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America (and likely China) is experiencing a cargo container feast and famine. Ryan Petersen, CEO of Flexport, deserves an “A” for effort with his influential Tweetstorm. He gets the problem, the choke point, right. Peterson is able to be a catalyst for discussion leading to real solutions because he is not in one of the positions being blamed: shipping companies, dock managers and workers, trucking companies and truckers, or government. However, Peterson shows the limits of his knowledge in his suggested means to the end of getting trucks to the cargo terminals with empty trailers. Let us consider what he wrote, how things work, and who is actually in a position to lead an integrated solution to this short- to medium-term logistics problem. Hint: politicians touring and talking “infrastructure” spending are not part of the solution.
Prelude for context
I have seen this problem before in a much more localized, smaller, but far more critical circumstance. I saw the problem of container management, writ large, in the context of war. All containers were trucked north from ports in Kuwait to a corps distribution center just north of Baghdad. From there, containers were either opened, with the contents reconfigured to smaller loads for infantry and armored division customers, or sent onward as a container in a supply convoy to a unit in central, northern, or western Iraq. Each container had a tag that would respond to a short-range interrogator, allowing precise tracking of the movement and location of each container, with associated manifest, list of contents.
Sound fairly simple? The containers started stacking up almost immediately. The problem was only solved by a ruthless senior commander driving staff and commanders with twice-daily meetings capturing the movement of every trailer, by twenty-foot equivalent, and whether it was loaded with cargo or available for a load now, tomorrow, or the next day. Complicating matters, containers, pallets, and specialized roll-on/roll-off flat racks had to be retrograded, returned from customers to be filled at some point in the logistics network. The commercial containers were the property of some civilian transportation company, so Uncle Sam was facing financial penalties if some captain or sergeant decided they would make a nice office or sleeping trailer.
A few terms
TEU: twenty-foot equivalent units, a standardized container size that helps planners and operators match truck trailer or rail car length to loads. A forty-foot flatbed semi-trailer or chassis will hold two TEUs. Specialized railcars may carry two TEU in length stacked two high, so potentially four TEU per intermodal railcar.
Intermodal: transportation by more than one mode: sea, land, and air.
Intermodal container: ISO standardized container, durable property reused for many shipments, made in twenty- and forty-foot lengths, one or two TEU.
Chassis: a specialized steel framework semi-trailer designed to accept and secure intermodal containers.
Per diem: a charge paid when intermodal containers are not returned by the end of the allowable free time to its origin or to another location as previously agreed.
Demurrage: a charge paid when intermodal equipment (semi-trailers and containers) is stored on terminal property.
Ryan Peterson’s bright idea
“Did a Twitter thread just save Christmas?” Short answer: no. Credit to Ryan Peterson for focusing on fixing the problem, not the blame. He started doing so at the beginning of this past summer when he asked, “whose fault is the current ocean freight market crisis?” His answer: “nobody’s really,” meaning the problem lays across components of the global or regional logistics environment.
Today’s situation is comparable to a rush hour on Monday morning: It’s everyone’s problem. Global demand has peaked, and capacity is not sufficient to deal with it. This is exacerbated by the fact that one fourth of all vessels are waiting in queues at the ports.
As a global logistics industry, we’re all in this together to try to dig out: shippers, forwarders, ports, carriers, and technology platforms each play a vital role in the ecosystem and must work collaboratively to create solutions to our problems.
The simplest solution is to make sure you’re fully loading every container. Flexport’s machine learning technology digitizes packing lists including all the dimensions of the cartons inside our containers. What we see is that across all the full containers we ship for our clients, they are on average only ~70% full. The carriers might not be able to fit more containers on their ships, but shippers can fit a lot more inventory in their containers if they pack them smartly!
From this point in June, we get context for Ryan Petersen deciding to scout out the Long Beach port problem.
Ryan Petersen @typesfast
Yesterday I rented a boat and took the leader of one of Flexport’s partners in Long Beach on a 3 hour of the port complex. Here’s a thread about what I learned.
6:39 AM · Oct 22, 2021
The ports of LA/Long Beach are at a standstill. In a full 3 hour loop through the port complex, passing every single terminal, we saw less than a dozen containers get unloaded.
There are hundreds of cranes. I counted only ~7 that were even operating and those that were seemed to be going pretty slow.
