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Intermodal

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How customers can stop the threat to container efficiency

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2019 is off to a worrisome start for the dray community. But it’s not the usual suspects.

  • No, it’s not the driver shortage fomented by inflated pay from the oil fields, horrendous congestion, and increasing driver scrutiny.
  • No, it’s not the long lines at the ports and rail yards caused by Mega vessels.
  • No, it’ not bad chassis eroding our Compliance, Safety, and Accountability (CSA) scores.

Pending Problem

What you say, there is more?

It’s the street turns. A street turn is also known as reuse and triangulation or reload. This is when a drayman asks and is granted permission to apply an import empty to an export booking.

Street turns rarely occur at the same location. Hundreds of miles may lie between the empty container and the eventual reload location. Plus, often the container needs to be stored on the draymans’ property, for which it has expended substantial capital to operate, secure, and man.

The motivation for the street turn is to protect a customer’s booking without having to lose time going back to the port to interchange the container. Most likely, if the container is returned to the terminal, it will not be allowed to come back out with the inbound motor carrier. The driver will have to wait in line for an empty with the other dray trucks. Depending on contracts with the port, a huge exporter’s demand may reduce the drayman’s priority and cause it to wait even longer placing everyone but the largest importers at a disadvantage.

The major steamship lines: Hyundai, Zim, Seaboard and Maersk have implemented a fee for Street turns. This policy makes it cost prohibitive for drivers to pick up an empty container at one location and take it to another location, get it loaded, and then send it at another.

To avoid the fee, draymen have to take the empty container to the port, drop it off, and then wait in line to pick up an empty container.

This policy hurts everyone in the supply chain. It

  • reduces the number of moves a driver can perform (making drivers less efficient and the shortage even more acute)
  • adds mileage for each pick up and drop off
  • increases wear and tear on the trucks and chassis
  • creates more emissions which contribute to pollution and greenhouse gases

This policy may improve the steam lines bottom line in the short term. But, by adding millions of additional miles and introducing unnecessary wait times, it can only hurt everyone in the industry, including themselves, in the long term.

Plus, this comes after we collaborated with IANA to create the Street Turn Interchange (SIT). All of that is about to be undone, effective next week. These street turns have been a clear financial win for the entire supply chain and the environment. (Read more here,)

Logistics and Supply Chain Management 101

Charging a fee acts as penalty against logistics and supply management best practices.

The industry doesn’t have enough drivers with an average of 1500 loads per truck.

By introducing additional, unproductive moves, we decrease capacity and savings on interchange fees at terminals for steamship lines. Making street turns cost prohibitive introduces 20 to 200 moves per drayman per day, and contributes to air pollution, lines, and traffic.

Is this the best use of our chassis inventory? Is this the best we can do for our customers? We at Excargo don’t think so.

How You Can Help

As customers with direct relationships with the steam lines, we ask you to negotiate with steamship lines to stop this practice. Please interject your refusal to support this initiative or pay for street turns. The dray community is unable to absorb these costs and will have to pass them onto everyone in the supply chain.

Let’s work together to encourage collaboration and efficiency sharing and let’s be the best industry we can be.

Where Are All the Trucks?

In May, I was invited to speak at the Houston chapter of the Council of Supply Chain Management Professionals (CSCMP) on my favorite subject, the shortage of dray trucks.

Inefficiencies

I smugly declared, “There is no shortage of dray trucks, just waste and misuse.” Then I supported my seemingly contradictory claim with a long list of examples:

  • Lost in congested lines terminals
  • Parked on congested freeways with commuters, attempting to make that universal 8 a.m. appointment
  • Waiting at the dock for the two hour free time (Why rush, we have two hours to get this palletized load handled?)
  • Waiting for rail billing
  • Waiting for hazardous materials documents to be corrected
  • Waiting for paperwork or data to be prepared
  • Trying to find a road worthy chassis
  • Trying to find someone to fix the POJ chassis, the container was pre-loaded on by a the rail or port
  • Waiting through a roadside inspection by local law enforcement, incentivized by month end quotas
  • Waiting to get yet another empty off the stack our customer will accept (third try)
  • Making an unplanned trip to ditch a container because the broker rolled the booking at the last minute
  • Finding a terminal that will take a chassis because the assigned terminal filled up
  • Rerouting due to an accident
  • Getting to the overflow warehouse that was not on the original order
  • Verifying the weight at the scale house(driver says it pulls heavy)
  • Accommodating for miscommunicated, inaccurate, or not timely information

While all those inefficiencies still exist, the number of drivers has diminished in the last 4 months!

