I was at the State of the Port dinner last night. One of the speakers was the Executive Port Director for the port of Oakland. He got grilled by the shipping community during the QA session. Frustrations really boiled over. In fact, I’m surprised he didn’t get hammered even more.
On the surface, the problem is massive congestion. The congestion affects shipping in two ways:
1.) Container availability. With too many containers in limited space, containers are often put in closed off areas. These containers are often left in closed off areas for days on end. In some terminals that require an appointment to pick up a container, the terminals don’t have enough pickup dates readily available.
2.) Drivers can wait in line first thing in the morning to pick up a container. They may get out of the terminal by mid morning. If they are lucky, they are able to return to the terminals in the early afternoon to pick up another container. They then have to wait in line. However some of the terminals are closing the drivers out early/mid afternoon (3pm or earlier in some cases). Despite waiting in line, truckers may not be able to pick up a second container if they get closed out. This type of congestion is unworkable for most truckers. Their livelihood depends on making as many truck moves as possible. The shipping community cannot find enough truckers to do the work that is available. It’s not that the truckers don’t want to do the moves, they just can’t get out of the terminals fast enough.
What I was hoping Chris Lytle would do last night was provide a serious framework for solving these problems. Unfortunately, he barely touched on the problems during his speech. I think that was partly why the shipping community really went after him during the Q&A session. What we need is an open and honest conversation with the entire shipping community. The port of Oakland is not experiencing a huge sudden huge influx of surplus containers. The port of Oakland has handled this volume before and should be able to handle it now.
Keep in mind that I am not blaming Chris Lytle for the problems. He came on board last summer and walked right into a hornet’s nest. My own viewpoint is that it ultimately starts with the steamship lines. They are doing everything they can to cut costs. These measures have put a real damper on productivity at the ports:
- Maersk, APL, and Hanjin (three big carriers) have in the past few years stopped using their own terminals and merged in with 3rd party terminals in Oakland. Chris did acknowledge this as a big part of the problem yesterday. Consolidation of terminals is a key contributor to congestion at the terminals.
- From talking to one of the terminal managers, the carriers are really reluctant to spend extra money on more longshoremen crews to work the ships. I don’t know if this ultimately falls on the terminals or the carriers. I do know that in the case of Evergreen, they do have some power to decide on how many crews to hire. I don’t know if more longshoremen would lead to great efficiency.
- I learned the other day that the recent congestion at Ben E Nutter terminal was partly due to a broken transtainer. The transtainer had been broken since December. One month later, it is still broken. The terminal only had two transtainers to begin with. One is obviously not enough. The public hasn’t received any message of explanation as to why it is taking so long to get it fixed.
I have heard others in the shipping community say that the carriers really don’t mind if containers sit at ports longer. They feel that storage/demurrage charges are revenue generators for the carriers. I’m not sure if I completely agree with the argument, but I can see why members of the shipping community would feel this way.
The reality is that in the past five/six years carriers have really struggled with their profitability. What we are seeing at the port of Oakland is an example of legacy of the cost cutting measures. If service is measured by transit time and reliability, it is obvious to me that the quality of the service that carriers provide has seriously degraded.
Is there a light at the end of the tunnel? I am not sure. Chris Lytle mentioned that the port of Oakland should consider creating a Pier Pass system like the one in Los Angeles and Long Beach. The Pier Pass system would allow for before and after hours pickups. It would extend terminal operation hours from early morning to very late into the night. The cost of this system, if designed in the same way as that of Los Angeles and Long Beach, would be placed directly on the shipping community. I do believe most in the shipping community, after having spent the past half year complaining about service level at the port of Oakland, will accept this added cost.
Another related suggestion floated out there was adding a weekend (Saturday) service. Who would directly bear the cost of this service is a bit more difficult to figure out. If it requires the carriers to pay directly for more longshoremen, I can see the carriers being stingy. The track record of the carriers the past few years is that they are willing to sacrifice service, the importing community be damned.
Another x-factor in the whole situation is the ILUW (longshormen’s union). With the contract expiring on June 30th, we can be sure to expect games to be played by both sides (terminal and union) in the months leading up to the renewal.