I'm obliged to reader "Ray - SoCal" for sending me the link to an interesting series of tweets by Ryan Petersen about what he saw at the port of Long Beach yesterday, and his suggestions for dealing with the problem. (He's the CEO of Flexport, a freight forwarding and customs brokerage firm, and therefore speaks with considerable insight.) The text below is taken from ThreadReader, which consolidates his individual tweets into a text stream.
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.
First off, the boat captain said we were the first company to ever rent his boat to tour the port to see how everything was working up close. His usual business is doing memorial services at sea. He said we were a lot more fun than his regular customers.
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!
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 overriding 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.
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.
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.
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.
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.
We must OVERWHELM THE BOTTLENECK and get these ports working again. I can't stress enough how bad it is for the world economy if the ports don't work. Every company selling physical goods bought or sold internationally will fail.
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.
Cogent points all.
I'm not sure how practical his proposed solution might be - after all, POTUS and California's Governor simply don't have the authority in law to do what he's proposing, and I'd be wary of giving them that degree of control, because I don't trust professional politicians not to misuse it - but it's a start.
Peter
26 comments:
The governor can declare martial law at the ports and surrounding area if he so wishes.
He would be entirely justified in doing so, and on that basis, any and all municipal law is subject to being set aside.
Appointing a military governor for the ports, with any number of civilian logistical advisors, would be both wise and prudent UFN.
And container storage space is available vastly closer than 100 miles, even before we drag the federal government into the picture.
Being as we're talking about Gabbin' Nuisance, neither wisdom nor prudence is anywhere on the list of contingency planning availabilities.
So, ships will continue to come here, and it will clog to a total standstill.
The Navy and Coast Guard should already be literally diverting all container cargoes to any other port, until LA/LB catches up.
Continued arrivals exacerbate the problem, and will, until someone literally starts firing shots across the bows of recalcitrant sea captains.
More grist for the mills, which I was going to explore, until Alec Baldwin fortuitously dropped on my blog's doorstep:
https://www.freightwaves.com/news/22b-worth-of-cargo-is-now-stuck-on-container-ships-off-california
100+ ships, and $22,000,000,000 worth of cargo idling offshore, from Pt. Concepcion (that's Vandenburg AFB beyond Santa Barbara, 100+ miles to the northwest of the ports), and down to the SD county border.
It's time to do the obvious: federally declare the LA/LB port closed to all traffic not currently within 100 miles, on pain of sinking, UFN, and put the gorram Navy to good use.
Divert it anywhere else until the problem is properly sorted, and normal operations resume.
Some jackholes(or all of them) obviously decided sending more ships and more ships was a good idea.
It's time to disabuse them of that notion, forcefully.
We're at the point where failure to act is acting to fail.
The cynical part of me wonders if this situation is what certain people in authority want? The peasants need to know that bare shelves is the new normal, after all.
Tend to agree with Ostar. This is deliberate.
Peter, your source should know that what he describes in points #3 and #4 is the intermodal complex at Southern California Logistics aka Victorville Airport which is the old George AFB. Ownership was recently transferred from the USAF to the Southern California Logistics authority. Since the airport is listed as publicly owned, I reckon it is still government facility and lands.
For nigh on a two decades have trucking companies and the railroads been setting stakes to vacate LA County. The reason has been the increasing burden of government regulation. So, the privately held companies have done as much as they could to ease the coming storm. Yet the storm has come. How so? Government is become an immovable object.
Cynicism is not needed to see the truth in this matter. To be clear, this all is deliberate.
OTOH, this is NOT the 'new normal'. That will be decided by the people, as always. Given time, the people rally 'round. Always.
To those who think this is governmental malign design, rather than benign incompetence and inevitable result of feeding an elephant to a garter snake, kindly specify which particular agency/agencies it was that ordered 125% of everything in the last fiscal quarter from China?
Show all work.
Hint: Never assign to malice what can adequately be explained by incompetence.