It seems that everyone now agrees that the bottleneck is yard space at the container terminals. The terminals are simply overflowing with containers, which means they no longer have space to take in new containers either from ships or land. It’s a true traffic jam.
Right now if you have a chassis with no empty container on it, you can go pick up containers at any port terminal. However, if you have an empty container on that chassis, they’re not allowing you to return it except on highly restricted basis.
If you can’t get the empty off the chassis, you don’t have a chassis to go pick up the next container. And if nobody goes to pick up the next container, the port remains jammed.
With the yards so full, carriers / terminals are being highly restrictive in where and when they will accept empties.
Also containers are not fungible between carriers, so the truckers have to drop their empty off at the right terminal. This is causing empty containers to pile up. This one trucking partner alone has 450 containers sitting on chassis right now (as of 10/21) at his yards.
This is a trucking company with 6 yards that represents 153 owner operator drivers, so he has almost 3 containers sitting on chassis at his yard for every driver on the team.
He can’t take the containers off the chassis because he’s not allowed by the city of Long Beach zoning code to store empty containers more than 2 high in his truck yard. If he violates this code they’ll shut down his yard altogether.
With the chassis all tied up storing empties that can’t be returned to the port, there are no chassis available to pick up containers at the port.
And with all the containers piling up in the terminal yard, the longshoremen can’t unload the ships. And so the queue grows longer, with now over 70 ships containing 500,000 containers are waiting off shore. This line is going to get longer not shorter.
This is a negative feedback loop that is rapidly cycling out of control that if it continues unabated will destroy the global economy.
Alright how do we fix this, you ask? Simple. And we can do it fast now,
When you’re designing an operation you must choose your bottleneck. If the bottleneck appears somewhere that you didn’t choose it, you aren’t running an operation. It’s running you.
You should always choose the most capital intensive part of the line to be your bottleneck. In a port that’s the ship to shore cranes. The cranes should never be unable to run because they’re waiting for another part of the operation to catch up.
The bottleneck right now is not the cranes. It’s yard space at the container terminals. And it’s empty chassis to come clear those containers out.
In operations when a bottleneck appears somewhere that you didn’t design for it to appear, you must OVERWHELM THE BOTTLENECK!
This was inevitable, because the disruptions of manufacturing and draw-down of domestic warehouse inventories, together with Chinese domestic policies pushing locales to consume an annual allotment of electrical power early, created massive surges in supply, beyond the usual monthly and seasonal pattern. From a combination of causes, Chinese manufacturers are surging loaded containers to the specialized, very deeply dredged, ports of Los Angeles and Long Beach. The large difference between east-bound and west-bound containers is overwhelming the long-established system.
Just shunting empty containers off to some massive holding yard out of Indiana Jones will not smooth out the container cycle. The shipping companies need their empty containers back, to carry back to China for the next round of loading and transporting. The lack of smooth retrograde may already be causing problems in China, although we will not hear about this predictable problem until there are noticeable delays at the port of origin. Keep the full container cycle in mind as we read through the rest of Ryan Petersen’s Tweetstorm.
Here’s a simple plan that @potus and @GavinNewsom partnered with the private sector, labor, truckers, and everyone else in the chain must implement TODAY to overwhelm the bottleneck and create yard space at the ports so we can operate again[
1) Executive order effective immediately over riding the zoning rules in Long Beach and Los Angeles to allow truck yards to store empty containers up to six high instead of the current limit of 2. Make it temporary for ~120 days.
Good idea, but does each truck yard now have the specialized equipment to get past two high and manage stacks up to six high? If you are moving one container at a time from chassis to stack, you are likely using a reach stacker. The Army Reserve and Army National Guard have reach stackers, called rough terrain container handlers (RTCH, pronounced “wretch”) in small material handling detachments. However, if you are going six ISO intermodal containers high, you will quickly find yourself in need of a 6/9 high empty container handler. The RTCH and its civilian counterpart just will not do at this extreme limit.
This will free up tens of thousands of chassis that right now are just storing containers on wheels. Those chassis can immediately be taken to the ports to haul away the containers
2) Bring every container chassis owned by the national guard and the military anywhere in the US to the ports and loan them to the terminals for 180 days.
