Killing the Goose that Lays the Golden Egg
In our November 29th commentary, “The Whole Picture”, our opening paragraph begins in this way:
“A week ago we suggested that decision-makers on the West Coast should turn to ‘responsible logisticians’ for assistance. Perry Trunick of ‘Logistics Today’ is just one of the many specialists in that field who could make some sense of the problems facing the maritime community, and he’d be a great starting point.”
We stand behind that six-month old recommendation, and Mr. Trunick’s new article, “Slow boat from China” gives further proof of his capability. This latest article of his begins in this way:
“Ports on the U.S. West Coast receive 70% of all shipments from China, and the number of shipments is increasing by 14% annually, observes Chuck Lounsbury, senior vice president of strategy, marketing and acquisitions with 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 … 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 admits that the challenge is to ensure that importers and exporters will ship and receive cargo during those off-peak 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 …
“Truckers are key to the success at the port because theirs is the capacity that will move your freight off the port, adds Monroe …
“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.(congestion), 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 in 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 LA/Long Beach, Monroe states.
“Each solution seems to be as complex as the problem it purports to solve, and it 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.”
[Perry Trunick, Chuck Lounsbury and Jon Monroe typify the “responsible logistician” so sorely needed in containerization operations.]
Let’s repeat some of what these savvy logisticians have just said:
• ” …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.”
• “… thanks to the congestion at the West Coast ports that tends to slow the flow of goods inland to a standstill.”
• “Importers are not all as enthusiastic about off- peak operations as Seaton.”
• “Seaton admits that the challenge is to ensure that importers and exporters will ship and receive cargo during those off- peak hours.”
• “Truckers are key to success at the port because theirs is the capacity that will move your freight off the port, adds Monroe.”
• “‘Terminals are unprepared for the onslaught of freight they’ve seen,” Monroe observes”
• “‘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 in the airline industry.”
• “Each solution appears to be as complex as the problem it purports to solve, and it all carries a price that may not be spread evenly 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.” It would be fair to say that these logisticians view the congestion in West Coast ports in this way:
• The number of incoming containers is increasing at a rate of 14% annually.
• The rate of arrival of these inbound containers far exceeds the rate at which the so-called “infrastructure” can bear these containers away.
• The ports are not doing everything possible to ensure the smooth flow of goods inland.
• Not all affected entities in terminal and delivery operations are enthusiastic about the Pier Pass initiative, and some are outwardly skeptical.
• In spite of the hype given the Pier Pass initiative, terminals are unprepared for the “14%” increase — the “onslaught” — of containers coming eastward.
• Truckers are the key to the movement of goods away from the port. Truckers are also the big question mark.
• There is no coordinated effort between the various links in the supply chain to address the causes of congestion. Government intervention and control may be inevitable.
• Shippers are shifting cargo away from the problem- laden LA/Long Beach complex.
• Each hasty, ill-conceived and costly solution further complicates things.
• Costs of these inadequate stop- gap measures are passed along the links in the supply chain to the consumer. When the consumer determines that supply is no longer available at a reduced cost, the consumer ceases to demand. That will surely relieve the congestion.
[One way or another, the authorities will find a way to kill the goose that lays the golden eggs.]