Ports struggle to right the ship after unprecedented peak season
An inexorable march of containerships arriving from Asia has stressed U.S. ports like never before, resulting in record peak-season cargo volumes. As the surge rolls on into 2022, what does the recovery roadmap look like?
Gary Frantz is a contributing editor for DC Velocity and its sister publication CSCMP's Supply Chain Quarterly, and a veteran communications executive with more than 30 years of experience in the transportation and logistics industries. He's served as communications director and strategic media relations counselor for companies including XPO Logistics, Con-way, Menlo Logistics, GT Nexus, Circle International Group, and Consolidated Freightways. Gary is currently principal of GNF Communications LLC, a consultancy providing freelance writing, editorial and media strategy services. He's a proud graduate of the Journalism program at California State University–Chico.
After what has seemed like a never-ending peak season, with maritime operators and ports processing record container volumes and managing through unprecedented delays and congestion, there are signs that the historic surge in freight may be starting to moderate. And that’s good news for ports, dray operators, intermodal carriers, and truckers, who have battled to keep products moving through supply chains and onto store shelves with some level of fluidity.
Since mid-2020, consumer spending and surging e-commerce activity have underpinned what by many accounts has been a remarkably quick, strong, and sustained economic recovery. Job creation has reached record levels, while unemployment has dipped below the mid-single digits. And while the emergence of Covid variants and rising inflation remain a concern, they don’t seem to have curtailed consumers’ appetite for goods, with this past peak season setting records for e-commerce sales and marking a strong rebound for retail brick-and-mortar stores.
NOT IN THE CLEAR YET
Yet there are still clouds on the horizon that foreshadow some continued tough sledding ahead as the industry moves through the first half of the new year.
Among those still feeling the pain are drayage truckers on the West Coast. “Cargo is moving, but a lot of it is going on the rail, and we are still drowning in empties,” says Matt Schrap, president of the Long Beach, California-based Harbor Trucking Association, which represents drayage operators serving Long Beach, Los Angeles, Oakland, and the Pacific Northwest ports. Dealing with empty containers “has become the real issue at the end of the day.”
With the sustained surge in cargo, communication and coordination between ship lines, ports, and drayage operators is more challenging than ever, Schrap notes. “We have six different appointment systems across 12 different marine terminals” that drayage truckers have to work with, he says. “Better coordination would be helpful, but every [terminal and ship line] operates so differently it lends itself to inefficiency,” Schrap explains.
Then there are local, regional, and national regulatory pressures, and the emergence of digital brokerage platforms, all of which are impacting the driver experience, their profitability, and truck capacity. “It’s an expensive profession that’s only going to get more so,” Schrap says. “The old joke is [the way] to make a small fortune in trucking is to start with a large one.”
HOPE ON THE HORIZON
Nevertheless, Mario Cordero, executive director at the Port of Long Beach, cites improvements in throughput and shorter wait times for boxes to be unloaded and moved out of the port. In early December, the San Pedro Bay had 67 container vessels at anchor, “less than the 86 we had two weeks ago,” Cordero noted. Cargo has been moving faster out of the terminals, he says, citing a reduction of more than 30% in containers sitting nine days or more. Terminals are running 19 hours a day, striving to get containers and truckers in and out as quickly as possible.
At the Port of Los Angeles, the backlog of containers has dropped to 71,000 from 95,000 in late October, and the numbers continue to improve, noted Gene Seroka, the port’s executive director.
Both Cordero and Seroka say the late-October announcement that the two ports would begin imposing a container dwell fee, essentially a penalty on long-sitting containers, is producing results. Under the temporary penalty program—implementation of which continues to be delayed in response to improving dwell times—ocean carriers could be charged $100 per day for each container left at the terminal for more than nine days while waiting for a truck. The charge for containers awaiting movement by rail comes into play for units sitting on the dock six days or more.
Before the pandemic, the average dwell time for containers awaiting pickup by truck was under four days, with containers headed to trains waiting two days.
