Situation
Southern California’s entire international supply chain network has been fractured with numerous pain points since imports began to increase rapidly in late June. The problems include vessel bunching at the ports, congested marine terminals, shortage of skilled equipment operators on the docks, lengthy truck queues at the gates, chassis shortages, and distribution facilities short labor and filled to near capacity. Shippers’ goods movement costs have significantly increased while service failures are rampant. Supply chain disruptions and choke-points are forecasted to continue through May-June 2021.
SoCal vs. Other Ports
Long Beach-Los Angeles ports handle much larger container exchanges with each vessel call than the East Coast ports. This is because the Asia-Pacific Southwest services make vessel calls at only two ports, either Long Beach or Los Angeles inbound and Oakland outbound. At Long Beach-Los Angeles vessels discharge & reload 80 to 85% of their contents. East coast service normally involves calls at several ports, each with lower container exchanges, in addition to deploying smaller vessels on average. Long Beach-Los Angeles regularly handles 8,000 to 12,000 container moves per vessel call, whereas East Coast ports are in the 2,500 to 4,500 range.
Long Beach-Los Angeles ports have 12 marine container terminals, which increases the complexity, challenges, and cost in moving loaded and empty containers and chassis in and out of the ports. On the other hand, Gulf and East Coast ports have less complex operations with fewer terminals [ Virginia (2), Savannah (1), Charleston (2), Houston (2) ].
Long Beach-Los Angeles ports are landlord ports. They build port infrastructure and lease terminals to independent operators. Operating ports like Savannah, Charleston, Norfolk, and Houston build infrastructure and operate the marine terminals and can change processes as they see fit.
Pain Points / Remedy
Before the COVID-19 pandemic shippers were experiencing significant increases in demurrage and detention costs. Shippers, 3PLs and Drayage Operators submitted complaints with the Federal Maritime Commission (FMC) for assistance.
- On November 19, 2020, the FMC’s announced it was launching a formal investigation. Maersk Line, the largest volume ocean carrier in the world, has started investigating their Southern California marine terminal in an effort to improve container throughput velocity and reduce demurrage and detention cost. Additional ocean carriers are anticipated to follow Maersk’s example.
- Both Ports of Long Beach & Los Angeles are aggressively pursuing commitments from marine terminals to increase dual transactions closer to 50% through financial incentives and collaboration. Ports are also incentivizing terminals to improve truck turn-time processing and providing near-dock container yard space for staging containers and chassis to help reduce terminal congestion.
The on-going congestion challenges make inbound shipment visibility and planning critical.
- Both ports are providing inbound shipment port-wide tracking and empty container return information to help. Shippers and their 3PLs should take advantage of this information.
3PL warehouse operations face increasing pressures to meet faster order processing times while dealing with labor shortages and new restrictive work rules as result of COVID-19 pandemic.
- There’s been an evolution of robotics capabilities because of increased computational power, better computer visions, more in-depth algorithms, machine learning, and AI. Los Angeles-based Port Logistics Group (PLG), an omnichannel logistics services provider, recently announced it has teamed up with Wilmington, Mass.-based Locus Robotics, a provider of autonomous mobile robots for warehouses for a major initiative at PLG’s facility in Chino, Calif., in which PLG will deploy more than 150 autonomous mobile robots, or LocusBots, for its fulfillment processes.
WCL Consulting Recommendations
Marine container chassis shortages continue to be an issue with the increased volumes and extended dwell times at local DCs.
- Work closer with drayage companies that own or lease their chassis. Shippers should support drayage operators with a long-term commitment.
Ocean carriers are restricting the number of throughput containers via rail intermodal to shorten cycle times in getting empty containers back to Asia. This has increased volumes handled at local warehouses and transload operations.
- Shippers and 3PLs should collaborate in conducting an Operations Interface Audit to identify friction points that need improvements.
Current marine terminal drayage driver appointment systems are not functioning as efficiently as they should.
- Ports of Long Beach & Los Angeles should take the lead working with marine terminals to develop a port-wide, standard, integrated appointment system.
A successful method to avoid terminal congestion in the past was for drayage trucks to participate in Marine Terminal Free-Flow operations.
- Shippers should support their drayage operator to participate in Marine Terminal Free-Flow (Peel-Off) operations whenever available.
Marine terminal congestion and cost issues are forecasted to continue.
- Shippers and 3PLs should continue to pressure the Federal Maritime Association for help.