Short and Sweet?
This is supposed to be the IT age, the age of “Information Technology”. The problem is that the information being spewed out for public consumption is either inaccurate, incomplete or insincere. In a lengthy analysis of the economic conditions on the West Coast, the Regional Economic Briefing published by the Federal Reserve Bank of San Francisco included 31 graphs, a generous amount of charts and some authoritative comments on past and future developments. In all, the presentation required 12 full pages and had the appearance of a white paper rather than a “briefing”. But …. only 7 lines were devoted to the West Coast’s most important economic issue, the congestion that’s strangling port operations and the transportation infrastructure. The report, however, states that the situation has been “resolved”. Here’s what appears at the bottom of page 4 of the briefing:
• The backlog of inbound ships in Southern California generally has been resolved.
• Contacts at the Los Angeles port indicated that the bottlenecks were in part resolved by hiring new workers to handle the high volume of traffic.
• Shipping lines had responded to the bottlenecks by increasing their prices for ground and sea transport.
• According to our contacts, transport lines have not lowered their prices as the backlogs have been resolved.”
So there you have it. Short and sweet. The backlogs have been resolved, according to “contacts”. Those contacts, of course, weren’t identified in the report, but just a few days ago at the Long Beach AAPA seminar, Mr. Philip Connors, Maersk’s Executive VP, saw things differently. After citing the port’s adverse capacity, he stated that the infrastructure limitations in the rail and trucking industries are even worse. “The real problem is infrastructure … It is, in my opinion, a national crisis”. How did the “contact” miss out on this assessment? Mr. Connors was one of the featured speakers at the AAPA seminal.
In nearby Oakland’s Marine Terminals is an acknowledged authority on West Coast congestion, Douglas Tilden, and he’s the one the Fed’s should have consulted. This is what he said:
“2004 demonstrated once again the fragility of the international transportation system. The combinations of unexpectedly strong volumes out of China and issues with “right-sizing” the Southern California work force brought previously unimaginable delays to the movement of transPacific cargo … Other ports around the world struggled with congestion, but none suffered the level of disruptions of Southern California …We will definitely be faced with much broader issues in 2005″. [Makes you wonder on what other matters the Fed may have been led astray.]
“You ain’t seen nuthin’ yet!”
Vol. II, Art. 21
Peter Keller of NYK North America had some interesting comments to make about the state of affairs in the U.S. supply chain. Here are some of the concerns he touched upon in a recent interview.
• “Everybody’s mesmerized by this ‘just-in-time’ thing. What people really want is predictability. We have to deliver the predictability in the supply chain. That’s as true for the hay cubes as for the fur coats.”
• With respect to the West Coast terminal work stoppages late in 2002, Mr. Keller pointed out that this event “brought home the fact that we probably had too many eggs in one basket. Long-term, we need to spread our risk … we need to look for other places to accommodate growth.”
• In criticizing the low rate of productivity at LA/Long Beach, he stated that even an improved rate would contribute little to the solutions so desperately needed. “Even if you increase productivity, all you’re doing is buying time until 2009 or 2010″, he said.
• His advice to the industry was to address the approaching crisis in two ways. In noting that steps had to be taken in order to cope with the growing congestion at the LA/Long Beach complex, he stated first of all that existing resources must be utilized more efficiently, but in acknowledging the severity of the challenge ahead, he recommended the construction of new facilities and the acquisition of new equipment.
Mr. Keller has been involved with transportation for the better part of 40 years, and has witnessed the phenomenal growth that has taken place in this industry during those years. In the past half-dozen years or so this phenomenal growth has turned into explosive growth. Think it was bad in 2004? As Al Jolson would say, “You ain’t seen nuthin’ yet!” The respite after the Christmas season was supposed to bring relief to bedraggled port personnel. It was catch up time. It was time to make preparations for the coming year. And, according to the script, the shutdowns during celebrations of the Chinese Year of the Rooster would also provide the terminals with some breathing room. But it isn’t shaping up that way. To the surprise of exactly everyone, January shipments at the Port of Long Beach were 35% higher than they were last January, and this record rate of increase is projected to continue through the rest of 2005. Look at Vancouver. The port is so badly jammed up that force majeure was declared a couple of weeks ago. The outlook is so bleak that carriers are forced to reduce incoming volumes and to divert to other ports. This is one of the ports that is supposed to accommodate diverted vessels from Southern California, remember?
Now about those new facilities and equipment Mr. Keller recommended. Our patented and programmed systems are the answer to his concerns with respect to “just-in-time” efficiencies and predictability. Our November 1st commentary endorses his suggestion to spread the risk, and our system’s space-creating and time saving features produce undreamed of rates of productivity.
We agree wholeheartedly with Mr. Keller’s analysis and hope to be of assistance in the days ahead.