Day Of Reckoning
Mr. Wilson Lacy, Director of Maritime at the Port of Oakland, states that, in addition to the three ports in California, along with Seattle and Tacoma in Washington, additional ports will be required on the West Coast because of the enormous growth in Asian goods. “If all the economic forecasts are on- stream, and I believe they will be”, said Mr. Lacy, ” there will be 10 gateways
on the West Coast”. He stated that, “The way China has been centralized as the manufacturing center of the world, all of these infrastructures throughout the world will have to be improved, or we will see inflation like you can’t believe”. Now let’s see what he means by those statements. Richard Martin of Australia’s International Market Assessment Asia has forecasted a cargo increase of 9 percent over 2004 levels for West Coast ports this year. Mark Page of Drewry Shipping Consultants is predicting a 12 percent increase over 2004 levels, and the Pacific Maritime Association has projected that West Coast ports will see a 13.67 percent increase in cargo over 2004 levels. Paul Peyton, though, secretary-treasurer of Local 63, and David Arian, the president of Local 13, both think that these projections are much too low. They believe that an increase of 18 percent over 2004 levels is a more realistic estimate. These two labor leaders, a lot closer to the action than the outside prognosticators, remember only too well the 9 percent 2004 projected cargo increase issued by those outside sources for the ports of LA and Long Beach. The unexpected deluge of a 24 percent increase in Long Beach last year, however, along with the rapid developments in Asia these past few months, have no doubt infected these local officials with an attitude of realism. This attitude was bolstered by the recent announcement that growth in Seattle’s imports during the month of January surpassed last year’s figure by 57.4 percent. Imports increased by 26 percent in Tacoma, 32.4 percent in Oakland and 25.4 percent in Long Beach. To put it mildly, the West Coast ports are in for a spanking this year. Jim Spinosa at the ILWU sees it coming, too. “A wave has crested over this industry”, he said. [Maybe it’s more than a wave, Jim. Maybe it’s a full-fledged tsunami.] Let’s look a little closer at what Mr. Lacy was saying. He concerned himself, first of all, with the insufficient number of available ports on the West Coast but he also said that infrastructures will have to be improved. The excessive amounts of containers arriving in 2004 revealed the shortcomings in the landside links in the supply chain, the so-called infrastructure, which included the physical space in terminals, the shortages of longshore labor and truck drivers, and the sudden and unexpected demands placed upon a semi-dormant railroad system. With respect to the growing need for drivers this year, Jim McKenna, president of the PMA, asks, “Where are those extra draymen going to come from?” Piecework compensation and the rising costs to operate trucks priced many of the estimated 10,000 port truckers out of the industry, and kept delays at crisis levels all last year. This year’s growth will compound matters and no solution to the problem is in sight. All efforts to attract drivers and alleviate conditions have failed so far. Recall what Clark Brown, President of Bridge Terminal Transport Inc., said about this shortfall of personnel. “We estimate that more than 50,000 drivers — roughly one-third of the total — have left the profession since 2002. Inadequate income is the top cause”.