The Fracking Effect

The recent rise in oil prices have rekindled the Permian Basin and the Eagle Ford Shale. Their demand for oilfield truck drivers has driven up wages.  Last week a former driver stopped by on a break from the Permian Basin. He told me he loved working for Excargo, but at $6K per week he couldn’t say no to the oilfield. He has a young family and bills to pay. Just last night a fellow fan at the Rockets’ game told me his friend is making $7K a week.

While some drivers are taking advantage of the fracking windfall, some threats and obstacles maintaining successful driver capacity are pervasive and others are changing.

Ultra Large Container Vessels

One of the latest challenges comes in the form of the larger container ships. The inconsistent dray work caused by less frequent sailings uncertainty and irregularity into every aspect of the supply chain, including dray drivers’ schedules. At Excargo, we’ve experienced this challenge firsthand, trying to hold on to our drivers during these peaks and valleys in the supply chain by diversifying services.

Seize the Dray

Dray provides the lifestyle so many safety-minded, family-oriented drivers prefer. Excargo is seeking to diversify with domestic and other freight services to add work for drivers in between vessels. To maintain driver capacity, we must work together with customers to continue to make it make sense for these driving professionals. Eliminating wasted time at customer docks so drivers can have productive, efficient days, and maximum their revenue is key to the success of the entire supply chain. Waiting is neither profitable nor fun. Steady, consistent workflow benefits us all.

When Bigger Isn’t Always Better

Supersize Shipping
With the advent of the mega ships such as Panamax and the Ultra Large Container Vessels (ULCV), shippers and logistics experts were all so excited. The thought of one ship holding 10,000 TEUs, 14,500 TEUs or even more promised untold efficiencies. This supersizing of shipping seemed like a universal advantage for everyone in logistics, economies of scale – multiplied. The reality has been somewhat different.

Container Mania
In the last decade, the number of containers per ship has doubled, tripled in some cases. This increased capacity necessitated improvements in the supply chains world wide. Ports have had to add cranes, upgrade software, and improve systems. Many corporate alliances have formed around the globe to make infrastructure improvements such as expanding the Panama Canal and studying a potential Nicaraguan canal. The increased capacity in one area of the supply chain, shipping, has both necessitated and inspired innovation and cooperation.

Nevertheless, the ability to build big ships is outpacing our ability to integrate them into the existing global supply chain. Supersizing shipping generates volume discounts in that industry but creates issues in the overall system. Bigger ships with more containers mean fewer sailings. Less frequent sailings mean less flexibility to market. Just in Time business processes have to be re-calculated. Lean Supply Chains must factor in safety stock and the added warehousing expenses.

Calling All Logistic Experts
Doubts about sustainability and resilience in the logistic models surface. (Never a dull moment in logistics.) This supply chain chaos threatens our customers “Amazon effect” readiness and lowest cost, best value strategies. They turn to us, the transportation experts, who have spent years learning lean processes, eliminating excess and inefficiencies, and engineering for level volumes and core competencies to deal with this dilemma.

Based on the demand, it appears that ULCVs are here to stay, redefining the scale. Every aspect of the supply chain, from infrastructure to personnel to software and systems, must change. But change takes time.
At the IANA conference in September of 2018, major importers and exporters complained about the effect that SuperSized shipping was having on global supply chains. The ULCVs save the shipping companies money by reducing their number of trips. However, they also reduce the frequency of ships, which introduces additional lag time. Then these 14,500+ TEU ships overload the supply chain partners at the port because they are not setup to handle the capacity. This results in

  • missed deadlines
  • not enough chassis
  • longer dwell times costing storage
  • warehouse and DC overwhelm
  • stock outages
  • missed appointments followed by truckers calling for work…root cause could the bigger ships coming less often.

 

Take Action
As Supply Chain specialists and Logistics experts it’s our duty to manage this issue with regard to both the infrastructure and the customer experience. I challenge/advise you to have a conversation with your partners. Plan ways to sustain their businesses between the large vessel arrivals. Help them devise a solution that provides continuous service level for your warehouse, and minimizes per diem, storage, overtime. There are lots of options. But it’s going to require everyone in the transportation industry to work together to refine Just In Time processes and create Lean Supply Chain 2.0.

My ask is that we plan for success together and realize we are all working with new challenges requiring new solutions.