Walmart executives say a new pop-up yard near the ports of Los Angeles and Long Beach has helped the retailer improve import cargo flow and make more goods available for customers. The good news about having few shortages was delivered to President Biden Monday during a White House meeting to learn how major retailers, grocers, toymakers and other companies have overcome supply bottlenecks and are preparing for the holiday shopping season.
Walmart CEO Doug McMillon said the retailer improved its ability to clear goods through ports by rerouting cargo to other ports, extending lead times and developing other creative solutions. He also credited the Biden administration this fall for pressing ocean shipping stakeholders to collaborate on fixing gridlock created by record import volumes.
Marine terminals squeezed by an overflow of shipping boxes have slowed down this year because there is little room for cargo-handling equipment and trucks to maneuver, or for incoming cargo to be stored.
“We have seen an increase in throughput over the last four weeks of about 26% nationally in terms of getting containers through ports,” McMillon said, according to a White House transcript of the meeting. “And in the Southern California ports, in particular, where you’ve been really focused, we’ve seen a 51% improvement in that flow. And that’s helped a lot as it relates to categories like toys, which are so important for Christmas.”
Also contributing to the reduced cargo friction, and unmentioned by McMillon, are Walmart’s new overflow yards for staging containers and private chartering of small vessels to get around ocean shipping delays. The temporary lots prevent import boxes from becoming trapped under piles of cargo in major ports and give the retailer a place to store merchandise until there is room to accept it at crowded import centers for redistribution around the country.
Walmart (NYSE: WMT) recently leased an empty lot near the Los Angeles and Long Beach harbor and four weeks ago began using it to store loaded containers, empty containers and chassis, Joe Metzger, executive vice president of supply chain operations for Walmart U.S., said in a LinkedIn post. The message showed the new facility full of containers and trucks entering to drop off or pick up loads.
“Now it processes over 500 containers per day, helping to sort through priority freight for our downstream operations, and most importantly, having the inventory and stock for our Walmart customers for the holidays! This pop-up operation has dramatically improved our flow of containers not only out of the port but back into our port terminals with empty containers,” he wrote.
Walmart intends to use the dedicated container depot for the foreseeable future, said spokesman Scott Pope, who also confirmed Walmart has established a pop-up container yard near the Port of Savannah in Georgia.
An official at the Georgia Ports Authority told FreightWaves that several retailers have opened their own temporary container-storage areas this month, minimizing the need to leave containers on the docks when warehouses are too full for new cargo and helping relieve terminal congestion. The officials in Savannah, Los Angeles, Long Beach and California are all setting up auxiliary storage sites on or off port property, or looking for more land to do so.
Pope said Walmart has implemented a similar approach at all ports where it operates, using a “peel-and-go” strategy to shuttle containers to the pop-up yards.
Instead of containers coming off a vessel and getting arranged in communal piles, dockworkers group Walmart’s boxes in one area and its logistics provider arranges for truckers to pick up the first box off the top rather than a specific shipment and deliver them to the yard.
The peel-off, or free-flow, technique produces faster throughput for the terminal because workers don’t have to hunt down a specific container and dig it out of a pile.
Segregating containers so large port users can pull them out in rapid-fire style is not new. Previous use cases, however, have typically involved ocean carriers or logistics companies creating off-dock yards to store containers for a large customer base. As the congestion reaches unprecedented levels, large retailers are now taking direct control of storage lots for their own import containers.
FedEx Logistics (NYSE: FDX), the freight-forwarding arm of the express delivery company, is managing a free-flow yard for an unidentified customer, CEO Udo Lange said in an interview. The trial was so successful that the company is extending the program to other cargo owners, he added.
The CEOs thanked Biden for his focus on supply chain bottlenecks and said their supply chains were in good shape, especially for seasonal items. They highlighted how they had planned ahead, diversified their supplier base, sourced new products and partnered with suppliers to meet holiday demand. The planning has resulted in high inventory levels and high on-time delivery rates, they said.
McMillon mentioned, as reported in third-quarter earnings, that Walmart’s inventory levels are up more than 10% from last year, noting that two-thirds of what the company sells is made or grown domestically and not affected by port delays.
“We’ll keep working to make sure that we’re in a good in-stock position as we go all the way through the season,” he added.
Walmart was one of nine companies asked by the Federal Trade Commission on Monday to turn over information about how they’ve managed through the supply chain crisis this year so the agency can determine if any business practices may have contributed to supply constraints and high prices that are having a disproportionate impact on consumers and small businesses.
The FTC also ordered grocery chain Kroger to provide a range of logistics-related information. Kroger increased its safety stock for more than 70 of its most critical categories, used its extensive data to identify substitute items when suppliers couldn’t meet demand for certain products, and diversified ports of entry, CEO Rodney McMullen said at the White House.
The White House has been closely monitoring the port situation in Southern California and encouraged the ports to operate around-the-clock to optimize asset utilization and avoid daytime traffic. It also got Walmart, FedEx and a few other large companies to commit to longer warehouse hours so truckers could make container deliveries at night. Biden has repeatedly talked about new 24/7 schedules helping to alleviate the logjam there even though only one terminal has offered predawn truck gates and there has been little utilization so far.
Biden reassured the public that they will be able to find the goods they need this season and pointed to strong Black Friday sales as another sign that the economy is shrugging off the pandemic. The National Retail Federation expects a record-setting holiday season with sales forecast to grow between 8.5% and 10.5% over 2020.
He also noted the ports of Los Angeles and Long Beach have reduced long-dwelling containers by 37% since the end of October after threatening to levy stiff fees for late pickups. The White House endorsed the plan, which was postponed again this week because of progress decluttering the terminals.
“We applaud President Biden for taking action to drive the public/private collaborations that are helping solve supply chain challenges that otherwise could impact the holiday season,” said Samsung North America CEO KS Choi. “Since the White House roundtable on port congestion, we have ramped up our capacity and have significantly reduced our backlog at the ports of LA and Long Beach, which helps ensure we will deliver on our consumers’ holiday purchases.”
Also attending the supply chain meeting were the chiefs of Best Buy, Food Lion, Mattel, CVS Health and Etsy.