American consumers are confronting a new reality– product shortages and rising prices. To shed some light on current conditions and how we ended up in this circumstance, I reached out to my nephew Luke Doremus. Luke has spent his entire career in the shipping industry and is now Director of Sales for Ports America, the nation’s largest port operator. This position provides him with a unique perspective into one key part of the nation’s complex supply chain.
How did ports fare throughout the pandemic?
U.S. ports experienced a sharp volume decline in April 2020 and then a steep rebound in July 2020 when factories in China started to recover (see chart below). As volumes increased last summer and into the fall, most ports struggled to balance productivity demands with labor shortages. Many workers chose not to work at all, while others (or entire teams) were frequently forced into quarantine. Equipment cleaning and social distancing protocols impacted productivity and generated a new set of costs. Across large ports like LA/Long Beach, NY/NJ, and Savannah, hundreds of jobs per day went unfilled during peak volume periods. In some instances, vessels that would normally complete operations in eight hours were alongside the dock for two to three days. Not surprisingly, smaller ports located further from major metro cities had an easier time managing through the pandemic.
What do things look like today?
Literally every container ship on the planet is deployed and many non-containerized vessels are also being used to carry containers on all world trade routes. Large U.S .container ports are not yet back to normal. The labor shortage has improved, but the record volume surge has created more supply chain problems. On the West Coast (Vancouver, Seattle/Tacoma, and LA/Long Beach) terminals are full. Much of the problem is due to a shortage of rail cars. Currently, some LA/Long Beach marine terminals have four to five times more containers on terminal waiting to load the rail than they would under “normal” operating conditions. Dwell times, which measure how long a container remains at the terminal before delivery, peaked in January at just over five days – more than twice the standard length. There are also trucking problems due to driver and equipment (chassis) shortages as well as warehouse capacity constraints. These “downstream” problems have created terminal congestion which leaves less room at the ports to discharge ships. Labor is available, but space is limited. East and Gulf Coast ports are experiencing some of the same problems, though generally not as severe.
What does the future of U.S. port operations look like?
The current situation should gradually subside, but longer term there are still a number of ways to improve port efficiency. Opportunities to expand terminals will help. Over the past 10 to 15 years, vessels have doubled in size and container moves per port call have more than doubled. Larger terminals can more easily handle the cargo “dump” this creates. Better coordination between supply chain stakeholders will also benefit the industry. There are many companies working on blockchain technology and other data sharing platforms to provide improved cargo visibility to everyone involved. Continued investments in equipment and more sophisticated terminal operating systems will allow more ports to improve productivity. Terminals that have already made these investments are seeing real benefits. For example, some terminals have cut their gate turn times (the amount of time it takes a trucker to pick up a container and leave) almost in half. These are just a few of the ways the industry will improve. Innovation is everywhere, and port operators will continue to make the investments needed to keep up with future demand.