Today, The Wall Street Journal announced the launching of an editorial vertical to be termed WSJ Logistics Report, with the prime sponsor being global package delivery provider UPS whom will supplement this site’s dedicated subject-matter coverage with sponsored content, (supposedly to be cleared labeled). The fact that our broad-based supply chain management community will have a business media resource destination for dedicated logistics and transportation news and editorials is a noteworthy step.
We at Supply Chain Matters will continue to do our part in insuring that readers are alerted to noteworthy news and editorials and that such content represents what we consider to be a balanced view of developments.
To kick off reader interest in the topic, today’s U.S. printed edition of the WSJ featured a front page article, Bigger Ships Snarl U.S. Ports. (Paid subscription or free metered view) This article reinforces what you have perhaps already experienced within your supply chain or read on this blog, namely that the introduction of far larger container ships into operational service is adding increased logistical challenges and congestion among many U.S. ports.
In the wake of the proposed February settlement of labor contract talks involving U.S. West Coast ports, Supply Chain Matters has posted advisories to industry supply chain teams to not assume that the logistical challenges and port gridlock that were amplified last fall would not happen again. Today’s WSJ article succinctly reinforces that message.
Reported is that congestion is becoming increasingly common among both U.S. West and now East coast ports, and according to the article authors: “ … a problem that could have profound implications for the $900 billion worth of goods transported to and from the U.S. each year by container ships.”
Increasingly larger container carrying vessels are overwhelming ports that were not designed nor equipped to handle such volumes carried by a single vessel. The WSJ cites American Association of Port Authorities data indicating that of the 10 busiest U.S. ports by container volume, at least seven are struggling with daily congestion. The effect is much more time required to unload and load vessels with extraordinarily longer waiting times for trucks to unload and load containers at port facilities. The WSJ cites specific examples occurring of late at the Port of Newark and Port of Virginia. In March, rising container volume and backups exacerbated by frequent winter storms reportedly pushed the Virginia International Gateway (Port of Portsmouth) beyond capacity prompting the need for overtime work, only to have to clear a subsequent backlog caused by the subsequent arrival of a single mega-ship.
Just this week, hundreds of frustrated truck drivers serving the Ports of Long Beach and Los Angeles went on strike, refusing to service the ports citing wage theft grievances. Four of the largest trucking firms servicing these ports classify truckers as independent contractors and thus drivers incur financial penalties with excessive wait times since payment is predicated on deliveries vs. an hourly compensation.
Compounding the problem are misplacement and/or unavailability of container chassis required for on-road travel. And as many industry experts have noted, the situation will only get worse without concerted industry actions and added investments in port automation. The WSJ quotes a retail industry strategist at Kurt Salmon indicating that shipping delays could reach $7 billion this year and climb as high as $37 billion by 2016.
That is a significant quantification of a multi-industry problem that requires resolution.
The problem itself stems from a combination of economic and industry forces on many sides. Ocean container lines, plagued by overcapacity and high costs, elected to invest in the larger vessels to save on operating costs. Larger ships and lower shipping volumes compounded into the need for multiple shipping lines to form capacity alliances with the implication that a single mega-ship will carry containers representing multiple shipping lines with different administrative and logistical processes.
While many industry supply chain teams are now re-evaluating shipment routing and logistics flows in the wake of the U.S. West Coast ports crisis these past months, the realty they are facing is that U.S. east coast ports are subject to the same logistical challenges and perhaps work stoppages.
The takeaway from our Supply Chain Matters lens is that while all of the industry is focused on solving ever increasing logistical challenges among U.S. ports, there appears to be little concerted industry and government actions related to long-term resolution. Carriers, ports, organized labor and transportation carriers are each addressing their specific business and financial agendas with little consideration of the overall global logistics implications being unanswered and unaddressed. Perhaps the assumption is that governments, public agencies, consumers and taxpayers will each have to determine and fund a resolution. That is not feasible.
In closing our commentary, we urge industry wide forums, legislative leaders, publications and media such as the WSJ Logistics Report to shed more light, attention and resolve toward required efforts among all stakeholders to address the root causes and required remedies of U.S. port congestion.
We concur that there are considerable industry supply chain impacts, both financial and operational at-stake.