Let’s talk about situation surrounding the current ports, rails and trucking systems related to ocean shipping and inter-modal transportation. Bottom line, it’s bad. OK, I take that back, it’s lousy, horrible, even pathetic. Ports are jammed up with shipments, rail ramps are congested, chassis are in high demand and winter snow with Polar Vortex temps are having a huge impact.
Consider the following as it relates to freight forwarding:
Problem # 1: Both west coast and east coast ocean terminals and piers are experiencing difficult backlogs. Currently, terminals are beyond 80 percent utilization, which is considered full. There are several reasons for this congestion. Why? The annual Chinese New Year traditionally creates large volumes with workers take vacations and spending well deserved time with family. This year is unusual. Shippers are uneasy. The current trade situation with China is rippling through the industry. At the end of 2018, there was heavy shipping demand due to companies strategically trying to get ahead of proposed tariffs. Some are concerned tariff negotiations will not be wrapped up by March 1 when the current deal expires.
Problem # 2: Rail congestion at inter-modal facilities. Currently there are some container yards that are overloaded to the point where facilities are refusing to store empties. Truckers are being forced to overload their own storage yards with empty containers. At some railyards, they’re only allowed to drop an empty container when picking up a full or vice versa. For certain export transactions, steamship lines will show an inventory of empty containers at certain rail yards, yet a physical inspection of that location shows no empty containers available. Truckers are told to come back or wait until an empty is brought back.
Problem # 3: Chassis shortage. Ever since steamship lines began to charge for chassis in North American markets, they’ve been declining in quality and availability. When you add the volume currently moving in the system there’s an even bigger problem. Containers require chassis to be moved and if they aren’t returned on time, there’s no chassis available. It’s simple mathematics. If a high percent of the containers aren’t returned on time, chassis sit with empty or unloaded containers.
Problem # 4: Trucker shortage. While the trucker shortage is not nearly as dire as it was a year ago (recall the ELD mandate of November 2017), things are still not stable. Container drayage suffered heavily as trucking companies adjusted to mandatory hour tracking. Yes, it’s getting better but it’s not nearly where it needs to be. Most truckers have gone from two standard free hours to one as the industry reacts.
What does this all mean?
The maritime shipping public is now adjusting to and expecting delays and additional fees related to container deliveries. Charges such as:
- Rail yard demurrage fees for containers stored at the ramp after the last free day;
- Trucker pre-pull charges for pulling containers out of the rail yard to avoid demurrage;
- New rail and ocean line instituted fees such as EIFS (Emergency Inland Fuel Surcharge) and street turning fees; (yes, they are going to start charging a fee for street turns)
- Attempt charges for truckers to recover an empty container which isn’t there;
- Trucker yard-storage fees for holding the container as it waits for delivery, which is much less expensive than storing the containers at the rail ramps;
- Chassis rental fees and repositioning fees;
- Higher delivery rates; and,
- Less than reliable lead times.
What’s a Midwest company that relies on ocean shipping in their supply chain to do?
The answer is to evaluate, plan, diversify and execute. There are 4 problems listed above, how about trying these 4 creative solutions:
Solution #1: Evaluate ports being used and rail lines attached to these ports. Most Midwest companies rely heavily on Chicago Rail ramps for containers in and out of the surrounding states. Remember each steamship line contracts with a rail line and a rail yard which ties you to specific delivery options. A cheap steamship line rate might be more expensive in the long run because of the partnering rail yard.
Solution #2: Plan your supply chain adding in these extra delays and costs. Planning must be flexible and actively reviewed. Plan more than one possible option with expected additional costs. Yes, plan on delays and additional costs and get creative to set the right expectation.
Solution #3: Diversify options and routes for imported goods and exported goods. Having a plan, A (cheapest) and plan B (next best choice), means emergencies are less likely. Consider evaluating other ramps in the Chicago area or if a different Midwest rail ramp would be an option. With Chicago trucking costs being as high as they are, the Indy ramp is a great option for Northern Indiana and Northwest Ohio. Indianapolis, Louisville, Cincinnati, St Louis, Detroit, Columbus, Cleveland and even the CSX ramp in North Baltimore, OH might be options to provide more affordable trucking costs.
Solution #4: Execute the strategy. Don’t wait for the next emergency or backlog to get strategic and find a creative solution. The current environment is likely the new normal. While the current port backlog may be temporarily solved during Chinese New Year, expect a number of possible disruptions in 2019 and beyond. Don’t put your supply chain on the back burner hoping for better days.
As always, remember that we are available to help.
Please contact your Cargo Services representative if you have any questions.