Executive Briefings

Can West Coast Ports Act to Reverse Their Slide in Market Share?

Shippers are still steaming over delays caused by West Coast dockworkers during contract negotiations with terminal operators in late 2014 and early 2015. But problems at the region's ports extend well beyond union intransigence.

Can West Coast Ports Act to Reverse Their Slide in Market Share?

The ports themselves admit that they'll have to play a more involved role in day-to-day operations, beyond acting as landlords for marine terminals and the carriers that call them.

Even without the grinding slowdown engineered by members of the International Longshore and Warehouse Union (ILWU), West Coast port operations "are lacking," said Michelle Staples, logistics director of pulp and paper marketer CellMark, Inc. Speaking at the annual meeting of the Agriculture Transportation Coalition (AgTC) in San Francisco, she cited a lack of transparency and cooperation among terminal operators, port authorities, ocean carriers, railroads and truckers. CellMark, she said, has been incurring heavy inland transportation expenses that are “completely out of our control. We don’t know what we’re going to be paying month to month.”

Staples noted one bright spot among recent West Coast developments: an alliance between the ports of Seattle and Tacoma, announced last fall, for joint management of investments in marine terminal development, operations and marketing. The ports are involving terminal operators, labor, shippers and truckers in their effort. “I don’t know of any other organization in the U.S. that’s doing this,” she said.

Nina Solari, vice president of quality control and food safety with Avanti Nut Co. Inc., said West Coast ports and terminals have failed to implement new technology to automate cranes, despite their ability to do so under the 2008 contract between ILWU and employers represented by the Pacific Maritime Association. Only the Port of Long Beach has capitalized on the opportunity so far, she said.

Jon Slangerup, chief executive officer with the Port of Long Beach, acknowledged that the port will have to do much more in the future than collect terminal rent and invest in infrastructure. “We need to facilitate change across the entire supply chain,” he said.

Long Beach has undertaken a sweeping optimization initiative that involves “rethinking the supply chain from end to end,” Slangerup said. “We’re bringing all stakeholders together around the table.”

The system as it stands today might not be broken, he said, “but it certainly is so suboptimal that we have to make the changes.”

Gene Seroka, executive director of the Port of Los Angeles, delivered a harsher verdict: “The supply chain is broken,” he said, “and has been for some time.” In Southern California, he said, 13 terminal operators are represented by 11 companies, deploying nine different operating systems. They serve four major carrier alliances, spreading cargo across multiple terminals, and making it difficult for railroads to assemble unit trains.

Since approval of the new dockside labor agreement in February, Los Angeles has sought ways to streamline the movement of containers through the port. Seroka argued for creation of a near-dock facility that can reduce congestion at the piers and route cargo through the various nodes of the system. The port has issued a request for proposal to develop an 80-acre site for that purpose.

The region’s ports continue to suffer from a serious shortfall of trucks and drivers. Those that do show up are stymied by inefficiencies. “We have a crisis in this area,” Seroka said. Los Angeles is designing a complex that would be equipped with satellite tracking and function under the Uber model of securing drivers. An algorithmic platform would oversee a system whereby an incoming truck would take the first available container, deliver it to a near-dock or inland location, and be paid by smartphone.

Chris Lytle, executive director of the Port of Oakland, proposed a similar arrangement for Northern California, involving creation of an equipment pool in the Central Valley. The site would eliminate the need for an empty container to travel all the way back to the port, where a trucker then hauls it back to the valley for loading.

Shippers and ports have struggled with equipment issues ever since ocean carriers began divesting their chassis. Lytle said equipment-leasing companies, which have taken over many of those units, have committed to setting up a “gray pool” of chassis in Oakland by the end of the third quarter. Such an arrangement, combining the equipment of three lessors and one marine terminal operator, has already been proven a success in Southern California.

About that labor slowdown. Shippers at the AgTC event made it clear that they haven’t forgotten the fallout from the union’s deliberate action to bring West Coast port operations to a virtual halt. Solari said family-owned Avanti paid out more than $50,000 in additional fees due to congestion issues at the Port of Oakland. “That was a significant hit to us,” she said.

Marlon Jones, manager of international distribution with International Paper Co., said the damage to his company as a result of the port slowdown numbered in the millions of dollars. Even worse, the congestion caused many of IP’s customers to seek alternative sources of product. “A lot of that business will never come back,” he said.

Solari said longshore labor should join railroad and airline employees in the category of workers who are prohibited from striking by the Railway Labor Act. And while that change probably isn’t politically feasible at the moment, opponents of ILWU’s recent action are trying another tack that might have greater traction. It’s S. 1298, a bill introduced by Sen. Cory Gardner (R-CO) that would create productivity metrics for dockworkers and amend the Taft-Hartley Act to give state governors more power to take action against work stoppages or slowdowns at the ports.

“The U.S. cannot afford another collapse of our gateway container ports,” said AgTC in a statement issued in early June. “We cannot stand by and wait for U.S. West Coast ports, which have now shut down twice over the past 13 years, to do it again when the recently approved ILWU-PMA contract expires in just four years, in 2019.”

It’s no secret that West Coast ports have been losing market share to their Gulf and East Coast counterparts in recent years. The question is whether ports, shippers, carriers and labor can unite to turn the trend around. Judging from the remarks by attendees at the AgTC conference, they have a huge task ahead of them.