Seroka, during an early December press conference, said, “Since we instituted a penalty for long-aging containers, the number of ships at anchor has decreased by more than 40% over a four-week period. We have not collected a nickel of that penalty yet. We put it out there to motivate people, and it has done just that.” In another media interview, the Port of Long Beach’s Cordero said, “I think it’s a fair representation that there’s been progress … [and] vessels at anchor have been diminished.”
Arriving ships to Southern California are allowed to hold at anchor inside a designated 40-mile zone, waiting for a berth to open. In mid-November, local authorities established a new Safety and Air Quality Area (SAQA) that extends 150 miles to the west of the ports and 50 miles to the north and south.
Data compiled by the Marine Exchange of Southern California showed some 44 containerships waiting within the 40-mile zone in early December. Other estimates calculated using Marine Exchange data put the number of containerships waiting outside the SAQA at 50.
Another action taken by the ports in a bid to reduce the container backlog was going to 24/7 container pickup and delivery operations. While in concept it seemed a good idea, in practice not so much. With port operations already running 19 hours a day, “we have had very few takers to date,” said Seroka. “We’ve had some hurdles to overcome. It’s an effort to get this entire orchestra of supply chain players … on the same calendar.”
All of the issues faced by ports—surging cargo volumes, congestion, equipment shortages, delays—are not new, notes Cordero. They’ve just been supercharged by the pandemic and the rapid economic recovery. Cordero cites one clear lesson: “We all understand how [vulnerable] the supply chain was to an unforeseen event.”
SHOCK TO THE SYSTEM
Lawrence Gross, founder and president of Gross Transportation Consulting and a 40-year veteran of the industry, agrees that the economy’s remarkably fast and strong recovery from the pandemic caught everyone by surprise. “We’ve never [before] woken the economy up from a medically induced coma,” he says, comparing this recovery to the years it took the economy to recover after the dot-com bust and then the 2007 housing crash and recession. This time, “things came back fast and hard.” And for maritime operators dealing with a sustained, unprecedented surge in cargo, “once you fall behind, it becomes exponentially harder to catch up. You need more resources just to stay even.”
He also cites the role of the containership lines. “Ocean carriers’ only concern is port to port,” Gross says. “They had zero concern with what happens after they unload the container from the ship. They went from blank [canceled] sailings to extra loaders and dumped all this extra volume into the system.”
Now, with empty containers clogging up the ports, “ocean carriers are not evacuating them [quickly enough] because they are not willing to suboptimize their operations to help solve the problem,” Gross says. Then there is today’s market where ocean carriers, after years of losses, are reporting all-time record profits. “To put it bluntly, I’m not sure the ocean carriers have been incented to change their practices at all,” Gross notes.
BUSINESS AS USUAL
What sometimes gets lost in the accounts of port logjams is that it’s not a universal affliction. For some U.S. ports, it’s been business as usual. “We are thankfully not having the types of problems that they are experiencing on the West Coast and the South Atlantic,” says Beth Rooney, deputy port director for the Port Authority of New York & New Jersey. “When it comes to ships at anchor, we have been seeing onesies and twosies [of ships waiting for a berth]. Year to date, the amount of time ships have waited at anchor is less than a day and a half.”
As for why the relatively short wait times, she says the facility is seeing the benefits of years of strategic expansion and the extra capacity that has given the port authority. “We are seeing about a 21% to 22% increase in cargo year over year, closely aligned with what other gateway ports are seeing,” she notes. “Capacity in the terminals has been [sufficient] to keep the ship traffic flowing,” Rooney says.
Nonetheless, the local port community has faced its share of logistics challenges. Like many ports dealing with surging inbound cargoes and record empties, availability of chassis, or “wheels,” to move containers in and out of the port remains tight. Street dwell times, or the days a container on a chassis sits somewhere outside the port and is not available to pick up the next import, are running 15 to 20 days, well above the normal five- to six-day average, Rooney notes. Inside the port, the normal four days a container would sit on port property has grown to as much as eight days.
