labor strike that could stop operations at East Coast and Gulf Coast ports as soon as October 1.
Less than two weeks from now, the existing contract between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance covering East and Gulf Coast ports is set to expire. With negotiations hung up on issues like wages and automation, the ILA has threatened to put its 85,000 members on strike if a new contract is not reached by then, prompting business groups like the National Retail Federation (NRF) to call for both sides to reach an agreement.
But until such an agreement is reached, importers are playing it safe and accelerating their plans. “Import levels are being impacted by concerns about the potential East and Gulf Coast port strike,” Hackett Associates Founder Ben Hackett said in a release. “This has caused some cargo owners to bring forward shipments, bumping up June-through-September imports. In addition, some importers are weighing the decision to bring forward some goods, particularly from China, that could be impacted by rising tariffs following the election.”
The stakes are high, since a potential strike would come at a sensitive time when businesses are already facing other global supply chain disruptions, according to FourKites’ Mike DeAngelis, senior director of international solutions. “We're facing a perfect storm — with the Red Sea disruptions preventing normal access to the Suez Canal and the Panama Canal’s still-reduced capacity, an ILA strike would effectively choke off major arteries of global trade,” DeAngelis said in a statement.
Although West Coast and Canadian ports would see a surge in traffic if the strike occurs, they cannot absorb all the volume from the East and Gulf Coast ports. And the influx of freight there could cause weeks, if not months-long backlogs, even after the strikes end, reshaping shipping patterns well into 2025, DeAngelis said.
With an eye on those consequences, importers are also looking at more creative contingency plans, such as turning to air freight, west coast ports, or intermodal combinations of rail and truck modes, according to less than truckload (LTL) carrier Averitt Express.
“While some importers and exporters have already rerouted shipments to West Coast ports or delayed shipping altogether, there are still significant volumes of cargo en route to the East and Gulf Coast ports that cannot be rerouted. Unfortunately, once cargo is on a vessel, it becomes virtually impossible to change its destination, leaving shippers with limited options for those shipments,” Averitt said in a release.
However, one silver lining for coping with a potential strike is that prevailing global supply chain turbulence has already prompted many U.S. companies to stock up for bad weather, said Christian Roeloffs, co-founder and CEO of Container xChange.
"While the threat of strikes looms large, it’s important to note that U.S. inventories are currently strong due to the pulling forward of orders earlier this year to avoid existing disruptions. This stockpile will act as an essential buffer, mitigating the risk of container rates spiking dramatically due to the strikes,” Roeloffs said.
In addition, forecasts for a fairly modest winter peak shopping season could take the edge off the impact of a strike. “With no significant signs of peak season demand strengthening, these strikes might not have as intense an impact as historically seen. However, the overall impact will largely depend on the duration of the strikes, with prolonged disruptions having the potential to intensify the implications for supply chains, leading to more pronounced bottlenecks and greater challenges in container availability, " he said.
The Owner-Operator Independent Drivers Association (OOIDA) says the bipartisan legislation—called the Household Goods Shipping Consumer Protection Act—is needed because motor carriers are victimized through unpaid claims, unpaid loads, double brokered loads, or load phishing schemes on a daily basis.
The proposed act, which was introduced by Congresswoman Eleanor Holmes Norton (D-DC) and Congressman Mike Ezell (R-MS), offers a solution, OOIDA says. If passed, the bill would restore and codify FMCSA’s authority to issue civil penalties against bad actors. The legislation also requires that brokers, freight forwarders, and carriers provide a valid business address to FMCSA in order to register for authority.
According to Rep. Norton, the bill “would clarify that FMCSA has the authority to assess civil penalties for violations of commercial regulations, and crucially, to withhold registration from applicants failing to provide verification details demonstrating they intend to operate legitimate businesses. Americans moving across state lines need to be able to have confidence in FMCSA-licensed companies transporting their physical belongings. I'm thankful for Rep. Ezell’s partnership in co-leading this bill with me and look forward to the bill’s progress in the Senate.”