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The ports themselves admit that they'll have to play a more involved role in day-to-day operations, beyond acting as landlords for marine terminals and the carriers that call them.

Even without the grinding slowdown engineered by members of the International Longshore and Warehouse Union (ILWU), West Coast port operations "are lacking," said Michelle Staples, logistics director of pulp and paper marketer CellMark, Inc. Speaking at the annual meeting of the Agriculture Transportation Coalition (AgTC) in San Francisco, she cited a lack of transparency and cooperation among terminal operators, port authorities, ocean carriers, railroads and truckers. CellMark, she said, has been incurring heavy inland transportation expenses that are “completely out of our control. We don’t know what we’re going to be paying month to month.”

Staples noted one bright spot among recent West Coast developments: an alliance between the ports of Seattle and Tacoma, announced last fall, for joint management of investments in marine terminal development, operations and marketing. The ports are involving terminal operators, labor, shippers and truckers in their effort. “I don’t know of any other organization in the U.S. that’s doing this,” she said.

Nina Solari, vice president of quality control and food safety with Avanti Nut Co. Inc., said West Coast ports and terminals have failed to implement new technology to automate cranes, despite their ability to do so under the 2008 contract between ILWU and employers represented by the Pacific Maritime Association. Only the Port of Long Beach has capitalized on the opportunity so far, she said.

Jon Slangerup, chief executive officer with the Port of Long Beach, acknowledged that the port will have to do much more in the future than collect terminal rent and invest in infrastructure. “We need to facilitate change across the entire supply chain,” he said.

Long Beach has undertaken a sweeping optimization initiative that involves “rethinking the supply chain from end to end,” Slangerup said. “We’re bringing all stakeholders together around the table.”

The system as it stands today might not be broken, he said, “but it certainly is so suboptimal that we have to make the changes.”

Gene Seroka, executive director of the Port of Los Angeles, delivered a harsher verdict: “The supply chain is broken,” he said, “and has been for some time.” In Southern California, he said, 13 terminal operators are represented by 11 companies, deploying nine different operating systems. They serve four major carrier alliances, spreading cargo across multiple terminals, and making it difficult for railroads to assemble unit trains.

Since approval of the new dockside labor agreement in February, Los Angeles has sought ways to streamline the movement of containers through the port. Seroka argued for creation of a near-dock facility that can reduce congestion at the piers and route cargo through the various nodes of the system. The port has issued a request for proposal to develop an 80-acre site for that purpose.

The region’s ports continue to suffer from a serious shortfall of trucks and drivers. Those that do show up are stymied by inefficiencies. “We have a crisis in this area,” Seroka said. Los Angeles is designing a complex that would be equipped with satellite tracking and function under the Uber model of securing drivers. An algorithmic platform would oversee a system whereby an incoming truck would take the first available container, deliver it to a near-dock or inland location, and be paid by smartphone.

Chris Lytle, executive director of the Port of Oakland, proposed a similar arrangement for Northern California, involving creation of an equipment pool in the Central Valley. The site would eliminate the need for an empty container to travel all the way back to the port, where a trucker then hauls it back to the valley for loading.

Shippers and ports have struggled with equipment issues ever since ocean carriers began divesting their chassis. Lytle said equipment-leasing companies, which have taken over many of those units, have committed to setting up a “gray pool” of chassis in Oakland by the end of the third quarter. Such an arrangement, combining the equipment of three lessors and one marine terminal operator, has already been proven a success in Southern California.

About that labor slowdown. Shippers at the AgTC event made it clear that they haven’t forgotten the fallout from the union’s deliberate action to bring West Coast port operations to a virtual halt. Solari said family-owned Avanti paid out more than $50,000 in additional fees due to congestion issues at the Port of Oakland. “That was a significant hit to us,” she said.

Marlon Jones, manager of international distribution with International Paper Co., said the damage to his company as a result of the port slowdown numbered in the millions of dollars. Even worse, the congestion caused many of IP’s customers to seek alternative sources of product. “A lot of that business will never come back,” he said.

Solari said longshore labor should join railroad and airline employees in the category of workers who are prohibited from striking by the Railway Labor Act. And while that change probably isn’t politically feasible at the moment, opponents of ILWU’s recent action are trying another tack that might have greater traction. It’s S. 1298, a bill introduced by Sen. Cory Gardner (R-CO) that would create productivity metrics for dockworkers and amend the Taft-Hartley Act to give state governors more power to take action against work stoppages or slowdowns at the ports.

“The U.S. cannot afford another collapse of our gateway container ports,” said AgTC in a statement issued in early June. “We cannot stand by and wait for U.S. West Coast ports, which have now shut down twice over the past 13 years, to do it again when the recently approved ILWU-PMA contract expires in just four years, in 2019.”

It’s no secret that West Coast ports have been losing market share to their Gulf and East Coast counterparts in recent years. The question is whether ports, shippers, carriers and labor can unite to turn the trend around. Judging from the remarks by attendees at the AgTC conference, they have a huge task ahead of them.

Comment on This Article

Can West Coast Ports Act to Reverse Their Slide in Market Share?