In conversations with shippers, Rooney is finding that street dwell time is rising simply because warehouses are full. “They don’t have the capacity to turn the container. Their store shelves are empty, but they cannot fit another spatula into the warehouse,” which, Rooney says, is indicative of issues with available domestic trucking resources—the link in the chain that moves goods from warehouses to stores or e-commerce fulfillment centers.
As for the new year, Rooney doesn’t expect volumes to moderate anytime soon. “Ocean carriers are seeing strong bookings well past the Chinese New Year and well into the second half of 2022. Shippers are saying the same things. They continue to order earlier than they normally would, are ordering more, or both,” Rooney says.
One fact Rooney says has become crystal clear over the past year: the value of the truck driver, and the challenges drivers face in running a successful business. She believes ports and maritime operators need to be much more supportive, communicative, and collaborative.
“The truck driver and the experience that driver has while in the port is a very important piece of the equation that we may not have been as focused on in the past as we needed to be,” Rooney says. “Providing a good experience for that trucker entering and exiting the port is going to be critical to retaining those we have and attracting more to the profession—especially when you consider the volumes we expect in the future.”
Online merchants should consider seven key factors about American consumers in order to optimize their sales and operations this holiday season, according to a report from DHL eCommerce.
First, many of the most powerful sales platforms are marketplaces. With nearly universal appeal, 99% of U.S. shoppers buy from marketplaces, ranked in popularity from Amazon (92%) to Walmart (68%), eBay (47%), Temu (32%), Etsy (28%), and Shein (21%).
Second, they use them often, with 61% of American shoppers buying online at least once a week. Among the most popular items are online clothing and footwear (63%), followed by consumer electronics (33%) and health supplements (30%).
Third, delivery is a crucial aspect of making the sale. Fully 94% of U.S. shoppers say delivery options influence where they shop online, and 45% of consumers abandon their baskets if their preferred delivery option is not offered.
That finding meshes with another report released this week, as a white paper from FedEx Corp. and Morning Consult said that 75% of consumers prioritize free shipping over fast shipping. Over half of those surveyed (57%) prioritize free shipping when making an online purchase, even more than finding the best prices (54%). In fact, 81% of shoppers are willing to increase their spending to meet a retailer’s free shipping threshold, FedEx said.
In additional findings from DHL, the Weston, Florida-based company found:
43% of Americans have an online shopping subscription, with pet food subscriptions being particularly popular (44% compared to 25% globally). Social Media Influence:
61% of shoppers use social media for shopping inspiration, and 26% have made a purchase directly on a social platform.
37% of Americans buy from online retailers in other countries, with 70% doing so at least once a month. Of the 49% of Americans who buy from abroad, most shop from China (64%), followed by the U.K. (29%), France (23%), Canada (15%), and Germany (13%).
While 58% of shoppers say sustainability is important, they are not necessarily willing to pay more for sustainable delivery options.
Schneider says its FreightPower platform now offers owner-operators significantly more access to Schneider’s range of freight options. That can help drivers to generate revenue and strengthen their business through: increased access to freight, high drop and hook rates of over 95% of loads, and a trip planning feature that calculates road miles.
“Collaborating with owner-operators is an important component in the success of our business and the reliable service we can provide customers, which is why the network has grown tremendously in the last 25 years,” Schneider Senior Vice President and General Manager of Truckload and Mexico John Bozec said in a release. "We want to invest in tools that support owner-operators in running and growing their businesses. With Schneider FreightPower, they gain access to better load management, increasing their productivity and revenue potential.”
Economic activity in the logistics industry continued its expansion streak in October, growing for the 11th straight month and reaching its highest level in two years, according to the most recent Logistics Managers’ Index report (LMI), released this week.
The LMI registered 58.9, up from 58.6 in September, and continued a run of moderate growth that began late in 2023. The LMI is a monthly measure of business activity across warehousing and transportation markets. A reading above 50 indicates expansion, and a reading below 50 indicates contraction.
