If your work involves the transportation or supply chain sectors, then you have likely heard of the California port crisis. It certainly is an issue that has been vexing trucking companies to no end. At the time of this writing, there are 65 cargo ships held up outside of two of America’s biggest ports, the Port of Long Beach and Port of Los Angeles. And when you consider that these two ports process 40% of all cargo containers entering the U.S., the scope of the problem comes into full view.
Before the pandemic, it was highly unusual for container ships to have to wait for a berth at the port. Many wonder how the crisis will be resolved with the U.S. government taking extreme measures to break up the backlog. So, what is driving the port crisis and how will it be resolved?
Surging Demand Creates Supply Chain Problems
The backlog has been linked to the surging demand in just about everything from U.S. consumers. Flush with stimulus money and sitting on an extraordinary level of savings, Americans are scrambling to purchase just about everything from toys to toilet paper.
Responding to the demand, retailers and manufacturers are scrambling to place orders and restock inventories, but the global supply chain simply cannot keep up. At the Port of LA alone, the amount of cargo handled in 2021 is up 30% compared to 2020 and 2019 combined.
The U.S. Toy Association, which represents 950 toy-producing companies in the United States, has warned its members that the supply chain crisis is likely to create lots of headaches for the 2021 holiday shopping season. And while larger retailers are better able to weather the storm, smaller companies are facing the brunt of the problem. They simply do not have the leverage or size to renegotiate annual contracts.
The Rise of E-Commerce and the Global Consumer
Supply chain problems are not a U.S. problem alone. With COVID-19 shuttering factories in Asia, suppliers simply are not able to keep up with the demand. Even in normal times, businesses would have trouble keeping up. But the combination of an empowered consumer with scaled back operations has created the perfect supply chain storm.
Many countries showered their citizens with money during 2020. And while this was an effort to keep their citizens afloat during a major crisis, the world’s manufacturers simply cannot keep up with the demand being unleashed because of pandemic stimulus spending.
Meanwhile, e-commerce continues to grow by leaps and bounds, which puts pressure on shippers. It should be no surprise that shippers like UPS and FedEx are increasing their rates to account for the higher demand. The numbers surrounding e-commerce growth are simply staggering.
E-commerce sales in the United States hit $408.51 billion, up 21.9% from $335.15 billion in the first two quarters of 2020. Online penetration reached 19.0%, up from 18.2% for the same period last year. Offline sales increased 15.4% year over year. This all points to a retail sector that has been on fire throughout 2021.
What’s Being Done About It?
Some cargo ships have been diverted to accommodate the backlog, with ports in Portland and Seattle reporting increased business as a result. But these ports simply do not have the capacity to release the pressure on the ports in Southern California. As a result, Southern California ports and the Biden Administration have taken steps to relieve the pressure.
Both the Ports of Long Beach and Los Angeles have announced new measure to improve freight movement and reduce delays. The first step was to expand hours at the port. With help from the Biden Administration, the Port of Long Beach has taken the first steps towards accommodating 24/7 container unloading and loading.
This means that hours-of-service rules for port truckers are being flexed so that truckers can access cargo containers from 11:00pm to 1:30am. The port is also opening its gates from 3:00 to 7:00am Monday to Thursday for two-way, prearranged “dual transaction” truck appointments to both drop off and pick up container in the same trip.
Meanwhile, the Port of Los Angeles plans to expand its weekend operating gate hours as part of a project dubbed “Accelerate Cargo LA.” Both ports have also been working with marine terminal operators to incentivize the use of all available gate hours, especially those at night gates. Finally, they are working with trucking companies to ensure truck drivers know how to take advantage of the expanded opportunities to pick up cargo.
Are Crane Operators Part of the Problem?
The congestion has caused a lot of consternation among interested parties all along the supply chain. The latest comes in the form of an article on Yahoo News that laid the blame at the foot of crane operators. The article has pit truck drivers against crane operators, with a title that said, “Lazy crane operators making $250,000 a year exacerbating port crisis, truckers say”.
Whether true or not, the Yahoo article suggested that the crane operator’s union has been protecting crane operators. Truckers say that crane operators are not working hard enough to unload the backlog of containers. The article interviewed truck drivers who said crane operators have too much power and are not held to account.
The problem truckers point to is in the waiting. Most truckers are independent contractors who are paid per container delivery and make a fraction of a crane operator’s salary. They only arrive at the docks after receiving notification that the cargo is ready for pickup. Waiting hours for shipping containers to be loaded onto their trucks is frustrating, and those who have complained were swiftly dealt with, they say.
President Biden’s Pitch to the Ports
Knowing that the supply chain problems are driving inflationary concerns, President Biden is trying to rectify the issue. With mid-terms coming in 2022, the Biden Administration is putting extra focus on doing what they can to increase the movement of goods. They hope this will take some of the steam off increasing price pressures.
Now, the Port of Los Angeles can operate 24 hours a day, 7 days a week. While there is a hope this will help mitigate the problem, there are other issues that will need to be addressed. Supply chain problems contributing to the container ship crisis include:
- Chassis shortages
- Warehouse hours
- Inefficient container use
- Labor shortages
Acknowledging this, the California Trucking Association stated that extending gate hours will not resolve the problem. They say these are part of systemic issues truckers at ports have dealt with over the years. And the problem does have to be dealt with by trucking operators. Truckers and cargo owners end up paying fees for not returning equipment to ports that cannot except them.
Addressing Systemic Inefficiencies is Key
Terminal operators are pushing back by saying that it does not make sense to add hours. Why? Because container pickup slots are going unused. According to a report in the Wall Street Journal, some terminal operators report that they are open 90 hours a week, but are seeing only 60% berth utilization.
Unfortunately, industry players continue to point the finger at each other. Steamship lines and marine terminal operators say that trucking operators are not meeting appointments made. Meanwhile, challenges faced by truck drivers are primarily related to productivity and inefficiency issues.
When you have thousands of empty containers sitting in fleet yards, the problem isn’t the trucking companies themselves. In many cases, the trucking company simply cannot free up a chassis to move an import off the dock. As a result, the appointment goes unmet, and the blame game begins. Intermodal chassis issues have become a big problem for trucking companies.
Problems go Beyond the Ports
Southern California ports are not the only ports facing issues. The Port of Savannah in Georgia recently saw its dwell time increase to as high 12 days. In this case, port operators point the finger at inland intermodal terminals.
The availability of intermodal chassis is a big part of the problem. And this is a problem at both at the ports and at inland rail terminals. And it’s not necessarily a matter of there not being enough chassis in existence; it’s that they are often sitting empty. Meanwhile, the chassis manufacturers and suppliers have said they’re not going to manufacture more equipment to meet the demand.
In the end, it will take hard work on the part of all players to get this resolved. Whether port operators, crane operators, truck drivers, or politicians in Washington, everyone must work together. Until then, expect the supply chain issues and inflationary pressure to only increase.