Dude does not have a clue, has not asked about, US Army capabilities in the region, nay, west of the Mississippi. Why would you loan old-style flatbed trailers, of the sort on which you see all manner of cargo secured? The moment they are loaded and hauled away by a civilian truck, they become part of the problem, as they will come back loaded with another empty container. On the other hand, the Reserve and Guard have the ability to operate the temporary container yards next proposed.
3) Create a new temporary container yard at a large (need 500+ acres) piece of government land adjacent to an inland rail head within 100 miles of the port complex.
From the facts already given in this Tweetstorm, you must have enough container yards, or enough control inside each yard, to separate containers by cargo shipping owner. Remember, empty containers must end up being loaded onto the appropriate container ship, not jumbled and randomly loaded into the first available container ship steaming for China.
4) Force the railroads to haul all containers to this new site, turn around and come back. No more 1500 mile train journeys to Dallas. We’re doing 100 mile shuttles, turning around and doing it again. Truckers will go to this site to get containers instead of the port.
This is exactly backward, given as fact the preceding tweets and the container cycle explained above. Turning the railroads into a local shuttle service creates a requirement for yard management, qualified container handlers, specialized equipment, and maintenance and life support (portapotties, water, food). Additionally, you are tying up the port railheads with a new and temporary shuttle service, while dumping all those empty containers in yards from which they will have to be loaded onto trains and sent to the appropriate port and pier. Never mind, there is no federal executive power to order any such thing. Oh, and the free time on the containers will run out while they sit ignored in the temporary container yards, triggering per diem charges unless the US government also negotiates this. But, let’s work with this.
Running a container yard and tracking container movement on a large scale is a real capability the Army Reserve and Guard bring to the logistics fight. Flip the flow in Petersen’s proposal. Establish temporary container yards, but make them empty container staging yards. Establish separate yards or sections inside a yard dedicated to each pier or to each shipping line at the ports of Long Beach and Los Angeles. That way, the containers are stacked up ready to be loaded out on truck or rail going directly to empty ships positioned to return the containers to China. The truckers would drop the containers short of the ports, and possibly stage at the temporary yards, stretching their legs while waiting for a call forward to the port to pick up loaded containers.
5) Bring in barges and small container ships and start hauling containers out of long beach to other smaller ports that aren’t backed up.
This is not a comprehensive list. Please add to it. We don’t need to do the best ideas. We need to do ALL the ideas.
The circulatory system our globalized economy depends has collapsed. And thanks to the negative feedback loops involved, it’s getting worse not better every day that goes by.
I’d be happy to lead this effort for the federal or state government if asked. Leadership is the missing ingredient at this point.
Doing ideas that help
Call the general, not the CEO. If the current administration, if the Congress, is serious about helping unclog the two-way flow of intermodal containers through southern California, they should already have directed the Department of Defense to task a senior logistics headquarters to provide several courses of action to restore normal circulation of containers. The 79th Theater Support Command is right there in the Los Angeles/Long Beach area, headquartered on Joint Forces Training Base Los Alamitos. They are in the business of planning and executing operational level logistics, so are in the best position to assess the situation in the western United States.
Get on board. The Tweetstorm actually tips us to a bigger picture. Look again at “No more 1500 mile train journeys to Dallas.” Why are the trains going to Dallas? Because movement of intermodal containers from sea to deep inland is most efficiently accomplished by rail. A “Panamax” ship could pass through the Panama canal with up to 13,000 TEUs. This is well below the capacity of truly massive container ships plying the route between China and southern California. If a portion of a very large shipment is intended for deep inland distribution, rail makes far more sense than over the road trucks. So, why all the trucks?
The trucks carry containers to local and regional customers, large and small. They are supposed to get cargo to the customer faster than waiting on a train to be loaded, then arrive at the nearest rail yard, then unload onto a truck. Because of the huge container backlog at the ports, this efficient system is temporarily failing. The railroads have already picked up on this problem. Union Pacific, Port of Long Beach (POLB), and the Utah Inland Port Authority (UIPA) reached an agreement that should take significant pressure off the trucking container yards at the ports.
“The direct, regularly scheduled rail service connecting the Port of Long Beach to Salt Lake City will allow cargo destined for all of the Intermountain West to be rapidly evacuated from terminals in Long Beach to Salt Lake City for further distribution throughout the region. Much of this cargo traditionally moves to Utah, Colorado, Nevada, and Idaho by truck, and thus must be removed from the port terminals one container at a time. Reengaging this direct rail service will allow removal of blocks of containers at a time.”
