DAMAGED GOODS

orangeThe unresolved contract between the ILWU and PMA has resulted in not only damage to the psyche of the West Coast shipper but also to the businesses and products shipped.

Even before the labor negotiations soured, shippers had grown weary of the congestion on the West Coast. With the increasing delays and inability to get their products to market, whether import or export, they are exploring alternative gateways.  Houston has been bantered about quite a bit lately.

This news is not good for California.  Once cargo is diverted, it may never come back.  Worse yet, export commodities are sitting at processing facilities, in warehouses or in containers up and down the state. Each one of these shipments represents a sale to an overseas buyer.  If the buyer is unable to get their hands on the cargo, or it arrives in a damaged state due to idling and longer transit times, they will seek out alternative suppliers in other parts of the world…we are not the only ones who grow things, after all. Once a customer finds a different supplier, they may never come back to their California grower.

Reliability is woefully missing and desperately needed.

CONGESTION!

121We certainly wish it was the kind of congestion that could be easily relieved with Mucinex or Sudafed, but alas, we are talking about the kind of congestion which creates long truck queues, delayed vessels and missed deliveries. The kind of congestion plaguing West Coast ports and contributing to Black Friday sale items and Christmas merchandise still sitting on the dock. The kind of congestion where the entire network struggles to move containers.

PORT OF OAKLAND PROTESTCertainly, one of the main factors contributing to the congestion is the unsettled ILWU contract…more on that later…but a contract agreement will not be the panacea as the causes of the congestion run deep.

The introduction of big ships, carrying two to three times the number of containers of previous vessels, dump a tremendous number containers on dock putting a strain on terminal operations. Additionally, these mega-ships take longer to unload/load, thereby, keeping ships in port longer and disrupting vessel schedules.

The changing chassis model is another reason. As ocean carriers divest themselves of these assets, the chassis providers are challenged to keep up with the necessary supply. It is not just a matter of the number of chassis but also having them available at the specific marine terminal where they are needed.

The growing vessel alliances play a factor in the “equipment challenge” as vessel partners call several terminals within the same port complex. This spreading-out of calls creates inefficiencies in the supply of chassis and containers. Motor carriers are forced to make multiple stops, chassis from one location and container from another, to complete one container move. These multiple stops add to the congestion, queues and ineffectiveness of the supply chain.

The limited gate hours, especially in Oakland, contribute to the backlog. When a marine terminal routinely stops taking transactions at 2:15pm, it makes it very difficult to move the required number of containers off-dock in a day. Basically, if the driver is not inside the terminal gates by lunchtime, he is not getting in. For all intents and purposes, that is a half day’s work lost.

Add to the above factors, the general busy-ness this time of year…exporters are eager to get their newly harvested goods to overseas markets, and importers are eager to get products on the shelves for holiday shoppers…and you have the perfect storm for congestion.

THE LONG ARM OF CONGESTION

123The effects of containers stacking up at West Coast ports is far-reaching. Inland rail depots in Chicago and Memphis are experiencing inconsistent surges of cargo. There are not enough trucks to move the containers out in the limited free time available, and the winter weather is not helping.

Container vessels, 20 at the latest count, sit outside the ports of Los Angeles and Long Beach. The longer these ships sit, the more issues it creates downstream for other ports both in the US and abroad. Berthing times at busy ports around the world are very difficult to come by, and when they are missed, it could be days before a slot opens up. It has become such a problem that Evergreen is dropping Los Angeles and Oakland port calls from its NUE service.

It has also been surmised the lack of fluidity in containers and vessel schedules, will likely result in container shortages in Asia…just in time for the pre-Chinese New Year push.

Let us not forget the long-term effects on the psyche of the West Coast shipper. The congestion and labor unrest continue to tarnish the reputation of West Coast ports and drive business to other gateways on the East and Gulf Coasts as well as Canada and Mexico.

REGISTER TODAY!

WIL PMSA Combo LogoWomen in Logistics (WIL) and the Pacific Merchant Shipping Association (PMSA) proudly present luncheon speaker Bill Mongelluzzo, Senior Editor, Journal of Commerce. Mr. Mongelluzzo will discuss the upcoming ILWU negotiations, the state of West Coast waterfront labor, port politics, competitive threats and challenges and chassis ownership. Register today here.

Bill MongelluzzoWhile you’re at it, become a WIL member. You can sign up on-line here, or complete an application here and mail it in.

 

WEST COAST LONGSHORE NEGOTIATIONS

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With the contract between the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU) set to expire on June 30, 2014, cargo owners shipping through US West Coast gateways are getting anxious. The first meeting between the two sides is scheduled to take place soon, and the union will be submitting their wish list. At the top of the list will be jurisdiction, automation and who will pay the tax levied by the Affordable Care Act on their “Cadillac” healthcare plan.

The general consensus among industry insiders is that while the contract will be renegotiated without major incident, the main issues will not be decided upon easily or quickly. A new contract will not likely be completed prior to the expiration of the current contract, and we will see a 90-day contract extension while negotiations continue. We will continue to keep you posted.