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, Supply Chain Xchange. He is 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.”
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."