October’s reading showed the fastest rate of expansion in the overall index since September of 2022, when the index hit 61.4. The results show that the industry is continuing its steady recovery from the volatility and sluggish freight market conditions that plagued the sector just after the Covid-19 pandemic, according to the LMI researchers.
“The big takeaway is that we’re continuing the slow, steady recovery,” said LMI researcher Zac Rogers, associate professor of supply chain management at Colorado State University. “I think, ultimately, it’s better to have the slow and steady recovery because it is more sustainable.”
All eight of the LMI’s indices grew during the month, with the Transportation Prices index showing the most growth, at nearly 6 points higher than September, reflecting increased activity across transportation markets. Transportation capacity expanded slightly during the month, remaining just above the 50-point threshold. Rogers said more capacity will enter the market if prices continue to rise, citing idle capacity across the market due to overbuilding during the pandemic years.
“Normally we don’t have this much slack in the market,” he said. “We overbuilt in 2021, so there’s more slack available to soak up this additional demand.”
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
The port worker strike that began yesterday on Canada’s west coast could cost that country $765 million a day in lost trade, according to the ALPS Marine analysis by Russell Group, a British data and analytics company.
Specifically, the labor strike at the ports of Vancouver, Prince Rupert, and Fraser-Surrey will hurt the commodities of furniture, metal products, meat products, aluminum, and clothing. But since the strike action is focused on stopping containers and general cargo, it will not slow operations in grain vessels or cruise ships, the firm said.
“The Canadian port strike is a microcosm of many of the issues that are impacting Western economies today; protection against automation, better work-life balance, and a cost-of-living crisis,” Russell Group Managing Director Suki Basi said in a release. “Taken together, these pressures are creating a cocktail of connected risk for countries, business, individuals and entire sectors such as marine insurance, which help to mitigate cargo exposures.”
The strike is also sending ripples through neighboring U.S. ports, which are hustling to absorb the diverted cargo, according to David Kamran, assistant vice president for Moody’s Ratings.
“The recurrence of strikes at Canadian seaports is positive for U.S. ports that may gain cargo throughput, depending on the strike duration,” Kamran said in a statement. “The current dispute at Vancouver is another example of the resistance of port unions to automation and the social risk involved with implementing these technologies. Persistent disruption in Canadian port access would strengthen the competitive position of US West Coast ports over the medium-term, as shippers seek to diversify cargo away from unreliable gateways.”
The strike is also affected rail movements, according to ocean cargo carrier Maersk. CN has stopped all international intermodal shipments bound for the west coast ports of Prince Rupert, Robbank, Centerm, Vanterm, and Fraser Surrey Docks. And CPKC has stopped acceptance of all export loads and pre-billed empties destined for Vancouver ports.
Connected with the turmoil, Maersk has suspended its import and export carrier demurrage and detention clock for most affected operations. The ultimate duration of the strike is unknown, but the situation is “rapidly evolving” as talks continue between the Longshore Workers Union (ILWU 514) and the British Columbia Maritime Employers Association (BCMEA), Maersk said.
Terms of the acquisition were not disclosed, but Mode Global said it will now assume Jillamy's comprehensive logistics and freight management solutions, while Jillamy's warehousing, packaging and fulfillment services remain unchanged. Under the agreement, Mode Global will gain more than 200 employees and add facilities in Pennsylvania, Arizona, Florida, Texas, Illinois, South Carolina, Maryland, and Ontario to its existing national footprint.
Chalfont, Pennsylvania-based Jillamy calls itself a 3PL provider with expertise in international freight, intermodal, less than truckload (LTL), consolidation, over the road truckload, partials, expedited, and air freight.
"We are excited to welcome the Jillamy freight team into the Mode Global family," Lance Malesh, Mode’s president and CEO, said in a release. "This acquisition represents a significant step forward in our growth strategy and aligns perfectly with Mode's strategic vision to expand our footprint, ensuring we remain at the forefront of the logistics industry. Joining forces with Jillamy enhances our service portfolio and provides our clients with more comprehensive and efficient logistics solutions."