Joseph Bonney and William B. Cassidy, March 31, 2014, Journal of Commerce
Truck drivers at Port Metro Vancouver added a percussive backbeat to the debate over port congestion delays and driver pay — the staccato sound of stones hitting the sides of dray trucks as they enter container terminals.
Unionized and non-unionized truckers on March 28 reached agreement with Port Metro Vancouver, ending a four-week strike that reduced truck traffic by 80 percent at the nation’s largest port and alarmed shippers throughout North America. The strike served as the flashpoint of an emerging drayage crisis that’s adding hundreds of millions of dollars to shipping costs and threatening the growth of intermodal commerce.
Vancouver port drivers idled their rigs to press demands for higher pay and paid waiting time, longer gate hours and other measures to speed turnaround times at terminals and reduce congestion. The British Columbia port’s partially unionized port trucking workforce may be unique, but its drayage problems aren’t.
Gridlock and delays have disrupted the flow of freight at the Port of New York and New Jersey and the Port of Virginia on the East Coast, and at the ports of Los Angeles and Long Beach, which handle more than 40 percent of U.S. containerized imports. Midwestern intermodal rail terminals also faced delays this winter as drayage trucks broke down and train speeds slowed, causing trailer and chassis capacity shortages at inland sites and East Coast ports.
The congestion cast a spotlight on rapidly escalating problems for truckers who provide last-mile delivery of containers. “Trucker dissatisfaction with marine terminals is not a local phenomenon,” Bruce Wargo, president of the PierPass extended-gates program at Los Angeles-Long Beach, said during a drayage panel at the JOC’s 2014 TPM Conference in early March. “It’s a symptom of the real problem, which is the traditional delivery process most terminals have in place today.”
There’s no quick fix for that delivery process, in part because so many parties have a say or a role in how containers flow from ships through ports to inland destinations. Any solution to the drayage problem will require cooperation among terminal operators, longshore labor, chassis suppliers, container lines and shippers as well as drayage companies and truck drivers. And those parties will have to be open to new ways of doing business and new technology.
With the spring retail season at hand, the U.S. economy showing signs of accelerating and the import peak season six months away, there’s growing concern that shippers and their supply chains will feel the impact unless systemic problems are addressed. “Economic and operational pressures on all the stakeholders should be forcing us to look for a better model that is more efficient and productive,” Wargo said. However, “these things are more complicated than some people would like to admit.”
Don’t Blame the Weather
Severe as they were, disruptions from this winter’s intense cold and storms weren’t the sole source of the drayage crisis. Instead, they amplified existing challenges of congested terminals, chassis supply, driver recruitment and retention, hours of service restrictions, equipment costs and stagnant rates.
The cost of all these challenges keeps mounting. Transportation consultant Tioga Group estimates that drayage delays add $348 million a year in unnecessary costs to the supply chain — including 15 million hours of lost work time and 9 million gallons of diesel fuel. Shippers are feeling the effect through slower delivery times, higher delivery costs and increased difficulty in planning and executing transportation.
“Drayage drivers are losing time, polluting the air and burning fuel while they wait” for hours in terminal lines, Daniel Smith, principal of the Tioga Group, said at TPM. “But what they’re really burning is your money.” Cutting just 10 minutes off terminal turn times would save 4 million driver and tractor hours, which translates to $90 million, he said.
For now, drayage companies and drivers are paying the highest price. Congestion at ports and intermodal rail terminals is raising their costs, reducing their productivity and challenging their ability to handle any increase in shipment volume.
“How many drivers or owner-operators did the industry lose because of the weather? There definitely are fewer coming in than going out,” said Michael Burton, president of C&K Trucking in Chicago Ridge, Ill. “What impact will that have on capacity in six months when we get to the fall peak?”
Outside Vancouver, some of the loudest complaints by drayage operators have come at the Port of New York and New Jersey, which has been in and out of crisis since Hurricane Sandy flooded terminals in October 2012.
Truckers battled portwide gridlock last summer after a problem-plagued system implementation at Maher Terminals coincided with longshore labor shortages and major construction at the East Coast’s busiest port.
New York-New Jersey operations regained a semblance of normalcy last fall, but that collapsed again in January. Terminals have spent three months clearing backlogs from a surge in pre-Chinese New Year imports and a series of blizzards that sapped productivity and left truckers fuming in hours-long lines. “During the last 16 months, we’ve had nine months in which we’ve been in crisis,” said Louis Notaro, president of F.O.X. Intermodal in Kenilworth, N.J.
Motor carriers have paid drivers for unproductive time while struggling to locate usable chassis and deal with demurrage and per-diem bills for containers that couldn’t be picked up or delivered on time. Drayage companies say some owner-operators refused assignments to congested piers or have quit the business. Owner-operator Edisson Villacis launched a Facebook page called Port Driver that has emerged as a bulletin board for traffic reports, news of terminal conditions, and gripes by the port’s mostly Hispanic drayage drivers. Most days in recent weeks, the page has described at least one port terminal as “bad.”
The Port Authority of New York and New Jersey has formed an industry task force to find ways to improve port performance. The task force is scheduled to recommend solutions by June, but some carriers say they need immediate changes. “At the rate things are going, some of us may not be around by June,” said Tom Heimgartner, president of Newark, N.J.-based drayage carrier Best Transportation.
The Virginia Port Authority, facing rising volumes, winter weather disruptions and bunched arrivals of large ships, also formed a motor carrier task force to deal with drayage issues that include long turn times at Norfolk.