[ . . . ]
Millions of TEUs of international goods are imported to or exported from the Intermountain West annually, but only 10% of this cargo currently moves by rail.
This will take pressure off the trucking container yards in both directions. Trucks will pick up cargo and then return empty containers to Salt Lake City, with trains carrying hundreds of containers at a time back to each Port of Long Beach on-dock railhead. With growing restrictions on trucks in California, the fleets of trucks and independent operators outside of California may benefit from a permanent shift to inland intermodal ports.
The Port of Los Angeles is linked with both Union Pacific and BNSF. Now moving only 35% of the intermodal containers, there is plenty of room for increasing train loads.
Five modern on-dock rail yards and a sixth yard – a multipurpose staging and storage facility – serve the Port’s full complement of seven marine container terminals. The network operates 24/7 and links to the Alameda Corridor, a dedicated rail expressway that connects the docks to the transcontinental rail system for cargo to flow nonstop between the Port and markets throughout North America.
The Port’s rail network also consists of the near-dock Intermodal Transfer Container Facility (ICTF) and five off-dock mainline rail yards – three operated by Union Pacific Railroad (UP) and two operated by BNSF. The UP East Los Angeles Yard and the BNSF Hobart/Commerce Yard near downtown Los Angeles, approximately 24 miles north of the San Pedro Bay ports, handle the majority of the intermodal cargo.
Stop government-created work obstacles. Increasing flow by going to longer port hours will only work if the truckers or train crews are met at the other end with warehouse crews ready to receive the containers. Is the trucker dropping the full semi-trailer and picking up an empty container on another chassis, or waiting for the container to be unloaded? Is the warehouse open and ready to receive the cargo? Running 24-hour operations requires staffing with qualified personnel for three shifts a day. So, is the government making this harder or easier within the legal U.S. population?
Make ocean carriers ship-shape. There may already have an underlying problem between the companies that own the containers, ports, and truckers. The issue of returning empty containers was raised in 2020 at the New York-New Jersey Port. The affected parties came to a three-point agreement that outlines the possible problem at any port.
- Ocean carriers should do their level best to ensure that empty containers are returned to the terminal in which they came from.
- Marine terminals should be responsible for notifying truckers more than 24 hours in advance if they can accept or reject an ocean carrier’s empty containers.
- Ocean carriers should provide more access to customer service reps who can help truckers to sort out issues they are having in returning containers.
So, there is some set of business rules or practices that changed recently and caused container return delays. It may be that the ports will need to apply more pressure to ocean carriers and shipping companies to take back containers. However, I suspect this will start self-correcting, as the ocean carriers need those containers back in China in order to make money on the next load and the next after that. These containers are not at all like a box from USPS or Amazon. They are durable property, costing thousands of dollars to make. Indeed, there is a business of maintaining and repairing intermodal shipping containers. Just making new shipping containers is not the answer.
Container manufacturers, mostly concentrated in China, are expected to churn out 5.4 million new containers this year, about double their pre-pandemic output, according to Drewry Shipping Consultants. But those efforts are being hampered by shortages in raw materials, such as steel and lumber, as well as welders.
Stuff those containers. Get American exports fired up. Stop stifling American business and workers with artificially high fuel costs, in the name of the environment, and work restrictions, in the false name of public health. An empty container returning to China is not making money. The growing number of empty containers on U.S. docks is a sign of growing import/export imbalance. Government officials at every level must take their feet off the brakes on our economy, on our lives.
Stop the plandemic
The ports have handled similar total TEU volume in recent years. Just look at the Port of Los Angeles container statistics since 2016. Even with over 9 million TEUs annually, there was no significant backlog. The number of ships stuck at the ports is unprecedented.
The size of the logjam is unprecedented. Before the pandemic, the ports hadn’t seen a backlog greater than 17 ships, Kip Louttit, head of the Marine Exchange, previously told Insider. But in the past few months, it’s been common to find around 100-plus ships lingering around these ports waiting to berth.
It is not just consumer demand driven by government edicts, since the total volume this year does not appear to be much different from 2019. Politicians and bureaucrats, first do no harm!
For a view from the ports in the news, here are the ports own reports: