It’s Time For A Change
By John McLaurin, President, Pacific Merchant Shipping Association
Our supply chain is overwhelmed with cargo. At its core, there is more cargo than the system can handle. That is evident by ships that are full and sitting at anchorage, terminals which are at capacity, containers and chassis that are fully deployed, scarcity of rail equipment, lack of adequate truck assets and drivers, and full warehouses and distribution centers.
It is also something that is happening all over the world. The explosion of e-commerce is a global response to the pandemic.
The result of this cargo surge: in Southern California, marine terminals have become storage facilities rather than transit points; chassis and containers are being taken out of service and used as mobile storage facilities; ships are inadvertently being used as floating warehouses as landside storage facilities are unable to accommodate additional volumes.
Delay in one segment cascades and becomes an additional delay in other supply chain segments. The unprecedented demand for consumer goods and industrial products shipped in containers has stressed chassis supply, truck power, berth space, terminal land and warehouse capacity resulting in many in the supply chain advocating “solutions” which only benefit the advocate but penalize everyone else and make the congestion worse.
The proposal to eliminate detention and demurrage charges is one such misguided effort. To argue that eliminating an incentive to return equipment you don’t own somehow promotes equipment availability is counterintuitive. If the complaint is that there are abuses in imposition of those fees, then the established oversight of the Federal Maritime Commission is appropriate and will hopefully be based on verifiable data as opposed to scattered anecdotes.
It is time to move away from myopic, self-serving solutions and consider real change in how cargo is transported through Southern California ports. The recent surge in cargo, and speculation by some as to whether this will be the “new normal,” requires the trade community to re-evaluate our entire logistics system.
One idea for real change is to rethink the current model and move away from the “pull model” of cargo owners going to marine terminals and retrieving the cargo as desired. Could you imagine the pull system being applied to FedEx or UPS packages, relying on customers to make an appointment to pick up their own packages – when it is convenient?
Instead, the port container system should consider the “push model” that is more common with final mile delivery of goods, where the ultimate consumer is informed of when the cargo is to be delivered to a warehouse or other location. If marine terminals are truly to be transit points as opposed to a de-facto storage yard, cargo needs to move through the terminal to either its final destination or to an off-dock facility or location that is easily accessible to cargo owners.
Will it be transformative? Yes. Will it require stakeholders to come together to make it work? Yes. Would it ensure cargo moves through the ports efficiently and improve velocity? Yes. Is it necessary? Yes.
The current chassis system is also the subject of perennial complaints. Chassis availability becomes an issue whenever cargo volumes surge. There is a feeling among many that the chassis system must change, and in fact it has changed in the last decade, just not to everyone’s satisfaction. Many complain that there aren’t enough chassis; the fees are too high; they take up space on terminals; street dwell time is too long and chassis are often damaged, creating artificial shortages. Has the time come to move chassis to an off-dock location and/or to require a trucker/BCO to utilize their own chassis as opposed to waiting at a marine or rail terminal for a chassis to become available?
Finally, California is rapidly driving logistics to a zero-emissions future. It will bring on many changes. There will be winners and losers. For a time, due to proposed California Air Resources Board policies, there could be a reduced pool of available trucks for use in the harbor area – bringing additional challenges to other segments of the supply chain. In addition to the public policy challenges requiring a zero-emissions supply chain, the collective industry needs to discuss what the port drayage model will look like in just a few years. Whatever surfaces, it will be transformative and affect everyone in the supply chain and will require everyone to work together.
The COVID crisis is providing a preview of the challenges facing the supply chain. Let’s take advantage of this opportunity and move together to a better system.
The views expressed by John McLaurin are his own and may not reflect the positions of the members of the Pacific Merchant Shipping Association.