Here’s an innovation that’s going to be popular at container terminals. It’s a fixed set of frames allowing containers to be stacked in individual pigeonholes. They’re placed and removed by stacker cranes running through the aisles. The system has been in development and testing since 2018.
Hardware innovations take a long time to develop, and they require a place for testing. The partnership of DP World and SMS Group, a German firm, combined the expertise and the need and test bed to create the product.
Stacking density may be improved up to 4 times using the Boxbay system.
This is not a new idea. Auto manufacturers and shippers have been using such arrays to store cars since the 90’s. I was shown a picture of one in Japan by Ernest Konigsberg, a Berkeley operations research professor who was familiar with the design and the optimizing software written to decide which locations to place vehicles. We would call it AI today, but then it was simply optimization software. It’s been around a long time.
An interesting question is why this technology is only emerging now. One answer is the Great Congestion about the time of the COVID epidemic. Yard storage was a significant problem during the supply chain crisis. This kind of system can improve the utilization of scarce container yard land. It’s a natural type of tech to invest in.
I’m sure we will see more such systems if container shipping demand comes back and exceeds the congestion period levels. But if ports aren’t handling so many containers, they may not be so eager to invest in this technology. I don’t see the large US ports jumping on this so soon, with traffic falling.
The article has a nice picture of Pusan Newport terminal, and judging by the stacking disarray in the right part of the picture, they can use this system1
Shipper complaints about demurrage and detention (D&D) charges by carriers have been many, especially over the Coronavirus period, when many facilities were congested and supply lines were overloaded. One of the main complaints was the uncooperative attitude of port terminals and yards when asked to release cargo.
The Federal Maritime Commission (FMC) held a hearing over one case involving Evergreen, a major container carrier, and trucker TCW Inc, in December. Evergreen was forbidden to make per diem charges on days when the motor carrier could not pick up the cargo.
The essence of the FMC argument is that you can’t charge D&D when it’s impossible to pick up the container. Frequently ports and yards may have reasons to deny a trucker from picking up, but if it doesn’t lead to congestion and is the yard or terminal problem, the carrier can’t charge D&D.
The latest case involves carrier Hapag-Lloyd and rail line CSX, versus a Wisconsin forwarder, ME Dey, and the trucker New Age Logistics. Hapag-Lloyd has already waived over $150,000 in charges, and the case is still ongoing. CSX rail may well cave in also.
The principle established by the FMC is important, and may prevent some D&D charging errors in freight bills. Carriers are going to need to be careful and monitor conditions at the facilities holding the containers.
This may go some way toward increasing communication among logistics ‘partners’. Now a carrier must keep informed about the conditions at the yard where the container is located. They will need to ask for information on a continuous basis, which they have a right to, because it is affecting their billing process. If the yard is closed for a holiday, or has the container under a big stack that cannot be moved fast, they will need to tell the carrier, so that the billing can be waived. This information exchange is a crucial part of the financial wing of the supply chain.
When there’s money involved, action often follows.
I think it’s great for the FMC to proactively insist on attention to the possibility of congestion. It will encourage yards to reduce it, and carriers to monitor it, and shippers to work to avoid it.
Richard Butcher has written an interesting article on the large quantity of excess containers floating around the world today. Many of these containers are plugging up the yards of major and minor ports, causing longer delays in cargo handling. The space issue is important because with more space you can arrange inbound and outbound containers for easy loading and easy drayage to the customer or warehouse.
He makes a strong point— that containers are held as assets on the books of ocean carriers, and they don’t want to write off too many at a time. Obviously, the costs of holding them don’t outweigh the value of keeping them in the container liners’ eyes.
While managing the inventory of empty containers and aging them aggressively is a great idea, I don’t believe the container carriers have enough motivation to do much. It’s very true that we now have the software and technology for tracking and identifying these containers easily, and managing them one by one.
But empty containers are packaging materials, and already we have seen in domestic industries the close attention retailers and firms such as Amazon have paid to the waste caused by packaging. One of the reasons is the downstream cost of disposing of it.
Containers are also packaging waste, and should be if extra cost were added to storing them empty, it would induce carriers to cut down their stocks. We have evidence of this. Moves by ports to add detention costs to containers that sit idle for days have already induced carriers to move out their containers, even though in some cases the charges have never been enforced.
One difference between containers and the Amazon box you get with your shipment is that the container is reusable. Actually, the customer may reuse the Amazon box; I know I do. But that is relying on a chance event; after a while if I have nothing to ship, I may send it to our local recycling. Of course I pay for the recycling through my taxes, and Amazon doesn’t directly pay, nor do the charges show up in their books. This strategy is not effective for a major item like a container.
However, I propose that ports and yards, or perhaps political entities, such as the US or EU, or state governments, institute a recycling charge for containers left beyond the limit of days set. Containers left past that time would be carted off, cut up for scrap steel, and the costs of the removal and disposal be charged to the ocean carriers. I further propose that the scrap steel value be retained by the governments, perhaps for use in port and yard improvement projects; I don’t care much, since I don’t think it will be too big. It’s like condemning an unsightly property that is blighting a neighborhood.
This proposal would immediately place an accounting cost on ocean carriers. They would have to plan for how many containers would be lost through this process, and accrue the charges they are likely to receive for container disposal. This additional cost should certainly be enough to encourage efforts at tracking, removing containers from yards, and getting them back to exporting ports for reuse. Loss of the asset and paying for its loss will provide motivation for the ocean carriers to take care of their own waste.
If the US or EU would put such provisions into effect it might do the trick. These are the largest importing nations in the world, and they have the most empty containers around. But I think if they led, other nations around the world would follow.
China might not; it would put a dent in their container manufacturing business, which is mostly state-owned. But it would put a stop to the practice of buying new containers instead of recycling old ones, and charging the shipper for the new container.
Actually, since China is a major source of steel production, one could view the manufacture of containers as a form of ‘dumping’ at below the cost of manufacture. But trying to resolve this through the WTO would take forever, and have no certain outcome, like most of the past disputes on trade presented there.
Taxing the old empties and disposing of them would cut through the noise and begin placing the cost of the packaging and the ‘pollution’ it generates squarely on the ocean carriers. And it would force them to recognize the costs they are generating in their books, hurting their bottom lines.
Supply Chain and Logistics 