Ryder System Inc. With that kind of growth, you'd think the ports would be doing everything they can to ensure the smooth flow of goods into the country. And of course, you'd be wrong.
It's easier to get shipments out of China than it is to get them into the U.S., says Jon Monroe, principal of Jon Monroe Consulting, thanks to the congestion at the West Coast ports that tends to slow the flow of goods inland to a standstill. Monroe has been working with companies locating in China and has seen the massive investments that country is making to develop logistics infrastructure.
By contrast, he points to ships waiting in U.S. West Coast harbors for as long as eight days and he has been telling importers to add three or four days into their normal planning. Those extra days are about to become more costly.
The Port of Los Angeles — the principal port for Asian imports — has been making slow progress towards relieving congestion, in the view of many shippers and carriers. But ask Bruce Seaton, interim port director, and he repeatedly brings the conversation back to the port's Pier Pass initiative, which he feels will help relieve some of the problem by extending terminal hours. Importers are not all as enthusiastic about off-peak operations as Seaton.
Seaton is putting some bite into the initiative through the port's current tariff proposal. In addition to a general increase of 5% in its tariff, the Port of Los Angeles will reduce free time by one day on July 1 and change the method for calculating free time. The tariff contains provisions for a further one-day reduction in free time by July 1, 2006.
As part of the tariff, free time will start being calculated when a container is offloaded, not when the ship leaves the dock, as it had been done. Seaton says the Port of Long Beach carried a similar proposal to its board.
"Our facilities have been used as kind of a surge tank for excess cargo that can't be picked up or is not picked up [at the discretion of] some logistics folks," says Seaton. "We cannot be operating as a warehouse here. We're a transfer facility, and if something comes on, we need to move that cargo in a timely manner," he adds.
Most importers would agree, but the perspective on what causes the constraints at the port differ depending on your position for viewing the problem. Seaton has put a lot of hope in the port's Pier Pass program, which will go into effect in late July. All 13 container terminals between Los Angeles and Long Beach will open for another 40 hours a week during evenings and weekends.
Seaton admits that the challenge is to ensure that importers and exporters will ship and receive cargo during those offpeak hours. To encourage off-peak moves, the Ports of Los Angeles and Long Beach will charge a fee for moving containers during peak times that will not be applied to shipments that move outside those hours. According to Seaton, that should encourage the shift to offpeak times and also help cover some of the cost of the off-peak operations.
Ships are in port and may not clear the terminal for four or five days, Monroe agrees, and it is the shippers who are being charged through increased demurrage costs. Logistics Today caught up with Monroe at the Logistics Forum in May, ahead of the implementation of the tariff changes that were coming at the Ports of Los Angeles and Long Beach.
Adding to some earlier comments that capacity is still available at various terminals at West Coast ports, Monroe says it is increasingly important for shippers and importers to find an efficient terminal. You have to look at each carrier and how they operate the terminals, he points out.
The dray carriers know which terminals are efficient and which terminals cause them the biggest problems and delays. And while commenting on the relationship with carriers, he points to another reason for the importance of a close relationship with dray carriers — access to chassis.
Truckers are key to success at the port because theirs is the capacity that will move your freight off the port, adds Monroe.
Look for on-dock rail capability as well, advises Monroe. That's an area where L.A.'s Seaton feels his port has an advantage. "L.A. probably has some better rail facilities than Long Beach," says Seaton. As a result, cargo is being trucked between Long Beach and L.A. to take advantage of L.A.'s rail facilities. Seaton says he has had to add a charge for cargo coming from Long Beach to be loaded on intermodal cars at L.A.
Seaton has identified another area of railroad operations that troubles him. The Burlington Northern Santa Fe (BNSF) railroad was limiting the minimum size of trains leaving the ports and, consequently, was running fewer trains, he says. To achieve maximum efficiency for its lanes, the railroad would build a 7,500-foot train to, say Denver, instead of pulling that train out of the port when it had reached 5,000 or 6,000 feet.
Seaton says that the port loses those additional trains and that puts more pressure on motor carriers to handle more of the moves from the port. He sees the reduced free time as one way to push carriers to get those shipments off the port faster.
Along with his concern over rail congestion and delivery times, Seaton recognizes that the additional demand for motor carriage is a problem. He believes the Pier Pass program will help that by allowing the dray carriers to get more efficiency out of their equipment.
During peak times, the turnaround for dray carriers is slower. Drayage companiesare paid by the move and the delays mean they are making fewer moves in the same number of hours, at the same time that their costs have increased.
Seaton hopes off-peak moves will help those truckers become more profitable and bring back some of the operators who had found they weren't profitable in the current environment.
Some shippers seem skeptical about the Pier Pass initiative. On the issue of drivers, the issues about long-haul carriers getting and keeping drivers are well publicized. But some shippers add another issue to Seaton's profitability factor — a crackdown on illegal immigrants in Southern California has deprived dray carriers of many of their workers.
While this may be a minority opinion, shippers do agree that opening the port terminals to traffic during off-peak times adds to their costs and operational complexity. Some say their facilities are near residential areas or trucks will have to pass through residential areas to make pick ups or deliveries. In addition to the problems this may cause with local residents or zoning commissions, shippers and importers note their distribution centers would have to be open longer, which adds operating costs and staff.
All of this growth in trade with China is having a significant impact on U.S., of course. There are a limited number of berths for the larger vessels and the longer time ships spend in port is adding to congestion.
"Terminals are unprepared for the onslaught of freight they've seen," Monroe observes. There are significant bottlenecks in the intermodal rail system. And even though other West Coast ports like Seattle are trying to lure freight away from Los Angeles, the ports generally are not communicating with others.
"What's lacking is a coordinated effort between the ports, terminals, carriers, railroads, motor carriers and shippers," he says. We could even reach a point, says Monroe, where the government would have to control lanes and grant rights the way it manages landing rights for the airline industry.
While the southern California ports struggle to find solutions, ports in the U.S. Northwest — particularly Seattle, Tacoma and Oakland — are seeing phenomenal growth as shippers shift their cargo away from L.A./Long Beach, Monroe notes.
Each solution appears to be as complex as the problem it purports to solve, and it all carries a price that may not be evenly spread across the logistics landscape. At least privately, shippers' comments indicate they feel much of the cost is coming out of their pockets in the form of higher rates, surcharges, inventory and delays.
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