Chuck Mack, director of the Teamsters Union’s Port Division, already brought that to our attention. “Conditions are so bad,” he said, “that the turnover rate among these port drivers exceeds 150% per year as they cycle in and out of the industry”. Michael Belzer of the University of Michigan’s Institute of Labor Relations had earlier alerted port officials when he reported that, “Low wages, long hours, piece work and unsafe working conditions. You have working conditions that I believe can be characterized as sweatshops … If the problem is not resolved soon, you won’t have to worry about gridlock because there won’t be any trucks on the road … I can’t comprehend why people don’t respond to this as a national crisis”. The answer to Mr. Belzer’s question is that, in the present scheme of things, there is simply no way to respond to this crisis. The intermodal transportation system has been in place since the inception of containerization, and the system remains in its primitive state. It allows for no changes or improvements, and worse, none of the monetary pie includes provisions for beleaguered drivers. There seems to be no way for drivers to blend comfortably into the intermodal mix, but the day of reckoning has arrived. Either the drivers will be mollified, post haste, or 2005’s scheming and dreaming will turn out to be an economic nightmare. There is no tomorrow. The maritime industry, casting about for other scapegoats, assigned much of the blame for last year’s troubles to the railroads. A closer look, though, reveals that the railroads responded with no hesitation in the only way possible. Thousands of new employees were hired and trained, thousands of locomotives and flatcars were purchased and billions of dollars were allocated to upgrade the system. What else was expected of them? This response on the part of the railroads is beyond criticism because the entire industry stepped up to the plate in a determined effort to fulfill supply chain obligations. The same cannot be said for some of those who are closer to the firing line. Anyone with a clear head can see that neither the underpaid driver nor the overly cooperative railway industry is responsible for the congestion within the port terminals. The blame lies elsewhere. The flood of containerized imports are arriving from the water side of the port not the land side, and that makes it apparent that the terminal operations within the port and the gate connections to the surface delivery system are not able to manage the volume of incoming containers. Marine engineers have stated that West Coast ports have enough “latent capacity” to accommodate projected growth rates if throughput per acre can be increased by about 40%. That’s a big “if”. They don’t say how this can be done, or how this latent capacity will be of any use during this year’s bedlam, but anyway it sounds good. We also hear suggestions that TEU throughput per acre per year should be increased from the present 4,000 to 6,500, as though that dream will in some way facilitate container movement during this year’s pandemonium. Proposed construction programs such as additional terminals, near-dock rail yards and the expansion of the I-710 freeway are also being touted as panaceas, but these programs exist only on a drawing board. In order to manage the increasing numbers of containers this year, not ten or twenty years from now, creative solutions are required. Right now. Instead of creative solutions, though, all that’s been forthcoming in recent months is speculative fantasy. Why is there no mention made of the inefficiencies inherent in the primitive concept of stacking, searching, retrieving, repositioning, stacking again, searching again, etc., etc. Every move costs time and money. Every “move” increases the cost of the goods produced, and these increased costs, passed on to the consumer will soon bring the industry to its knees.
And that brings us back again to what Mr. Lacy had in mind when he said, ” …all of these infrastructures throughout the world will have to be improved or we will see inflation like you can’t believe”. He remembered from Economics 101 that whatever is determined to be a cost of doing business at any point in the transportation chain, from manufacturer to retailer, is tacked on to the price of the product and the total of these add-ons will be the selling price borne by the consumer. It follows, therefore, that operational changes will almost always result in one of two very basic corollaries: either efficiencies introduced along the chain will lower the selling price and create greater demand, or inefficiencies introduced along the chain will add to the selling price and discourage targeted consumers. Inefficient practices can be accidental, illogical or legislated, and the industry of late has been running the entire gamut. The consequences of escalating prices, regardless of the causes, will bring eventual disaster to national economies unless steps are taken to effect repairs upon those linkages that are still controlled by the transportation system. The entire industry is now at risk and although we have no options against the expensive measures mandated by federal and local governments, we must nevertheless give serious consideration to the accidental and illogical practices that have given birth to inefficiencies in the intermodal chain. In an earlier evaluation this website insisted that “the tail is wagging the dog”, and we’ll take one or two paragraphs to prove our point. If it hasn’t yet become obvious to port officials, let’s review some of