Air Logistics body copy
C.H. Robinson
Client Advisory October 29, 2014 Los Angeles and Long Beach Terminal Congestions Dear Valued Customer, Following up to our earlier announcement on the severe productivity decline at the terminals in Los Angeles and Long beach, the situation continues to be dire. There have been numerous articles published on this topic in various trade journals showing how almost everyone in the supply chain is being impacted by this congestion. The Federal Maritime Commission hosted a few open forums to discuss this situation. C.H. Robinson and other Beneficial Cargo Owners (BCOs) participated to ensure that customer's’ voices are heard. We believe it is important for everyone to truly understand the cause of the problem; what the situation looks like in the current state; what is being done to address the situation; and also, what we can expect in the near future. CAUSE • • • • • • • •
Larger Vessels. Currently 10,000+ TEU vessels are cascading down to the transpacific trade from the AsiaEurope trade. While this reduces costs due to scale, the terminals have not evolved to manage the operations of these vessels. Incremental Volumes. Due to a possible strike over the USWC, most retailers took precautions and have been moving a high level of inventory replenishment in preparation for a robust year-end shopping season. Labor Discussion. No deal has been inked despite publications over an agreement on the healthcare issue. While the ILWU labor continues to work, the lack of contract limits arbitration. There have been perceived slowdowns through increased inspection that continue to exacerbate the situation. Chassis Shortages. Carriers have continued to divest these assets which have caused dislocation of chassis and imbalance between the chassis providers with the terminals. Carrier Alliances. The continued evolution of Vessel Sharing Agreements is putting additional pressure on terminals as they make changes to accommodate the alliance changes. Truck Power. The lack of drivers add pressure to the industry, especially as it relates to the movement of containers as some terminals have moved from a wheeled to a grounded operation. Additionally, the turn times at the ports are currently poor. Intermodal. This is the primary mode of transportation inland throughout the U.S. and will continue to compete for capacity with the oil and gas industry and truck-intermodal conversion moves into the interior of the U.S. This will continue to be a challenge as long as the oil price per barrel remains above US$70. Free Time. Most retailers have extensive free time which is tying up the empty containers and chassis.
CURRENT STATE • •
What used to be First In – First Out has changed to be First in - Last Out. Due to the heavy influx of cargo and issues downstream, the containers continue to be stacked making it difficult for the terminals to release the older containers. Delays with specific terminals have approached 40-50+ days. Below is a quick visual representation of the terminal congestion in Southern California. Terminals shown in red are quite congested so we are doing our best to avoid those terminals. However, with the carrier alliances, it can be challenging. Terminals shown in yellow are congested, but fairly manageable. Currently, there is only one terminal shown in green with no congestion, but it is not an immediate option due to it being only one carrier with a very small allocation dedicated to BCOs.
This document is compiled from a number of sources that to the best of our knowledge represents accurate and correct information. It is always the intent of our company to present accurate information. C.H. Robinson accepts no liability or responsibility for the information or opinions published herein. 14701 Charlson Road Suite 1700 | Eden Prairie, MN 55347 | PH 800.323.7587 | www.chrobinson.com © 2014 C.H. Robinson Worldwide, Inc. All Rights Reserved.
• • • • •
Closed areas are getting more common in the terminals which cause inefficiencies. Free time and demurrage concerns over containers that are not available continue to mount with exceptions being more difficult as terminals continue to pay overtime and weekends to assist with the congestion. Chassis splits are becoming more common causing additional cost and longer transit times. Lack of power is creating increased wait time surcharges. Vessels are starting to drop anchor while waiting for berthing windows to open so delays will be imminent for specific service strings. Below is an illustration that shows approximately 12 vessels anchored today.
This document is compiled from a number of sources that to the best of our knowledge represents accurate and correct information. It is always the intent of our company to present accurate information. C.H. Robinson accepts no liability or responsibility for the information or opinions published herein. 14701 Charlson Road Suite 1700 | Eden Prairie, MN 55347 | PH 952 937 8500 | www.chrobinson.com © 2014 C.H. Robinson Worldwide, Inc. All Rights Reserved.
