The response to the supply chain crisis at ports was disjointed until the White House got involved, says port envoy John Porcari.
In a lengthy interview on the Bloomberg podcast “Odd Lots,” the supply chain czar said the Biden administration is acting as an honest broker to get cooperation from industry and local jurisdictions that usually act in their own self-interest, using carrots and sticks to make small improvements while building toward more systemic improvements.
“These are parts of the supply chain that have not talked to each other much and certainly have not exchanged data. So that honest broker role is a crucial one in unlocking underlying operational issues and pushing hard for the kind of collaboration that you’re actually seeing in the port of Los Angeles and Long Beach right now where goods movement is much more fluid than it was six to eight weeks ago,” he said on the Nov. 25 episode.
An overflow of shipping containers from record import volumes created gridlock at the ports. More than 80 box ships were lined up in the Pacific Ocean waiting for a berth when congestion was at its worst last month. Truck drivers have difficulty making appointments to collect import loads because of changes to vessel schedules and the lack of equipment to make a swap.
In July, the White House set up a Supply Chain Disruptions Task Force to advise officials about conditions on the ground and possible solutions to the situation in Southern California and other ports.
“Ocean carriers and terminal operators weren’t communicating with each other on things as basic as throughput, and the cargo owners in many cases had no intention or need to take those boxes off the docks immediately. They were essentially using them as free storage. And one of the early conversations was about clearing that out and making sure that everyone understood each other’s pressures, motivations and what they were doing,” Porcari said.
“The way we have operationalized this is that we have calls three times per week and we have everybody on those calls: the ocean carriers, terminal operators, the railroads, trucking companies, the Federal Maritime Commission, the Surface Transportation Board, the leadership for both ports — everyone who plays a role in the goods movement chain — and we literally are fostering real-time conversations.
“In the first couple of weeks on the job I was in a listening mode and everyone was pointing fingers at everyone else. [After everyone said their piece it was] time to actually be productive and work with each other. And that kind of forcing mechanism [got the parties] sharing information now on an ad hoc basis. In the longer term, we want to make sure they are more systematically providing transparent data throughout the system to the benefit of all the private sector companies that run the goods supply chain.”
The White House subsequently arranged for the ports of Los Angeles and Long Beach to levy a stiff congestion surcharge on containers sitting longer than six or nine days, depending on whether they move out by rail or truck. The port authorities have postponed collecting the fee because the number of long-dwelling containers has declined 40% since the fee was first floated in late October. The threat of escalating surcharges motivated carriers to bring in extra vessels to clear out empty containers and importers, who feared carriers would pass the fees onto them, to pick up more boxes or set up off-dock overflow yards to store shipping units.
Administration appeals for cooperation also could have spurred some of the response since many big retailers and manufacturers have ocean contracts granting them two to three weeks of free storage at marine terminals. And last week, ocean carrier CMA CGM, which participates on the White House task force, said it would offer a temporary discount of $100 to $200 to shippers that evacuate containers from the twin ports within eight days.
“But that has been one of the single most important elements in restoring fluidity to the ports, which are gridlocked by the lack of real estate,” Porcari said. “A lot of credit to the ports, truckers, terminals, railroads. You can both feel it getting better day by day, but you can also measure the progress.”
24/7 gates and off-dock storage
He also focused on how the administration pushed the ports and labor to adopt a 24/7 schedule for truck gates to take advantage of off-peak capacity and major cargo owners to operate warehouses at night so motor carriers can make deliveries. There is only one terminal trying the concept so far, with few truckers showing up during the late overnight hours, although CMA CGM did announce it will temporarily subsidize its own terminal to stay open later.
“You can’t flip a light switch and have it happen overnight, but you can change the way we operate collectively as a system over time,” the former deputy secretary of transportation said. “Those two ports are operating much more fluidly than a few weeks ago. But they are also moving towards 24/7 operations, which is where the long-term capacity is.”