“The frustration is building among drivers here,” said George Berry, an owner-operator in Virginia. Berry and other drivers held a rally in February to air their frustrations and call for action. “Our time gets sucked up in the port waiting for service, or dragging a damaged chassis around to get it repaired,” he said.
Virginia International Terminals, which operates port terminals, has agreed to trucker representation on the VPA committee. One of the task force’s first challenges will be implementation of a truck appointment system at Norfolk International Terminals. VIT already has an appointment system at its semi-automated APM Terminals facility in Portsmouth.
The Inland Effect
Congestion and equipment shortages aren’t just a problem for coastal ports. Severe winter weather slowed truck turn times at intermodal rail terminals in the Midwest, exacerbating chassis shortages that slowed operations all the way to East Coast ports. Trains ran slower, and trucks broke down more often in the cold. Union Pacific Railroad, for example, reported average terminal dwell time of 54.4 hours in Chicago for the first nine weeks of 2014, compared with 34.6 hours in the 2013 first quarter.
But rail terminals tend to run more smoothly than many marine terminals. Trains stick to schedules better than ships. Railroads have opened large intermodal terminals in the Chicago area and at other points, including Northwest Ohio, Memphis and Kansas City, over the last several years. And unlike marine ports, many inland terminals operate round-the-clock.
“Running 24/7 allows them to recover more quickly when they get backed up,” said C&K’s Burton. Many rail ramps are in less congested areas (Chicago being an exception) and have efficient grounded storage or enough space to store containers on chassis.
When snow piled up in those intermodal yards and on highways, however, many containers and chassis were stuck. “Cold weather just magnifies the problem of getting chassis,” Jason Hilsenbeck, president of LoadMatch and Drayage.com, said at TPM. Not only do trains run more slowly, but trains also are shorter. “You have extra containers sitting in the terminal on wheels,” he said. “If the customer you’re trying to deliver to is closed, those are extra days those chassis are sitting somewhere.”
If the number of turns a chassis makes is reduced because of poor weather or other congestion, thousands of additional chassis and trucks are needed to haul the same number of containers.
“Let’s say you have 30,000 chassis that are loaded four times a month — a total of 120,000 containers,” Hilsenbeck said. If only three turns can be completed in a month, that means another 30,000 chassis must be found somewhere to move the 120,000 containers. “This becomes a vicious snowball effect,” he said.
With chassis stuck at inland terminals or yards or customer parking lots, fewer chassis are available for pickup at ports, creating or worsening equipment imbalances on the East and West coasts, Hilsenbeck said.
In some cases, truckers have hoarded chassis until they’re confident they can obtain a usable replacement. At New York-New Jersey, shortages of International Longshoremen’s Association mechanics have aggravated the problem. “The terminals are full of out-of-service chassis. It’s the roach motel of chassis. The chassis go in, but they never come out,” said Christopher Shea, co-owner of Shea Trucking in Farmingdale, N.Y.
All of this is happening as container ship lines have moved away from routinely providing free chassis in a bundled move, and shifted responsibility to motor carriers. Most chassis now are in pools controlled by leasing companies. Though this generally is viewed positively, kinks in chassis supply are still being worked out. “This is a good wakeup call,” Hilsenbeck said. “It’s the first time we’ve had a big freeze since the consolidation of the chassis pools.”
Drayage companies have succeeded in passing along chassis rental costs but have had mixed results in offsetting many congestion-related expenses. Motor carriers complain that terminals don’t pay detention time for hours-long waits outside gates, and that ocean carriers are charging per-diem fees for late return of containers that can’t be delivered on time because of congestion.
Some New York-New Jersey drayage operators imposed congestion surcharges this winter, but others said such a move would meet resistance, particularly from ship lines hiring drayage companies for store-door moves.
Whose Problem, Whose Solution?
Many of the solutions discussed at TPM revolve around operational changes at port terminals that would reduce the number of trouble tickets issued to drayage drivers and improve the flow of vehicles at gates. But implementing these solutions requires cooperation among parties that typically have their own, sometimes-conflicting interests. Longshore workers, for example, aren’t likely to leap at the prospect of greater port automation just to speed drayage truckers through ports. And shippers aren’t likely to welcome changes to procedures that would raise their supply chain costs.
“The pocketbook is empty,” Scott Larson, vice president of global logistics and customs for The Bon-Ton Stores, said at TPM, referring to shippers. The implication is that higher rates alone won’t solve congestion problems at terminals. Shippers’ costs already are rising, Larson said, as drayage delays add days to supply chain transit times. “As a major retailer, we’re trying to bring product in on time, and we’re scrambling, he said. “You have to scramble to deal with this congestion.”
The drayage industry itself isn’t likely to solve the problem. Drayage is a fragmented industry, which weakens companies’ negotiating position with ocean carriers, terminals and shippers. Drayage companies range from single-truck operators to a few national companies with hundreds of trucks. In between are numerous local or regional operators that manage a few dozen trucks, often as agents for a company that handles receivables, insurance and other functions.
Shippers are the key to the kind of fix ultimately needed: a solution that covers all the inter-related problems holistically, across supply chains, and not just within one or more of the silos surrounding drayage, TPM panelists said. “All the money in this game eventually comes from the shipper,” said Tioga’s Smith. “The hammer that I see that gets the collaboration done is leverage from the BCOs.”
If port congestion problems mount, shippers will start swinging that hammer. It’s rapidly becoming more expensive to live with the drayage problem than to try to fix it. “As BCOs, we’ve got to get involved and we’ve got to speak out,” Larson said. “Maybe it comes down to having a task force with a group of us sitting together trying to resolve this issue. Right now we’re reading about it, but we’re not speaking out a lot about it.”