Weekly Report – September 26, 2016 – Port of L.A.

The Port of L.A. encompasses 7,500 acres of land and water along 43 miles of waterfront. It features 27 passenger and cargo terminals, including automobile, breakbulk, container, dry and liquid bulk, multi-use, and warehouse facilities that handle billions of dollars’ worth of cargo each year. The Port has embarked on a 10-year, $2.6 billion infrastructure investment program that is committed to modernizing its facilities and helping to create better information flow for stakeholders via technology.

Since taking office two years ago Gene Seroka has focused on a few main goals: Maintaining the Port’s premier position in the U.S., growing cargo traffic, fixing  cargo bottlenecks and other efficiency impediments in the San Pedro Bay port complex and readying the Port to handle ever-larger container ships.

Below is an Analysis of Some of the Challenges Facing the Ports

  1. Big Ships

Impact:  Carriers have shown a growing interest in deploying ultra-large container ships in the transpacific trade lanes, and, as a result, our local ports are processing higher container volumes per ship call then other west coast gateways. Each vessel call generates 5,000 to more than 10,000 container moves during the several days a ship is in port, stressing berth, yard and gate operations.*

Solution: The big ships are here to stay. Vessel sizes will grow if they prove to be more cost-effective and west coast ports can effectively service them; so our ports and their supply chain stakeholders must work together to improve their productivity in processing higher volumes of cargo per call.

  1. Bigger Cargo Volumes

Impact: In 2014, the Port moved an impressive 8.3 million TEUs that established a new national container record. Surpassing the 2006 container volume record (8.5 million TEUs) is inevitable, but larger ships discharge greater amounts of containers per call, causing new challenges in sorting those containers and moving them to their final destination by trucks or train. Alliances between the carriers that call at our ports have added to the complexity of cargo flow because the ships now alternate their calls between terminals in L.A. and Long Beach, which decreases the predictability and puts the onus on terminal operators, labor, the railroads and fleet operators to better communicate and plan for each ship call.

Solution: The entire supply chain must forge higher levels of collaboration and create more robust technology platforms in order to handle larger container volumes per ship call. This requires more information flow between carriers and terminals with regard to vessel cargo manifest and load sequencing; improved IT and common technology platforms across all the container terminals (a baywide truck appointment system, for example), new greater levels of communication and coordination between supply chain stakeholders. This may necessitate the hiring and training of additional longshore labor and truckers.

  1. Carrier Alliances

Impact: Alliance partners are spreading out their vessel calls over multiple terminals in Los Angeles-Long Beach – as many as five or six – creating a number of logistical challenges for truckers and cargo interests.

Solution: Carrier alliances are not going away, so the alliance partners must work closer with port operators and create more line of site for inbound vessels.  An improved system begins with with the stowage of containers on vessels overseas. This is a new level of cooperation, communication and data sharing.

  1. Chassis Shortages

Impact: Chassis are scattered all over the harbor, making it difficult for the equipment to be picked up or dropped off at the ideal locations for truckers.

Solution: Operators of the largest chassis pools in the harbor opened an interoperable chassis pool in March 2015, but refinements to the system still need to be made.

  1. Gate Hours

Impact: Even though terminal operators in Los Angeles-Long Beach keep their gates open up to 10 shifts each week, long truck lines at the beginning of each shift and after lunch breaks make a compelling argument for continuous operations over 16 to 18 hours each day, but there are other possible solutions, including a trucker appointment system that is now in development.

Solution: PierPass Inc. announced on Oct. 24 that most of the 13 terminals in the harbor were running an early flex gate at 7 a.m. each morning, an evening flex gate from 5 p.m. to 6 p.m. and were adding staff to keep their gates open through the day lunch hour and evening dinner hour.

  1. Labor Staffing

Impact: Congested marine terminals generate hundreds of extra container moves in the yards. Numbers posted on the Pacific Maritime Association website late last year indicated employers are paying 20 percent more man-hours compared to 2014 even though cargo volumes in Los Angeles-Long Beach are up only 5 percent.

Solution: Extending gate hours, moving forward with the gray chassis concept and improving terminal productivity should eventually de-congest the terminals and reduce unnecessary container moves within the harbor.