Watch: TGS Logistics President Peter Schneider on 24/7 ports
Logistics managers in the region say it’s difficult enough staffing day shifts at port gates and warehouses with such a tight labor market. 24/7 will help down the road, they say, but there aren’t enough longshoremen to cover the 3 a.m. to 6 a.m. period.
Porcari said White House officials have also “worked this at the retail level, talking to mayors and city managers about specific sites” where containers could be temporarily stored off port property to free up space. Potential sweeteners, besides revenue, include tree planting or other amenities provided by stevedoring companies.
The administration is coordinating efforts with California, which is also searching for state and private sites that can be used for short-term container storage. The city of Long Beach recently decided to temporarily relax height restrictions for stacking containers in industrial lots to provide more capacity for logistics companies and shippers. Christopher Koontz, the deputy director of development services, confirmed in an email that Long Beach consulted with White House staff about the regulatory change.
“The whole process has been bifurcated into looking into short-term operational changes and longer term more fundamental changes that will make for a more efficient private-sector goods movement chain,” Porcari said on the program. “Most of these operational changes, both on dock and further inland, work at the margins. But the fact is those margins add up and if you keep working this, you get more and more in operational improvements. That’s what you’ve been seeing the last couple of weeks where throughput is much better at the two ports.”
Porcari also provided more detail about how a new strategic partnership with California will work to accelerate development of major freight projects.
The federal government is extending California a $5 billion credit facility through the Transportation Infrastructure Finance and Innovation Act and Railroad Rehabilitation and Improvement Financing programs, giving the state “a hunting license for the first time ever to actually build a program of projects, not just at the ports, but inland from the ports. It might be rail capacity, grade crossing elimination, freeway capacity, it might be purchasing sites and modifying them for use as intermodal container transfer facilities,” Porcari said.
“The state has been very aggressive in building this program of projects and working through a process with all the stakeholders to prioritize that. And what you’ll see is a whole generation of projects where the local funding at the state and local level is actually a long-term loan program that the federal government has extended to it,” on top of potential grants available to states from the new $1.2 billion infrastructure program enacted by Congress, he said.
Porcari noted that the administration is trying to build resiliency, fluidity and velocity in other port cities too. The administration, for example, recently cut red tape so ports could use federal grant money for projects that came in under budget for initiatives to immediately address current supply chain bottlenecks. The Port of Savannah is taking advantage of the policy change to invest in several auxiliary container storage yards around the state and in North Carolina to open up more space on the docks. Most of the sites are connected to the port by rail.
“You’re taking incoming loaded containers out to these sites where they can transfer by truck. So you’re that much closer to the target market. But one of the additional important benefits is on the export side. Savannah is the No. 1 port for containerized exports. Those same pop-up sites are hundreds of miles closer to the agricultural sources, so it’s a lot easier to have a relatively short truck run to these pop-up sites where you’re putting it on trains and out through the port of Savannah,” he explained.
“We’re encouraging other ports to do the same. I think you’ll see a generation of projects in the short term around the country that will help maximize the existing on-dock capacity through interior pop-up sites,” the port envoy said. “The fundamental issue is that the docks themselves are such valuable pieces of real estate that you don’t want the containers dwelling there a second longer than you have to. You want to get them to the interior or back on ships to their target markets overseas.”
The traffic jam of ships anchored outside the Southern California port complex has made for eye-catching video on national TV, but Porcari said the numbers are misleading because many new carriers entered the market with small vessels because of the lucrative rates. The more accurate measure is the total number of standard shipping units floating offshore, which has started to come down.
The goal of the White House’s Port Action Plan, Porcari said, is restoring fluidity to ocean shipping. That means getting back to the historic lows for long-dwelling containers and the point where chassis are turned for export loads and empty returns within 48 hours instead of the 11 days that is common now.
“This is about building a more competitive supply chain for the future benefit of the country,” Porcari said.