Author Archives: just2bruce

Supply chain chaos and port gridlock could drag on into 2023

Posted on February 3, 2022 | 1 comment

Here’s one view from Alphaliner staff and others. Thre is some good data on charters and shipping supply.

But I don’t think the problems we are having in the supply chains now are due to shortages or issues in the maritime sector itself, even though shipping freight rates are sky-high. As the authors say, it’s landside.

While there are many coordination issues on the landside, in both China and the US, a serious bottleneck has been availability of chassis and space to put containers on. The US port terminals were not built for the kind of traffic we have been seeing; their yard space for both imported and for empty containers, is not adequate. Making space available near theport for storing empties isuseful, but still requires yet another two moves and chassis to be returned to the proper place in the supply chain.

The entire process can be seen as dumping containers onto the busy ports. Ports with lots of exports can reuse them easily; those with a big import trade imbalance cannot, and they build up, taking space. In the US, thre aren’t many ports with export excesses; most US exports are bulk goods like oil, grain,s and coal, which do not use containers. Some grain can be exported in containers, but to date int heUS, single-digit prercentages of export grains such as soybeans or corn go in containers. Most of the container soybean export goes from Gulf Coast ports, not West Coast ports, because the containers can be barged there rather than needing rail.

The dumping of containers is a problem for the ocean carriers, though they may not realize it, since they are principal owners of many of these containers, and even if they aren’t owners, they rely on containers as much as the shipper to carry the cargo. It’s unrealistic for the ocean carriers to think countries who are major customers for imports are going to sit around and let them continue to dump containers without a recycling plan.

It’s interesting that the space problems of ports and terminals in the US, especially the West Coast ports at LA and Long Beach, are not seen as sustainability or ESG issues.

Many US companies doing package shipping have gone to great lengths to adapt their packaging to mnake it more sustainable. That has been going on for a few years now, and we can see the results when we grab our Amazon package.

But ocean shipping is still conducted with packages essentially created in the 1950s with few changes. It’s just a matter of time before success leads to greater ‘pollution’ by excess containers at import-heavy countries’ ports. When the space at a terminal runs out, something has to be done with the trash.

One option is to place penalties on those wh do not move their containers away from the ports and terminals. LA and Long Beach are trying that, and other ports are following suit, with monetary demurrage and dentention penalties.

Another option is to destroy the excess containers. They can be scrapped; there is some value in the steel; and owners could be made liable for scrapping fees to cover the cost of the work. A problem in the US is that, unlike Bangladesh and ship scrapping, there is no established infrastructure to do this readily. To a point scrap yards would buy the containers, but too many would overwhelm their system. They do not have automated techniques for cutting up the containers, and uisng human blowtorch carriers who work by the pound, as in Bangladesh, is neither legal nor acceptable in developed countries.

Currently most container manufacture happens in China. There are three main state-owned firms there who manufacture the majority of new containers. They supply employment for lots of people in China. And China is one of the cheapest steel manufacturers in the world. So prices for new containers currently hover around $2000 USD for a twenty foot unit and maybe $3000 for a forty-foot unit. These prices are way up from even two years ago, and Chinese manufacturers would like them to stay there. The demand will support that, especially if empty containers are not substituted by customers.

And if a new container already in China can be purchased for that price, it’s just about cheaper to use one than to go to the work of repatriating to China a used container from the West Coast US, let alone from the interior US or the East Coast. Why bother?

So container users see no need to engage in the complex process of obtaining chassis and drayage to get to the port, loading at an already congested port, engaging in a long voyage with empty containers who do not pay any freight, possibly incurring damage to the containers, and offloading them somewhere in China for reuse.

The empty container supply chain is a form of reverse logistics. It needs more attention. It’s also part of a picture for green supply chains. How does the shipping world plan to cope?

Greg Miller, Senior Editor Wednesday, February 2, 2022

Supply chain chaos and port gridlock could drag on into 2023
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Posted in Logistics, Supply Chains, Sustainability

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Synchronisation across maritime value chains can ease inflation

Posted on February 1, 2022 | 1 comment

This interesting article suggests that slot management across supply chain entities could help ease the current supply chain congestion woes. It’s an attempt to define this concept that could induce more cooperation between firms and supply chain entities such as ports, terminals, and hauliers.

There’s no question that today’s world of maritime logistics and supply chains is dominated by decision-making for the benefit of each individual participant. The flow of goods overall could be improved by introducing a discipline that would make decisions for the common good look better.

The article leaves open the question of how to induce the players to participate.

