The BOC Blast 379 – Chassis shortage in likely to persist into 2021

Chassis shortage in likely to persist into 2021

Bill Mongelluzzo, Senior Editor | Published on JOC.com

Intermodal equipment providers (IEPs) say while they are making an all-out effort to remedy chassis shortages in Southern California, the shortages will likely persist into next year if the ports of Los Angeles and Long Beach continue to handle record import volumes from Asia.

IEPs and truckers blame inefficiencies at marine terminal gates as a major cause of the chassis shortages, and want the ports to require that ocean carriers share advance shipment information that will increase cargo velocity throughout the supply chain.

The IEPs note that pushing record container volumes through the Southern California supply chain over the past three months has stretched the assets and manpower of marine terminals, truckers, railroads, and distribution warehouses beyond capacity. They say it is unfair to single out chassis providers as the weakest link in the chain, especially because the IEPs are taking charge of those issues over which they have control, such as repairing out-of-service chassis.

“We are maxed out on fixing bad-order chassis. Our mechanics are working flat out. We couldn’t employ one more mechanic,” said Ron Widdows, CEO of Flexi-Van Leasing. DCLI, TRAC Intermodal, and Flexi-Van operate the Pool of Pools through which the three IEPs manage the fleet of interoperable chassis in Southern California.

Truckers, meanwhile, say the issues that contribute to inefficiencies in the Southern California supply chain have been well known for years and did not suddenly emerge because imports from Asia recovered faster than anticipated this summer. Weston LaBar, CEO of the Harbor Trucking Association (HTA), said the ports’ main failing is they are not doing enough to bring ocean carriers to the table with solutions that will enhance cargo velocity.

“I am sick and tired of the lack of action,” he told JOC.com Wednesday. “What do they mean, ‘There is too much cargo’? This is what we all do. We move cargo.”

The HTA has called upon port authorities to incentivize — and, if necessary, compel — ocean carriers to share shipment information with other members of the supply chain, so all asset owners are prepared for the cargo volumes they will be handling. In the case of truckers, who suffer the brunt of the delays at marine terminals, the key is for carriers to provide them with reliable shipment information so they can arrange appointments that foster dual transactions, LaBar said.

Dual transactions, which involve hauling an export load or empty container to the terminal and taking delivery of an import load on the same trip, can greatly increase trucker productivity, but dual transactions only account for about 20 percent of trucker visits to the harbor, LaBar said.

“Dual transactions, dual transactions, dual transactions. That’s the solution,” he said.

Import spike expected to continue through January

Shipments of personal protective equipment, e-commerce merchandise, and home improvement goods have been strong since late June as the US economy reopened from initial COVID-19 lockdowns. Imports are expected to continue at a high level until factories in Asia shut down for the annual Lunar New Year holiday beginning Feb. 12, 2021.

The Los Angeles-Long Beach port complex in September handled 828,880 TEU of imports from Asia, up 22 percent from September 2019, according to PIERS, a JOC.com sister company within IHS Markit. In the four-month period from June through September, imports from Asia moving through the largest US container gateway totaled 3.09 million TEU, up 12 percent from the same period last year.

The three IEPs that operate the Pool of Pools in Southern California say they are doing everything they can to expand the chassis pool, which totals about 65,000 units, including purchasing new chassis, repositioning chassis from surplus locations in other parts of the country, and working overtime to repair damaged chassis that are not roadable.

Daily updates on the Pool of Pools website show the IEPs have made great strides in recent months in repairing out-of-service chassis. Some 4,246 units were out of service at the 12 container terminals and four intermodal rail ramps in Southern California as of Wednesday, down from more than 8,000 bad-order chassis in June.

“Our contribution to the Pool of Pools is up,” said Ron Joseph, executive vice president and COO of DCLI. He said DCLI is also repositioning chassis from surplus locations in the Midwest.

Widdows said Flexi-Van’s contributions to the pool actually exceed its original commitment. Flexi-Van in September began deploying the first of 1,500 new-order chassis into its Southern California fleet. “We will continue to acquire new chassis through the end of this year and into next year,” he said.

TRAC Intermodal has new chassis on order, but due to tariff issues between the US and China, the IEP had to shift its purchases to North American suppliers, which delayed the orders, according to Val Noel, executive vice president and COO. The new chassis will begin to arrive in the second quarter of 2021, he said.

Productivity down throughout the supply chain

Port stakeholders have struggled with supply chain challenges all summer and fall. The problems began when distribution warehouses became filled to capacity due to a shortage of workers as COVID-19 cases spiked this summer. Warehouse operators also had to spread workers out at their facilities for safety purposes, which contributed to a decline in productivity.

As a result, the average container/chassis “street dwell” time more than doubled from about 3 days earlier this summer to 7.1 days this week, according to the Pool of Pools website. The average container dwell time at Los Angeles and Long Beach marine terminals rose to 3.25 days from 2.8 days in July, according to the Pacific Merchant Shipping Association, while the average truck turn time in September was 77 minutes, up from a record-low 58 minutes in June, according to the HTA’s truck mobility data.

Chassis shortages have also emerged at rail ramps. Union Pacific’s Intermodal Container Transfer Facility (ICTF), located about five miles from the harbor, has recently begun to ground containers because the Pool of Pools chassis supply tightened, UP spokesperson Raquel Espinoza said. Truckers say that is adding time to their ICTF visits compared with the normal process of taking delivery of containers that have been pre-mounted on chassis.

“We are working cooperatively with truckers to identify and mount stacked containers, but there are some delays since that process is outside of normal operations,” Espinoza said.

Crystal ball hazy

The IEPs are developing their business plans for 2021, but are struggling to project how COVID-19 will affect consumer demand, economic growth, and retailers’ strategies for inventory replenishment and storage, Widdows said.

“What Q2 next near will look like is difficult to map out,” he said. “There are a lot of moving parts.” 

LaBar, however, said the problems faced by truckers at marine terminals were present long before the coronavirus disease 2019 (COVID-19) and the explosive recovery this summer, and will persist into next year if something isn’t done quickly to improve communication among all of the supply chain partners, beginning with the ocean carriers.

LaBar noted that the Port of Los Angeles has invested millions of dollars in the Port Optimizer to enable the sharing of shipment information through the supply chain, and some of the terminals have invested in platforms that allow for advance sharing of shipment information, but participation by the carriers is still spotty.

“We need leadership from the two ports to make this happen. They need to do something bold to incentivize or compel dual transactions,” LaBar said.

TRAC Intermodal fully supports the sharing of shipment information in advance of vessel arrival, as it would make it easier for truckers to arrange dual transactions, resulting in benefits for the entire supply chain, Noel said.

“Collaboration and better shipment profile insight would be unbelievably valuable,” he said. “That’s a gap in the supply chain.”