The bill has been endorsed by the Transportation Intermediaries Association (TIA), American Trucking Associations’ Moving & Storage Conference (ATA-MSC), Owner-Operator Independent Driver Association (OOIDA), the National Association of Small Trucking Companies (NASTC), Commercial Vehicle Safety Alliance (CVSA), Institute for Safer Trucking (IST) and Road Safe America.
OOIDA is now calling for the bill to get a swift vote before the full U.S. House of Representatives.
"Freight fraud committed by criminals and scam artists has been devastating to many small business truckers simply trying to make a living in a tough freight market,” OOIDA President Todd Spencer said in a release. “OOIDA and the 150,000 small-business truckers we represent applaud the House Transportation & Infrastructure Committee for its bipartisan approach in providing FMCSA better tools to root out fraudulent actors, which are also harmful to consumers and highway safety. Because of the broad industry support for these commonsense reforms, we hope this legislation will move to the full House of Representatives for a vote without delay.”
A coalition of freight transport and cargo handling organizations is calling on countries to honor their existing resolutions to report the results of national container inspection programs, and for the International Maritime Organization (IMO) to publish those results.
Those two steps would help improve safety in the carriage of goods by sea, according to the Cargo Integrity Group (CIG), which is a is a partnership of industry associations seeking to raise awareness and greater uptake of the IMO/ILO/UNECE Code of Practice for Packing of Cargo Transport Units (2014) – often referred to as CTU Code.
According to the Cargo Integrity Group, member governments of the IMO adopted resolutions more than 20 years ago agreeing to conduct routine inspections of freight containers and the cargoes packed in them. But less than 5% of 167 national administrations covered by the agreement are regularly submitting the results of their inspections to IMO in publicly available form.
The low numbers of reports means that insufficient data is available for IMO or industry to draw reliable conclusions, fundamentally undermining their efforts to improve the safety and sustainability of shipments by sea, CIG said.
Meanwhile, the dangers posed by poorly packed, mis-handled, or mis-declared containerized shipments has been demonstrated again recently in a series of fires and explosions aboard container ships. Whilst the precise circumstances of those incidents remain under investigation, the Cargo Integrity Group says it is concerned that measures already in place to help identify possible weaknesses are not being fully implemented and that opportunities for improving compliance standards are being missed.
Dexory’s robotic platform cruises warehouse aisles while scanning and counting the items stored inside, using a combination of autonomous mobile robots (AMRs), a tall mast equipped with sensors, and artificial intelligence (AI).
Along with the opening of the office, Dexory also announced that tech executive Kristen Shannon has joined the Company’s executive team to become Chief Operating Officer (COO), and will work out of Dexory’s main HQ in the United Kingdom.
“Businesses across the globe are looking at extracting more insights from their warehousing operations and this is where Dexory can rapidly help businesses unlock actionable data insights from the warehouse that help boost efficiencies across the board,” Andrei Danescu, CEO and Co-Founder of Dexory, said in a release. “After entering the US market, we’re excited to open new offices in Nashville and appoint Kristen to accelerate our scale, drive new levels of efficiency and reimagine supply chain operations.”
The deal will create a combination of two labor management system providers, delivering visibility into network performance, labor productivity, and profitability management at every level of a company’s operations, from the warehouse floor to the executive suite, Bellevue, Washington-based Easy Metrics said.
Terms of the deal were not disclosed, but Easy Metrics is backed by Nexa Equity, a San Francisco-based private equity firm. The combined company will serve over 550 facilities and provide its users with advanced strategic insights, such as facility benchmarking, forecasting, and cost-to-serve analysis by customer and process.
And more features are on the way. According to the firms, customers of both Easy Metrics and TZA will soon benefit from accelerated investments in product innovation. New functionalities set to roll out in 2025 and beyond will include advanced tools for managing customer profitability and AI-driven features to enhance operational decision-making, they said.