  1. Safety Checks

Impact: The California Trucking Association this fall reported that ILWU mechanics, possibly in line with coastwide contract negotiations, launched a new policy of secondary safety checks on tractors, chassis and containers, causing unacceptably long turn times for truckers.

Solution: The Pacific Maritime Association and International Longshore and Warehouse Union must immediately come to agreement upon a new contract. The contract’s grievance machinery will then be in effect, and employers can seek timely arbitration when there is cause to believe frivolous safety checks are being required.

  1. Hard-Timing TraPac

Impact: TraPac is the first terminal in the harbor to automate its operations.  Ho, is resisting attempts by the ILWU to force the employer to accept manning requirements TraPac says are unnecessary. Productivity at the terminal is way down.

Solution: This is a war of attrition to see which side wins and sets a precedent for future automation on the West Coast. Once again, a coastwide labor contract will reinstitute the grievance machinery, and TraPac and the ILWU can seek arbitration to resolve the matter peacefully.

  1. Truck Capacity

Impact: Federal hours of service restrictions and severe terminal congestion have stressed truck capacity in the harbor beyond its breaking point. Drayage companies are turning down pleas from importers to take on new business because the motor carriers don’t have enough capacity to handle their existing book of business.

Solution: The Harbor Trucking Association says there would be sufficient truck capacity if the terminals weren’t so congested. As an interim solution, a request to the government to temporarily extend the hours drivers can work might offer some measure of relief. Improved turn times at the terminals are crucial to attract more drivers to the harbor.

  1. Vessel Bunching

Impact: Big ships are being delayed at major gateways around the world because they take longer to be worked. When they reach Los Angeles-Long Beach, the terminals are assigning only two or three work gangs alongside the ships, rather than five or six, and are using most of the workforce to decongest the yards, further delaying the vessels.

Solution: Terminal operators around the world must develop processes to turn the big vessels in a timely fashion so the ships can be kept on schedule.

  1. Port Non-Productivity

Impact: Shipping company executives have stated, and The JOC Group Port Productivity database numbers confirm, that U.S. terminals lag their counterparts in Asia and Europe in working today’s mega-ships, so the problems being experienced in Los Angeles-Long Beach today could easily spread to other U.S. ports in the near future.

Solution: Terminal operators must analyze existing work practices and work rules, borrowing best practices from world-class ports in Asia and Europe, to prepare U.S. ports for the eventual arrival of vessels with capacities up to 18,000 20-foot container units.

Workforce Implications

The Port of Los Angeles is a critical source of quality jobs to the region. Port operations and commerce facilitate more than 133,000 jobs (about one in 14) in the City of Los Angeles and 479,000 jobs (or one in 18) in the five-county Southern California region. According to “Strengthening Los Angeles,” a recent report by JPMorgan Chase & Co., global trade and logistics is one of two top fields in the region and nation with strong middle-skill job opportunities.  Middle-skill job opportunities are critical because they provide a living wage and career mobility.

Technological advancements will continuously alter the skill set necessary to compete in the global maritime industry.  To enhance the talent pipeline, the Port of Los Angeles recently signed an MOU with California State University Dominguez Hills and the Los Angeles Harbor College to enhance global logistics curriculum, transfer opportunities, and internships that will better prepare interested students for careers in port operations and logistics.  Both institutions will regularly consult with the Port of Los Angeles to assure integration of emerging and relevant logistics topics into curriculum.  Maintaining strong partnerships with educational institutions will be critical to the Port not only to keep up with technological change, but to ensure a strong pipeline of workers as roughly 20% are over 55 and will retire in the near term.

* A massive ship-building boom (some researches say there is an estimated 30 percent overcapacity) and sluggish market demand have prompted price wars amongst major shipping lines, causing freight rates to tumble to levels that barely cover fuel costs. Hanjin’s recent decline has highlighted this fact and it could have particularly acute effects in Southern California because Hanjin owns a majority stake in Total Terminals International, which operates Long Beach’s largest terminal. From January to July, Hanjin accounted for about 4 percent of containerized cargo imported to the Port of Los Angeles and 12 percent of containerized cargo to the Port of Long Beach. Some experts expect the world’s 20 biggest container operators to lose between $8 billion and $10 billion this year. Most were deeply in the red in the second quarter.