We already see signs that some large shippers have already decided not to play on the same terms. Firms like Home Depot, Walmart, Amazon, and IKEA are trying out chartering their own ships and selecting their own ports, terminals, and inland transport to make their specific supply chains work better. This individual management could bring gains especially for them, and there’s a chance that if enough of it happens, some of the major bottleneck ports such as Shanghai, LA/Long Beach, and Rotterdam could see a reduction of traffic enough to lower backlogs and congestion. And the smaller ports these individual shippers might use, such as Seattle/Tacoma, Norfolk, and Savannah, will see increasing traffic and congestion. If they have the capacity that’s ok, but if not the woes will continue.

These are just examples of how not to participate.

I agree with the authors that just allowing market principles to work won’t create the gains in throughput we need to see. The markets don’t work fast enough to prevent hardship and business and personal failure.

A suggestion made earlier was for a system to ‘label’ each container (in the paperwork, and perhaps physically on it, like the priority mail labels in the US mail) with a service level standard required for this container. Those handling the container would know its priority and could adjust their individual workflows to meet the standard delivery time. Even if there were bottlenecks, the standard would help those in a position to relieve one to see which containers needed to be handled or placed first, second, and so on.

I submit that introduction of a world-wide slot system for maritime container transport needs to be accompanied by a system to reallocate the benefits and costs of the system. There need to be charges or inducements at ports and terminals to get players to fit their needs and actions in with the slot optimization system.

In fact, any system that would operate throughout whole maritime value chains needs to have the incentives designed along with the tracking or resource allocation system.

A worthwhile start would be a model of a realistic slot allocation system and its effects on, say the current congestion worldwide at ports and in hinterland supply chains. Not an easy study to conduct, but it would show where inducements need to be given, and where penalties need to be put, to prevent or reduce gaming the supply chain. Experiments with inducements could be made to gauge their effect and help choose the right ones.

By Mikael Lind et al 01/02/2022

Synchronisation across maritime value chains can ease inflation – The Loadstar
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Posted in Logistics, Ports, Strategy, Supply Chains

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Two less-obvious reasons why trucking capacity has remained so tight

Posted on January 28, 2022 | 1 comment

C. H. Robinson is a well-established third-party logistics company, with close ties to academic communities of logistics experts, as well as broad contacts in the field. Their 2020 Annual Report shows revenues over $16 billion, and a $2.4 billion profit. Their main businesses are North American surface transportation and global forwarding. They are the largest less-than-truckload 3PL in the US.

Clearly they have expertise in trucking, and a need to know what’s going on in the area. In this article they asked Jason Miller, a Logistics professor at Michigan State University, to talk about why trucking capacity is so tight.

He offers two reasons.

First, the pandemic surge was very disruptive to trucking, more than we think. It’s not just the COVID impact itself, and the loss of time, and it’s not just the ‘driver shortage’. it’s the fact that drivers started changing jobs to find positions safer and more conducive to a lifestyle they find more comfortable. Retention of drivers became a big problem. My research too indicates that turnover at trucking firms reached as high as 90% over the last two years. That adds recruiting, hiring, and training costs, and makes it hard to keep to schedules and load commitments. It’s part of ‘The Great Resignation’, and it hit trucking harder than most other sectors.

Second, one of the choices drivers made was to leave employment at trucking firms, and become owner-operators. The figures Dr Miller shows on this are remarkable.

Source: CH Robinson Blog

Many of these new owner-operator firms were local freight rather than long-haul, showing that drivers wanted to be home more often than a long-haul schedule allows. Acting as an owner-operator also allows drivers to choose which loads they will accept; they can reject loads that carry onerous schedules or working conditions or excessive paperwork. As employees they had no say about which job they would take.

We know that trucking as an owner-operator is an easy-entry business. All you need to do is have a tractor and the appropriate filings with the government. Load boards provide a constant source of business you can bid on. And over time you can build a repeat-business clientele of shippers you want to work with.

You can also easily switch markets. Now that West Coast freight rates have shot up, we find that owner-operators have left the East and Midwest and flocked there to feast on the elevated drayage and haulage rates in the West. That creates shortages in other areas.

Miller has some advice for C.H. Robinson clients, which you can read. I wanted to highlight the article for its insightful look at aspects of truck driver supply we don’t often think about.

Trucking never fails to be interesting to examine!

Two less-obvious reasons why trucking capacity has remained so tight | C.H. Robinson blog

Two less-obvious reasons why trucking capacity has remained so tight | C.H. Robinson blog
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Posted in Logistics, Trucking

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