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.”
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.