Circumnavigating the choke points (page 2)

-- Logistics Management, 10/1/2005

Page 2 of 3
The congestion problem has been most severe at the ports of Los Angeles and Long Beach, which are ranked number one and two, respectively, in terms of annual container volumes. (See Figure 2 on Page 42.) Although the ports and the state of California have made large-scale investments in transportation infrastructure in recent years, rail and truck connections have proved inadequate to handle the amount of cargo pouring through Southern California's harbors. "Rail delays are 24 to 48 hours on some trains," says Robert Sappio, senior vice president of trans-Pacific trade for ocean carrier APL. "There are even 90-hour delays with certain rail providers."

In a bid to mitigate traffic problems in the San Pedro Bay area, LA and Long Beach launched a controversial program dubbed "PierPass," which is designed to encourage ocean shippers to move containers at off-peak times. Under that program, shippers pay higher fees for cargo handled during regular business hours.

Shippers may not be happy about those additional costs, but ports may simply have no choice but to operate around the clock. "There's limited land for expansion. One way to improve productivity is using what we have more efficiently," explains APL's Sappio. "We have to run off-peak gates and hours. That way we can get more out of the assets we have."

 
Alternative gateways

As Los Angeles and Long Beach have become increasingly tied up in knots, some ocean carriers have extended service to other West Coast gateways, such as Oakland, Seattle, Tacoma, and Vancouver. For instance, Maersk Sealand, the world's largest container carrier, added direct service to Tacoma this year. Another leading ocean carrier, Evergreen, recently opened a new terminal at that port.

But the Pacific Northwest isn't the only alternative. Steamship lines are also adding calls and improving service to Gulf Coast and East Coast harbors. Mitsui O.S.K Lines (MOL) recently announced plans to launch the first direct container service between Jacksonville, Fla., and Asia. Maersk Sealand, meanwhile, has trimmed transit times from Asia to Port Elizabeth, N.J., and Norfolk, Va.

In a throwback to the days before double-stack trains carried intermodal containers from the West Coast across America, more ocean carriers are adopting all-water routes from Asia, directing ships through the Panama and Suez canals to reach the East Coast. "Customers are willing to take longer transit times to avoid capacity constraints on the West Coast and the perceived pain of the West Coast," says Manny Hontoria, a principal at Mercer Management Consulting.

Some shipping lines are eyeing Mexican ports as a potential entry point to the Pacific Coast. Already, two carriers—Maersk Sealand and CP Ships—have launched services linking Asia and Mexico. CP Ships will call at the Port of Lázaro Cárdenas, and Maersk will stop at both Lázaro Cárdenas and Ensenada. Others may follow suit. "Mexico has some options worth further study," says Sappio, "but you'll still have to route cargo into the U.S."

Carrier executives believe that additional port calls represent only one piece of the solution. "The chokepoint is the terminal," Sappio asserts. "It's not just rail—it's truck too."

Block Stowing and More

In addition to adding ports of call, ocean carriers are taking other actions to expedite cargo flows. OOCL, for example, is engaging in a practice called "block stowing," in which it loads containers bound for the same destination into vessel hatches so they can be unloaded more quickly. "By block stowing and pre-positioning, we unload when the (rail) cars are there and reduce congestion in the yard by 10 to 15 percent," says Edward Zaninelli, vice president, trans-Pacific trade—westbound.  Continued...