From what I hear, some of the truckers have found their own way to offload empty containers: onto neighborhood streets.
Paying people stimulus checks for not working. Rent holiday (eviction moratorium). Everyone sitting around with nothing to do, and money to spend. Trillions of money printed from thin air and distributed to consumers. That's your got action. To assume they didn't know what would happen when everyone's not working but still getting a paycheck? Idiots and/or villains.
I'm cynical. Chinese influence with Progressive politicians, and the willingness of labor unions to fall into lockstep, makes me wonder what the endgame will be. If I had to guess, the endgame is open borders, with trucks hauling Chinese goods from Mexican ports controlled by the Chinese.
If you want a knowledgable take on what's going on and how to address it, I commend unto you https://www.youtube.com/c/WhatisGoingonWithShippingwSalMercogliano/videos - Sal Mercogliano is a former merchant mariner and instructor in these policy areas. Useful stuff. Too bad nobody in the FJB administration is paying any attention.
government diddling caused this crap storm.
More government diddling will not fix it.
See California environmental buffoonery and ensuing wildfires as an example.
Diverting ships won't work, there just aren't enough good west coast harbors. Long Beach/LA harbor is by far the best to handle the volume (San Diego and San Francisco aren't going to handle a fraction of the problem.
If the State/Feds were to offer to let the private trucking companies store empties on government land, that would allow them to free up the chassis, not need to override zoning laws, and there's enough government land in the area to make a large dent in the problem (and that would not be limited by the zoning laws for private property)
I don't know what the availability of container rail cars is, but if there are any not in use in the country, they could be rented to move the empties around.
But there would need to be some assurances to the truckers that they get the right containers back as needed, otherwise they can be in trouble with the shippers (as noted, containers belong to individual companies, and those companies have to approve what's done with them)
City of Long Beach just changed their regs to allow higher stacking (4-5) Friday night.
I kid you not, the original reg was made so as to keep the view pretty….
If we add local federal property to the mix, there are places within 20 miles, forget 100, that could store containers for months on end with no hassle.
And sending ships elsewhere on the West Coast gets them out of the LA/LB queue, which is the entire problem.
They don't have to be able to take all of them, but they can start running all WC ports at full capacity, for as long as necessary. The port, trucking, and railway workers elsewhere aren't going to whine about making money hand over fist like ND oilfield workers, and it runs everything at max ability UFN.
When you've jammed an entire redwood forest into one wood chipper, throwing more wood into it isn't helping anything.
This problem is not new. It's not even new to the USA. This is exactly what happened on the east coast during the build up for WWI, except in reverse. Empty trains were blocking the rail yards at the ports, because the companies didn't want to pay to haul empty cars away.
This also meant there weren't enough empty cars to load up with goods elsewhere. Trade ground to a halt.
The solution then was for the federal government to nationalize the railroad operations, and force the companies to take the empties away from the ports back to where they could do some good.
McChuck is correct. The problem is that its cheaper to build new containers (partly because it keeps the container builders busy) than it is to ship the empty containers back to China.
All of the container-owning companies need only to add some new columns to their databases that track their containers if they're being moved by someone else. This is the same activity that railroad car owners do. They don't care where their railcars are as long as they're being paid for their use. If containers were handled the same way, this would help relieve this problem, but not if the containers aren't returning to China.
There's a lot of good and a lot of nonsense suggestions here. I'll echo Whostruckjohn here and say that the guy he links to, Sal M, is pretty decent. I don't agree with everything he says, but I believe he gives a good summary.
Other Fun Facts:
1) There are NO American ships on the Far East Liner trade. There are a few 'American' (but not really) ships that run on schedules and do make far east calls, but only as part of their routing in constant circumnavigation, rather than directly.
Remember that there are only 108 ships in the US merchant fleet, most of which are small oil tankers.
2) With Apologies to Aesop, container ships captains have little autonomy. They're so rigidly controlled that weather routing companies determine their course, not the captain. While the captain does retain ultimate control on paper, and legally, he will be called to account for minutia. Further there are LESS ships than 10 years ago servicing the Far East trade. It's just that the individual ships are 2-3 times larger today.
