FreightWaves recently chatted with Daniel Walsh, president and CEO of TRAC Intermodal, about reported chassis shortages and the congestion issues facing the supply chain.
This question-and-answer interview was edited for clarity and length.
FREIGHTWAVES: How is chassis availability in the regions that you serve? What are you seeing in the markets that you serve, and what is TRAC Intermodal doing to ensure things are running smoothly?
WALSH: “Just starting with the supply chain flows: Obviously what we’re seeing is very significant import volumes. And if you look at the U.S.’ biggest ports, you can see that we’re predicted to have volume which is 35 points up year-on-year for the six months of 2021.
“A lot of that is driven by e-commerce. … The reason that’s relevant is — obviously, it’s driving additional volume — it’s on the back of changed consumer behavior, where there’s an expectation for faster delivery. And that’s putting pressure right through the supply chain, from the manufacturing locations to the shippers to the providers of containers, to the labor at the port to the chassis providers and the transporters to the warehouses — to everybody. So clearly it’s tight. I think that, however, all participants in the supply chain, particularly and humbly TRAC and our competitors in this space, have done a very good job of servicing this demand in the middle of a global pandemic.
“In terms of specific markets, obviously they vary depending on things like vessel and train discharge, export needs, dwell. … I think generally all participants in the supply chain have done a great job of keeping things moving during the pandemic, and they’ll continue to do a good job on the back of constant high demand, which we think will carry on into the second half.”
FREIGHTWAVES: What are some of the ways you see TRAC and others working on moving volumes smoothly?
WALSH: “For us, there are three things. The first one is adding capacity to the pinch point locations. We’re repositioning our chassis from surplus locations. But at the same time, we’re investing in new equipment and upgrading our current equipment to support the flow of goods. If you look at our investments since 2015, it comes to north of $700 million … . That’s capital investment on equipment: upgrading equipment, buying new equipment. That’s the first thing.
“The second thing is getting the out-of-stock units down as quickly as possible. Bringing them back into service has been a key priority for us: to maintain our equipment during COVID. I think we’ve done this effectively in partnership and through collaboration with our maintenance and repair vendors. And if you look at our 40-foot fleet, it’s only at 3% out of service in New York and New Jersey. It’s a little bit higher farther out in LA and Long Beach, and less than 2% in Houston. … We’ve been partnering effectively with our maintenance providers to make sure the [out-of-stock] are brought back into service.
“The third one is managing street dwell. That continues to be an opportunity for us, and we work in partnership with our transporter customers and everybody else involved. But you can see … that the average street dwell is well above normal in all markets. If you look at the percentage of chassis that are out for more than 11 days, [as of mid-July] we’re at a low point of 31% and a high point of 43%. Normally, it’s in the 7%-8% range. So, we’re trying very hard to get that down and to work with our partners to get the assets back in cycle and through.”
FREIGHTWAVES: What sort of things would you like to improve upon?
WALSH: “In my view, the biggest opportunity we have is data sharing and forward provision of forecasted volumes utilizing technology. I think as an industry, we have an abundant opportunity to improve. We struggle sometimes to have full visibility on the movement of assets through the supply chain. So, what ends up happening, in my opinion, is that nodes of the supply chain tend to get optimized as opposed to the entire supply chain being improved. And I just think, culturally, we haven’t made that leap yet to really share information openly, but I think there are some really encouraging developments. A number of the ports are providing portals where people can see what’s coming and you can back solve into the demand. But I just think that if we can get to a place where we’re more effectively sharing information well ahead of the arrival of cargo, we’ll be better able to arrange our assets to move it.”
FREIGHTWAVES: You mentioned the ports. Who should be the one to take the initiative on data sharing?
WALSH: “Where this has worked well before is the ports. LA, Long Beach have a portal that is a way of collaborating with the steamship lines and the providers to marry up the data. Based on experience, I like that model. I think that works well.
“It’s not as extreme a concept as it may sound. There are many industries that are very open about what’s being moved by who and where and when because there’s been a general acceptance that providing that sort of information enables things to run better. And I think that we’ve previously seen that as commercially sensitive information. I’m not sure that it is, but putting [the data] all together gives a better chance of optimizing the degree of marrying up or down execution … which is absolutely critical.”
FREIGHTWAVES: Are you experiencing fall peak right now? When does that season start for you, or is it more like constant demand?
WALSH: “I think it’s pretty constant. If you look at all the indicators, we see that there will continue to be strong volume and it may manifest itself in a surge in the summer. But I think, more critically, we see the current high levels of activity continuing through to the balance of 2021. While it will level off at some point, I don’t think we’ve caught up all the way [from COVID, when things completely shut down]. So, there’s still a strong tailwind and we expect that to carry over into early 2022 and then after that it might tail off somewhat.”
FREIGHTWAVES: What else have you heard about the market in 2022? How long will there be elevated port volumes?
WALSH: “In my opinion, it all starts with consumer behavior. I think COVID accelerated the adoption of e-commerce in the consumer base. And that drives an expectation for faster delivery … . It requires us to reconfigure the supply chain to meet that expectation. But also, it hastens consumption, in my view. You don’t actually have to travel anywhere to buy anything. You can do it all online … and while everyone was doing a lot of DIY and upgrading and so forth in COVID, I still think there’s going to be consistent growth in e-commerce year-on-year. And so that means retail sales are going to grow. They might not grow as much but they’re still going to grow.
“… [Inflation] is possibly a limiting factor. If we get into a high inflationary environment, consumer confidence could suffer and confidence could drop, so at the moment … we’ve got an eye on inflation.”
FREIGHTWAVES: There’s been a need for labor at the ports and at other places supporting the supply chain. Is labor an issue for you at all?
WALSH: “TRAC ourselves is in very good shape. We do understand, however, that we can be in a hot market for labor. … While it’s not an issue for us, it’s an issue for the supply chain. It’s certainly an issue in the service industry … all of which will have an impact on spending. I know at certain ports, it was a massive challenge getting qualified labor to handle the volumes at the rate in which they were coming in. I think great strides have been made in the context, but perhaps we’re not all the way there. So, it’s not an issue for us but it’s certainly an issue for the supply chain and definitely an impact for the broader economy.”
FREIGHTWAVES: Is there anything else you’d like to mention?
WALSH: “I just want to recognize the contributions from everyone that works in logistics and supply chain. While I understand that there’s pressure and in some cases, it’s something that’s manifested itself as congestion and some issues, I think the execution and effort by all the people working in logistics and supply chain around the world but particularly in the United States in the middle of a global pandemic has been fantastic.
“On behalf of TRAC, I want to thank everybody who’s been a part of that. We have a lot to be proud of, and people generally realize it was a Herculean effort on the part of everybody in the supply chain to get goods moving the way they did in the middle of a global pandemic, the likes of which we haven’t seen for a hundred years.”