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Target on port congestion

Retailer diverted cargo, formed chassis fleet, and used untapped drayage to combat West Coast congestion.

   Port congestion at U.S. West Coasts in late 2014 and 2015 plagued the Minneapolis-based nationwide retailer Target just as it did nearly every other importer and exporter moving cargo via those ports.
   Only the congestion had the potential to disrupt Target’s supply chain to a larger degree. That’s because the sheer size of Target’s import operations, with roughly 500,000 TEUs in annual imports, makes it vulnerable to widespread congestion as was seen at West Coast ports.
   Which places a greater onus on the retailer’s international transportation team to manage those situations more proactively.
   “We’re a very, very large importer,” Josh Dolan, senior director of international transportation at Target, said during a panel at the SMC³ Connections conference in San Diego in June. “One in every 40 containers imported [into the United States] is a Target container.”
   Dolan added that around 64 to 65 percent of Target’s volume comes via West Coast ports, and the remainder through East Coast ports.
   About 60 percent of its West Coast volume moves via Southern California and 40 percent through the Pacific Northwest. Similarly, on the East Coast, about 60 percent moves via Norfolk and the remainder through Savannah.
   Bearing those splits in mind, Dolan said Target was forced to divert cargo to East Coast ports to cope with the congestion crisis.
   “We were able to the shift purchase order port of entry where appropriate,” Dolan said. “There was shifting taking place over the course of the year from the West Coast to the East Coast based on where we could do it.”
   Target’s network is set up so it can consolidate overseas and deconsolidate in the United States. With that infrastructure in place, Dolan said, “you can’t just shift incredibly large amounts of volume from one coast to the other without running the risk of disrupting the supply chain.” 
   So to navigate the impacts of congestion, and diversion of cargo to its East Coast gateways, Dolan’s team mapped out several courses of actions to maintain its flow of cargo.
   “We leveraged collaboration both internally with our business partners as well as externally with our service providers within our supply chain to ensure consistent visibility in solutions both in development and execution,” he said. “There was a tremendous amount of planning that was taking place upstream in anticipation of potential disruptions.
   “From a benefit perspective, [the goal was] minimizing supply chain disruption and risk, so that we could exceed expectations and rise above our competition, which ultimately we were successful in doing,” he said.
   Dolan said one of the more difficult pieces to control was the lack of definitive information around contract negotiations between the International Longshore and Warehouse Union and their employers, represented by the Pacific Maritime Association. For months, details of the negotiations were largely kept out of the public arena, save for some strongly worded press releases from both sides.
   “There was a tremendous amount of speculation of what was happening with the contract negotiations themselves,” Dolan said. “As we were thinking about our flexibility and our ability to navigate through those challenges and determine what our solution needed to be, that information coming through and changing almost on a daily basis had a material impact on our planning and our execution.
   “The delayed agreement and contract negotiations created tremendous fluidity uncertainty in terms of how we were executing, but also what we were communicating to our senior leadership within the supply chain,” he explained.
   Dolan said Target’s transportation team focused on partnering with merchant engagement within Target early on “to make sure we were making the right decisions and that we were keeping them very much aware of what was taking place, so that as much as we could from an inventory management standpoint, we could mitigate some of the risks of potential [disruptions], which a number of retailers reported through their financial results in terms of the impact that they experienced.”
   Target also stayed in close contact with its ocean carriers and drayage providers to inform them about what it was doing, as well as to get a better idea of the challenges they faced and what they were doing to overcome those challenges.
   One particularly problematic area during the congestion crisis was the availability of chassis at West Coast ports. Target responded to this by examining the idea of dedicated chassis pools. American Shipper chronicled the concept of dedicated chassis fleets in its February cover story, “Chassis countermeasure”.
   “We were working with providers to secure individual pools for Target,” Dolan said. “One of the things that helps us is our volume, and at times, that volume can create challenges for us as well. The amount of cost that’s associated with doing things like establishing an individual chassis pool are not options that small shippers can participate in. This was an area where our team in Minnesota did a fantastic job in being proactive in anticipating what the challenges would be and then exercising the opportunities to leverage that chassis pool to maintain cargo fluidity.”
   The result, he said, was that Target containers continued to flow through major gateways while drayage efficiency increased through repositioning.
   “There were a lot of drivers that sat in line for a really long time at these terminals and weren’t necessarily paid for some of that wait time,” he said. “That created problems—as you bring back an empty container, having to deliver that chassis somewhere else because the chassis they need isn’t there.”
   Target also pinpointed the impact of a driver shortage in the trucking industry that was exacerbating the problems of drayage providers during the congestion. Simply put, available truck capacity fell during the congestion.
   “A lot of that was just drivers slowing down because of the waits but also we started to hear a lot from our service providers about drivers leaving the market, compounding the challenges,” he said.
   Dolan said Target attempted to ensure its drayage drivers were being “adequately compensated,” since the congestion was causing their daily turns to go from two or three in normal operating circumstances to one per day. The retailer also leveraged existing partnerships to increase capacity with carriers that weren’t previously part of its network.
   Dolan said Target worked directly with the marine terminal operators on a number of initiatives to battle terminal congestion.
   “[We did] things like grooming the yards, where we could make sure we were pulling a certain amount of containers per day to make sure we were turning those drivers very, very quickly,” he said. “We were also exercising opportunities where we would establish night and weekend gates that were specifically set up for Target. And while these options are very costly, the volume that Target had allowed us to spread that cost out over a larger volume of containers and make it less cost prohibitive. At the end of the day, it was about making sure that our stores were in stock and that our guests were satisfied.”

This article will be published in the August 2015 issue of American Shipper.