“The terminal and vessel backlogs that occurred in San Pedro between July 2020 and August 2021 were the result of a cumulative collapse of the entire logistics supply chain.”
The above statement is the conclusion of a report to the Pacific Maritime Association (PMA) by Martin Associates, a consulting company that in October, presented a deep-dive analysis into the Los Angeles and Long Beach container and logistics problems.
The federal government has been trying to zero-in on a quagmire that not only threatened Christmas, but presents serious economic and inflationary issues.
One major effort started in September when the U.S. Department of Transportation (DOT) published a request for information (RFI) about restoring “resilience in the freight and logistics sector.” The RFI was prompted by a President Biden executive order issued in February 2021. In its request, DOT listed 12 broad issues on which it wanted information, on issues ranging from infrastructure bottlenecks and cargo-handling equipment to warehouse and technology to workforce and regulatory barriers.
By October 18, the Transportation Department received over 400 public comments. Staff is now reviewing the comments and plans to develop supply-chain policy recommendations, expected in early 2022: the President’s executive order requires a report “within one year.”
In response to DOT, the PMA and Northwest Seaport Alliance—a partnership between the Port of Seattle and the Port of Tacoma—each sent extensive and detailed comments and suggestions regarding DOT’s list of priority topics.
The NWSA is the fourth-largest container gateway in the US, managing container, breakbulk, auto and some bulk terminals. PMA, based in San Francisco, represents West Coast maritime companies and negotiates maritime labor agreements with the International Longshore and Warehouse Union.
For each organization, technology presents as a standout issue, and it’s a priority that aligns with the concerns of experts across the supply chain. For both NWSA and PMA, technology isn’t their only concern, but it is referenced as an issue that, if fixed, could help unlock the tangle of other concerns that makes this issue so complicated.
Broadly, these tech insights refer to the need to maximize tech capabilities. Experts see the need for a seismic shift , a dramatic change among all supply-chain participants, to move from proprietary company-based systems to open-access data and communication.
Data sharing, for example, is a critical component within President Biden’s new Action Plan for America’s Ports and Waterways, released in November. The plan seeks an open exchange to maximize supply/logistics timeliness and efficiencies. The Federal Maritime Commission is on point for this.
Another example and venue: Tech challenges were repeatedly referenced during the initial meeting of the FMC’s new National Shippers Advisory Committee. In discussion, committee members said that without a common tech platform among multiple players, supply-chain data and communication are essentially gibberish.
What’s needed, experts say, is a system that allows truckers heading west from Indianapolis or St. Louis to have the same real-time information as port managers in LA and captains in San Pedro Bay. Somehow, a babble of proprietary information and data needs to be made clear, standardized, transparent and accessible, available to everyone working within and across the supply chain.
In its comments to DOT, NWSA advises development of “port community systems or similar technology” including blockchain technology. The Alliance references work in European ports to develop a platform for the secure exchange of information on cargo moving through facilities.
“Standardized, secure information systems,” NWSA wrote, “would provide the efficiency, capacity and safety improvements of cargo transfer between different links of a supply chain that European ports already enjoy.”
PMA wrote that the standardization of information is crucial to improving cargo visibility, efficiency and supply-chain stability, saying that technology standardization is key to the long-term efficiency of the supply system. All container terminals in Southern California, for example, have implemented technology changing the way information is handled from a manual process to electronically.
Data availability now needs to expand throughout the supply chain. If terminals know when to expect truck arrivals, containers can be positioned at the appropriate time and to expedite container movement.
Beyond technology, other stated top priorities for PMA and NWSA include:
- More federal money. NWSA contends that the feds need to provide more for port/freight projects. Grant funding got off to a great start, but these national competitive programs were soon “oversubscribed and underfunded.” To add perspective, the authors write:
- “Canadian federal contributions to British Columbia port projects over the last five years totaled US $372 million compared to US $45 million for Washington state ports and US $179 million for California ports.”
- The entire system needs attention. NWSA writes the supply chain was overwhelmed by sudden increases that “rippled through each part of the supply chain, unable to catch up.” The authors comment that “logistics is an asset-heavy process” requiring long lead times to meet new demands, and that the focus can’t be at only one point in the chain, but increased capacity throughout must be considered.
- Infrastructure. With a global supply chain, congestion originates far from US seaports and docks. Equipment shortages, warehouse capacity limits, and intermodal chokepoints (including major U.S. regional rail hubs) all add to the backlog of container vessels at anchor and marine terminal congestion. At LA-Long Beach, imports for onward shipment to Chicago rose 32% year-over-year in the second quarter of 2020 and 18% compared with the same period in 2019.
- Warehouse challenges. Proposals for new warehousing draws opposition from activists and residents concerned about noise, air pollution and traffic. Government can help sort out conflicting policy priorities at local, state and federal levels.
- Automation/Labor. PMA notes the long history of automation at LA and LB and notes further that labor demands increased at the same time because the investments in automation were fundamental to expansion. Now, automation has new challenges, for example, demands in renewable electric energy to power all-electric ports and vessels at berth. Similarly, labor’s rich contracts—ILWU foremen average $281,555/year—make LA/LB less competitive with other ports. PMA notes that Canadian gateways have a labor cost advantage on the order of $100 per container.
Currently, there are at least five major supply-chain initiatives at the federal level alone.
Timing and next steps, though, are hard to judge. When asked about their timeline after they complete their September RFI review, DOT staff’s only reference to timing was to deadlines in another document, the President’s November Action Plan, which sets deadlines of between 45 and 90 days for work pertaining to grants and port projects. The Action Plan has no timeline for new digital infrastructure, just an advisory to watch for a new request for information.
The Biden Administration issued another Executive Order in November, this one establishing an “Infrastructure Implementation Task Force,” a cabinet-level group charged with coordinating “effective implementation of the Infrastructure Investment and Jobs Act and other related significant infrastructure programs within the executive branch.”
The order sets “bolstering United States manufacturing and supply chains” as a second-highest priority, after “investing public dollars efficiently.” But the new Executive Order also contains no dates or deadlines.
Since submitting their comments to the Department of Transportation, NWSA and PMA officials were asked if they viewed the recent flurry of supply-chain initiatives as generally aligned with their proposals. The PMA did not reply, but Ryan McFarland with the NWSA’s government affairs division, said that the Seaport Alliance sees these new developments as positive.
He specifically referenced the $5 billion for ports and waterways in the recent Infrastructure Investment and Jobs Act, and additional spending on infrastructure. McFarland also cited new attention on establishing near-dock container yards, also mentioned in DOT comments.
“This is one tool ports and other supply-chain stakeholders can utilize to help alleviate congestion,” he remarked.
Regarding data sharing, McFarland said NWSA is still reviewing the data proposal within the Action Plan for America’s Ports and Waterways.
NWSA is also tracking the work of the new National Shipper Advisory Committee, and recently hosted Federal Maritime Commission members Carl Bentzel and Louis Sola, a visit that included a roundtable discussion with port stakeholders.
One of the main goals: identify solutions.
“We plan to continue this dialogue by reconvening the roundtable in the form of an ongoing task force,” McFarland said.