3) There are NO small container ships not already on charter and a a few dozen large container barges that are also mostly on charter to service the east coast ports. They are already in use; small container ships are what feeds the Caribbean and Central/South America. There have already been some diversions to the US East Coast that have caused shortages in Honduras and Columbia.
As was noted elsewhere, most of the problems stem from regulations designed to choke port business purposefully. And the power of the unions on the West Coast, of course. I wouldn't mind taking a variant of what McChuck said and go all Reagan on the LA/LB longshoremen but it'd be a moot point without addressing California's insane restrictions.
4). Most of the port facilities in the US are not American companies. Maersk, the largest shipping company in the world, also owns and controls more container ports in the US than any other company. Just before this crisis started, Maersk announced that many of its' ships would stop using non-Maersk owned terminals in the US. I'm sure that didn't help. As an example in my neighborhood, Maersk stopped making port calls to Howland Hook Terminal in NY, and shifted their container traffic to APM (their terminal) in Elizabeth NJ, which now is experiencing backlogs. Howland Hook, meanwhile, literally 2 miles from Elizabeth, is still underutilized.
I wonder if this port snafu will actually bring back more manufacturing to the US?
And hurt China.
Sounds like it won’t be resolved for a while.
The Defense Production Act does give POTUS wide latitude to take control of facilities in an emergency. It would suspend all the union and local rules that are blocking a sensible, expeditious unwinding of the port snarl.
Step 1.
Suspend city rules that block stacking empty containers 6+ high and then unload all the truck trailer chassis that have been sidelined
Step 2.
Rapidly unload ships to rail intermodal and haul them to a nearby site for sorting, loading on long distance trains and trucks for delivery
Step 3
Re-load ships with a mix of empty and packed containers bound for Asia
Bring on the collapse.
For alternative perspective, see Karl Denninger:
https://market-ticker.org/akcs-www?blog=Market-Ticker
It's not simply a matter of empty containers. It's a breakdown of the entire logistics chain including shortages of truckers, warehousemen, loading docks etc...
If it is made in the US, it doesn't need to be delivered by a container ship, or unloaded at the port. Perhaps this (possibly orchestrated) clusterf*** will cause at least some companies to STOP DOING BUSINESS with China, who is not our friend. Capitalism and our Contstitution is what has enable America to become the greatest nation that ever existed. Unfettered Capitalism, corrupt government/bureaucraies are what is destroying it, along with virtually unrestricted illegal invasion, and complicit media. God save us US. I think we are already too far gone.........
@Bart,
Please provide an example of "unfettered Capitalism" in the US.
The closest I can think of is Big Tech, and that is not truly unfettered as it is horribly distorted by the section 230 liability shield that they have.
Bingo
Here's the Contrarian view, which says that Flexport's CEO called it incorrectly: http://h2.jaguarpaw.co.uk/posts/flexport-ceo-wrong-bottleneck/
The author uses the business novel The Goal by Eliyahu Goldratt (which is about optimizing business processes) to introduce an optimizing method called the Five Focusing Steps.
Identify the constraint: It seems to me that the constraint is the shipping of empty containers to where they are actually needed, China and other origins of US imports.
Exploit the constraint: make sure that no ship leaves an overloaded port without as many containers as it can carry. If that requires increasing the fee paid to shipping companies then so be it. If transporting empty containers is dangerous then find a way around it. Maybe you can fill empty containers with scrap metal or sand.
Subordinate everything to the constraint: only allow one container off a ship for each container that you have just put on a ship. Only allow a truck to bring a container to a port if there is a ship waiting to take it.
Elevate the constraint: perhaps unladen ships that would not have otherwise been sent to US ports can be diverted there to pick up empty containers and take them to China.
At this point, if the constraint has been broken then it’s back to business-as-usual
Who knew that the business of "business" had become a technology?
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