ADDRESSING THE PROBLEM • • • • • • • • • •
The Department of Justice approved the formation of the “Grey Chassis” pool to improve the efficiencies of chassis usage among the pool operators. Hopefully, an ILWU-PMA contract can be negotiated, to get this up and running. The terminal operators are working overtime (including weekends) to clear the congestion which is slowly beginning to help. Ocean carriers are reviewing alternate ports of call to balance the congestion. However, it is feared that a similar situation in Los Angeles will be created if there is significant change in volume to alternate ports. We are watching this situation closely. Numerous trade groups are working to persuade the ILWU-PMA to reach an agreement prior to the end of 2014. Additional chassis are being injected into the supply by the chassis providers and daily positioning reports are now being provided to assure they are being used effectively. C.H. Robinson is proactively routing cargo via alternate ports based on the final destination as well as diverting and terminating cargo based on urgency and availability. Carriers are feeling pressure to ensure they are working with the terminals to elevate the issues and meet KPIs. Customers should proactively forecast their business needs and continue to communicate with their C.H. Robinson representative. Customers should be open to alternate routes that might be slightly longer and consist of transshipment points. The Port Authority is currently trying to seek a waiver to help, and if an agreement can be reached, then consider authorizing containers to be pulled during the day using Pier Pass.
FUTURE STATE • • • • • • • •
Anticipate congestion for future peak shipping periods. The next anticipated peak time will be during the Chinese New Year in February, 2015. ILWU-PMA will need to reach an agreement to have a meaningful discussions related to the issues at the port terminals Automation will need to be implemented sooner rather than later to allow greater efficiencies to occur with the larger vessels. Hopefully “Grey Chassis” pool is implemented in early 2015, to prevent severe congestion around Chinese New Year. The improved chassis situation will help the truck dwell time and productivity and also entice more drivers to enter back into the workforce. Rail Lines should work to proactively improve rail maintenance to ensure there is adequate power for intermodal moves. No consistent and common operation matrix exist therefore one should be established so performance can be measured in an industry-accepted manner. The ports should be encouraged and act to play a larger role in creating solutions to these challenges versus operating as a Landlord only. .
Thank you for being a valued customer. If you have any questions, please do not hesitate to contact C.H. Robinson for further information.
Sincerely, C.H. Robinson Ocean Services
This document is compiled from a number of sources that to the best of our knowledge represents accurate and correct information. It is always the intent of our company to present accurate information. C.H. Robinson accepts no liability or responsibility for the information or opinions published herein. 14701 Charlson Road Suite 1700 | Eden Prairie, MN 55347 | PH 952 937 8500 | www.chrobinson.com © 2014 C.H. Robinson Worldwide, Inc. All Rights Reserved.
Client Advisory October 29, 2014 Los Angeles and Long Beach Terminal Congestions Dear Valued Customer, Following up to our earlier announcement on the severe productivity decline at the terminals in Los Angeles and Long beach, the situation continues to be dire. There have been numerous articles published on this topic in various trade journals showing how almost everyone in the supply chain is being impacted by this congestion. The Federal Maritime Commission hosted a few open forums to discuss this situation. C.H. Robinson and other Beneficial Cargo Owners (BCOs) participated to ensure that customer's’ voices are heard. We believe it is important for everyone to truly understand the cause of the problem; what the situation looks like in the current state; what is being done to address the situation; and also, what we can expect in the near future. CAUSE • • • • • • • •
Larger Vessels. Currently 10,000+ TEU vessels are cascading down to the transpacific trade from the AsiaEurope trade. While this reduces costs due to scale, the terminals have not evolved to manage the operations of these vessels. Incremental Volumes. Due to a possible strike over the USWC, most retailers took precautions and have been moving a high level of inventory replenishment in preparation for a robust year-end shopping season. Labor Discussion. No deal has been inked despite publications over an agreement on the healthcare issue. While the ILWU labor continues to work, the lack of contract limits arbitration. There have been perceived slowdowns through increased inspection that continue to exacerbate the situation. Chassis Shortages. Carriers have continued to divest these assets which have caused dislocation of chassis and imbalance between the chassis providers with the terminals. Carrier Alliances. The continued evolution of Vessel Sharing Agreements is putting additional pressure on terminals as they make changes to accommodate the alliance changes. Truck Power. The lack of drivers add pressure to the industry, especially as it relates to the movement of containers as some terminals have moved from a wheeled to a grounded operation. Additionally, the turn times at the ports are currently poor. Intermodal. This is the primary mode of transportation inland throughout the U.S. and will continue to compete for capacity with the oil and gas industry and truck-intermodal conversion moves into the interior of the U.S. This will continue to be a challenge as long as the oil price per barrel remains above US$70. Free Time. Most retailers have extensive free time which is tying up the empty containers and chassis.
