Unlike in 2004, international containerized cargo moved relatively smoothly through the U.S. transportation system last year. But that doesn't mean that shippers and carriers can ignore the possibility of future congestion.
In fact, things weren't quite as rosy in 2005 as reports suggested. During the peak summer shipping season, imports moving to U.S. destinations by rail and truck were regularly delayed by up to a week, according to Albert A. Pierce, executive director of the Transpacific Stabilization Agreement. Containers arriving at West Coast ports, particularly in Southern California, were still backing up on the docks or at inland storage facilities. A shortage of rail equipment led to delays of between one and four days, as cargo became stalled at various points in the pipeline. Additional delays were seen at the Panama Canal, which was operating at near capacity due to carriers' increased reliance on all-water service between Asia and the U.S. East Coast.
None of those problems approached the severity of 2004, when shippers and carriers alike were caught unprepared for a sharp increase in imports from Asia. The result was massive tie-ups throughout the system. In some cases, vessels waited 10 days or more to unload their containers at the ports of Los Angeles and Long Beach. There were further snarls in the inland intermodal system.
The crisis of 2004 was due to multiple factors, according to Barry Horowitz, a former logistics executive who is now general manager of container marketing at the Port of Portland, Ore. Longshore labor was in short supply, the railroads weren't prepared for the surge in business, and carriers couldn't secure enough containers for the available freight. The last factor was partly the result of an economic boom in China, which snapped up most of the world's steel production in massive building projects.
Connecting infrastructure was similarly lacking. Road and rail capacity was "woefully inadequate," says Horowitz.
Carriers vowed that 2005 wouldn't see a repeat of that disaster. One major strategy was to divert import containers away from Southern California in favor of terminals in the Pacific Northwest. But if ports like Portland thought they were in for a windfall of new business, they were disappointed. Carriers continued to be drawn to Los Angeles and Long Beach due to a combination of that region's direct rail connections to the interior, and a massive consumer market for goods sold locally.
In theory, carriers should have been tempted more strongly by the Northwest's intermodal capacity, says Horowitz. As in Southern California, import containers unloaded at the ports can move intact all the way to destinations such as Chicago, Memphis and New York. But a demand for empty containers in Asia caused carriers to turn many boxes at the port, with their contents transloaded into domestic equipment. No shipping line could afford to have its equipment wandering around inland while it struggled to meet the demand for boxes moving eastbound from China and other Asian locations.
All-water service to the East Coast, via the Panama Canal, is another option to be embraced by trans-Pacific carriers. Some importers in the eastern U.S. are willing to wait longer for their goods if they can count on the shipments arriving on time. Still, Southern California continues to be the major gateway for U.S. containerized imports from Asia, and it's there that shippers and carriers are seeking long-term solutions to the congestion problem.
The PierPASS Experiment
The biggest effort to date is PierPASS, a program that levies a "traffic mitigation fee" on containers moving out of Los Angeles and Long Beach marine terminals by road during peak hours, from 3:00 a.m. to 6:00 p.m. Monday through Friday. The money is used to pay for additional shifts at the terminals from 6:00 p.m. to 3:00 a.m. Monday through Thursday, and from 8:00 a.m. to 6:00 p.m. on Saturday. The effect is to reduce the number of trucks on local roads and freeways during peak hours.
By all accounts, PierPASS has been an early success. More than half a million trucks were removed from peak daytime traffic between the program's startup in July and October 2005, officials claim. That represents roughly a third of all eligible containers moving over port docks. Organizers hope to increase that share to 50 percent.
PierPASS was "a big help," says Horowitz. "It had to be a cooperative effort, which we so rarely see in this business." The program's ultimate success depended on numerous players in the supply chain, including ocean carriers, marine terminal operators, labor unions, truckers and local receiving docks, all agreeing to operate in the off-hours.
Other factors in relieving congestion over the past year included the addition of trains and slower growth in trans-Pacific imports. At the same time, the International Longshore & Warehouse Union (ILWU) promoted 2,000 part-time workers to full-time and added 5,000 more part-time positions in Los Angeles and Long Beach alone.
|"Anything that gives more flexibility to shippers, we're in favor of. That's something you'll see in 2006."|
- Mark Yeager of Hub Group Inc.
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