what was taught way back in Logic 101. For starters, don’t take our port officials off the hook because of the giant ships that are being built by foreign ship owners. That won’t fly. Logically speaking, these ship owners may own the vessels but they do not own the U.S. container ports, and therefore they have no right to expect or demand that costly dredging projects must be undertaken and paid for by U.S. taxpayers/consumers. But these demands are indeed being made and port officials are indeed knuckling under. Fie on the taxpayers/consumers! If that isn’t bad enough, the enormous size of these mega-ships confine their services to a handful of “hub-ports” requiring further truck and rail transport for delivery to distant end users. This entails not only an add-on to the product, but it also has an adverse effect upon our clean air policies. Port officials are misguided (or irresponsible) in other ways as well. They acknowledge the cost- effectiveness of a “wheeled” operation, as opposed to a “stacking” operation which admittedly increases labor costs because longshoremen are continually repositioning containers in order to locate and retrieve needed ones, yet they permit their thinking to be directed toward expensive and impractical, or rather, impossible operational concepts. John Vickerman gave officials at LA/Long Beach food for thought when he reminded them that cargo volumes are projected to double by the year 2010 and possibly triple by the year 2020, and that more than 3,600 additional acres would be required to handle this volume. In spite of that admonition, however, their outlook is undeterred. They’ve either forgotten or ignored what Richard Steinke declared last year when he said, “I’m here to tell you, the land will run out”. At $ 150,000 per acre per year, that’s a blessing in disguise. Imagine how that add-on would affect the cost of imported goods, and how the consumer would react to it. But it’s an impossible scenario. The land simply isn’t available … the consumer wouldn’t pay … cooler heads would long since have prevailed … and proper adjustments in the intermodal chain will have been made because a system of this magnitude, and dominant personalities within the system, will not permit illogical practices to kill the goose that lays the golden eggs.
With any luck these cooler heads and dominant personalities will take action before a crippled intermodal supply chain throws the U.S. economy into complete disarray. Because time will have run out, the only remaining tool available to calculating minds will be the ability to apply the principles of valid reasoning and correct inference. Guesswork and speculation will no longer be options. Only timely corrections will save a sinking ship and only logical analysis will determine where these corrections are to be made. The first of two corrective measures will be immediately obvious to analysts.
Conventionally-structured and operated container terminals must be replaced by the patented system described in this website, because: \
• Doug Tilden said, “We have to find a different way to operate …”.
• Rick Larrabee said, “We’re not going to double the space for container terminals … We need to find innovative ways”.
• Daniel Griswold said, “Without aggressive modernization of facilities and operations, U.S. seaports risk losing business not only to other modes of transport but to other foreign ports”.
• Gill Hicks said, “Working 24/7 is not going to solve our problems. We will need major infrastructure improvements”.
• Tony Scioscia said, “Container terminals need higher productivity, achieved through the use of new technology, processes and equipment”.
• Capt. S.Y. Kuo said, “The fact that the ports … have become bottlenecks, rather than funnels, should be a significant concern and a priority issue to solve in the immediate future”.
• Zhang Liyong said, “… if your vessels can’t get into port and your containers are backed up at the terminal, the supply chain is seriously affected”.
• J.Y. Park said, “A negative consequence of growth has been severe congestion at the ports”.
• Sergey Kozlov said, “We will undoubtedly continue to experience major infrastructure problems at the ports of Los Angeles and Long Beach, which have led to recurring congestion and long delays for shippers”. The second corrective measure has already been revealed by Secretary Mineta when he informed the industry that an additional 200 U.S. ports will be required to handle containers in the near future. Carriers, therefore, will be directed to these underutilized facilities in order to restore order in the larger ports and inland infrastructure and allow time for the U.S. economy to recover.
• Erik Stromberg said that smaller ports will relieve the pressure felt by the larger ones.
• In the way of a statement, carriers diverted more than 100 vessels to other West Coast ports because of congestion at the LA/Long Beach complex last November and December.
• The Canadian ports at Vancouver and Prince Rupert are already expanding in an effort to draw imports from the U.S. intermodal system.
• Hutchison Whampoa has begun to develop container ports in Mexico in an undisguised attempt to capture disgruntled carriers from Asia.
• Ports at San Diego, Port Hueneme, San Francisco, San Pablo Bay, Portland in OR, and Grays Harbor, Seattle, and Tacoma in WA are anxious to service vessels from Asia.
Now that the problems and the corrective measures have been identified, why not take immediate action? Why wait until economic disaster strikes? An ounce of prevention … is a lot cheaper.