CURRENT STATE • •
What used to be First In – First Out has changed to be First in - Last Out. Due to the heavy influx of cargo and issues downstream, the containers continue to be stacked making it difficult for the terminals to release the older containers. Delays with specific terminals have approached 40-50+ days. Below is a quick visual representation of the terminal congestion in Southern California. Terminals shown in red are quite congested so we are doing our best to avoid those terminals. However, with the carrier alliances, it can be challenging. Terminals shown in yellow are congested, but fairly manageable. Currently, there is only one terminal shown in green with no congestion, but it is not an immediate option due to it being only one carrier with a very small allocation dedicated to BCOs.
This document is compiled from a number of sources that to the best of our knowledge represents accurate and correct information. It is always the intent of our company to present accurate information. C.H. Robinson accepts no liability or responsibility for the information or opinions published herein. 14701 Charlson Road Suite 1700 | Eden Prairie, MN 55347 | PH 800.323.7587 | www.chrobinson.com © 2014 C.H. Robinson Worldwide, Inc. All Rights Reserved.
• • • • •
Closed areas are getting more common in the terminals which cause inefficiencies. Free time and demurrage concerns over containers that are not available continue to mount with exceptions being more difficult as terminals continue to pay overtime and weekends to assist with the congestion. Chassis splits are becoming more common causing additional cost and longer transit times. Lack of power is creating increased wait time surcharges. Vessels are starting to drop anchor while waiting for berthing windows to open so delays will be imminent for specific service strings. Below is an illustration that shows approximately 12 vessels anchored today.
This document is compiled from a number of sources that to the best of our knowledge represents accurate and correct information. It is always the intent of our company to present accurate information. C.H. Robinson accepts no liability or responsibility for the information or opinions published herein. 14701 Charlson Road Suite 1700 | Eden Prairie, MN 55347 | PH 952 937 8500 | www.chrobinson.com © 2014 C.H. Robinson Worldwide, Inc. All Rights Reserved.
ADDRESSING THE PROBLEM • • • • • • • • • •
The Department of Justice approved the formation of the “Grey Chassis” pool to improve the efficiencies of chassis usage among the pool operators. Hopefully, an ILWU-PMA contract can be negotiated, to get this up and running. The terminal operators are working overtime (including weekends) to clear the congestion which is slowly beginning to help. Ocean carriers are reviewing alternate ports of call to balance the congestion. However, it is feared that a similar situation in Los Angeles will be created if there is significant change in volume to alternate ports. We are watching this situation closely. Numerous trade groups are working to persuade the ILWU-PMA to reach an agreement prior to the end of 2014. Additional chassis are being injected into the supply by the chassis providers and daily positioning reports are now being provided to assure they are being used effectively. C.H. Robinson is proactively routing cargo via alternate ports based on the final destination as well as diverting and terminating cargo based on urgency and availability. Carriers are feeling pressure to ensure they are working with the terminals to elevate the issues and meet KPIs. Customers should proactively forecast their business needs and continue to communicate with their C.H. Robinson representative. Customers should be open to alternate routes that might be slightly longer and consist of transshipment points. The Port Authority is currently trying to seek a waiver to help, and if an agreement can be reached, then consider authorizing containers to be pulled during the day using Pier Pass.
FUTURE STATE • • • • • • • •
Anticipate congestion for future peak shipping periods. The next anticipated peak time will be during the Chinese New Year in February, 2015. ILWU-PMA will need to reach an agreement to have a meaningful discussions related to the issues at the port terminals Automation will need to be implemented sooner rather than later to allow greater efficiencies to occur with the larger vessels. Hopefully “Grey Chassis” pool is implemented in early 2015, to prevent severe congestion around Chinese New Year. The improved chassis situation will help the truck dwell time and productivity and also entice more drivers to enter back into the workforce. Rail Lines should work to proactively improve rail maintenance to ensure there is adequate power for intermodal moves. No consistent and common operation matrix exist therefore one should be established so performance can be measured in an industry-accepted manner. The ports should be encouraged and act to play a larger role in creating solutions to these challenges versus operating as a Landlord only. .
Thank you for being a valued customer. If you have any questions, please do not hesitate to contact C.H. Robinson for further information.
Sincerely, C.H. Robinson Ocean Services
This document is compiled from a number of sources that to the best of our knowledge represents accurate and correct information. It is always the intent of our company to present accurate information. C.H. Robinson accepts no liability or responsibility for the information or opinions published herein. 14701 Charlson Road Suite 1700 | Eden Prairie, MN 55347 | PH 952 937 8500 | www.chrobinson.com © 2014 C.H. Robinson Worldwide, Inc. All Rights Reserved.
