Chassis Shortage Solution Demands Change From All Involved
The practices of container lines, terminal operators, intermodal equipment providers (IEPs), truckers and beneficial cargo owners (BCOs) all contribute to chassis shortages at US ports, so all of the parties must all be willing to modify their behavior if this costly problem is to be overcome, according to an IEP executive.
“The question is, what can we do as an industry to improve chassis utilization, not just what one player can do,” Bill Shea, CEO of Direct ChassisLink Inc., told the 17th Annual TPM Conference in Long Beach last week. Shea’s comments were directed at the “pool of pools” arrangement in Southern California, but many ports and inland distribution hubs experience chassis availability issues to some degree.
As the largest US port complex, with about 80,000 chassis moving between the 13 container terminals and distribution facilities and rail yards in the region, Los Angeles-Long Beach grapples with chassis shortages at some locations, excess chassis at others, an unacceptable level of out-of-service chassis and excessive equipment dwell time to a greater degree than most regions.
Chassis imbalances are a way of life in Los Angeles-Long Beach. Four of the terminals hold 43.5 percent of the total inventory at the 13 container terminals, but they serve only 27 percent of the total demand, according to the pool of pools that was set up to manage chassis operations in Southern California. The remaining 56.5 percent of the inventory held by the other terminals must serve 73 percent of the demand.
The three major IEPs — DCLI, Flexi-Van Leasing, and TRAC Intermodal — on March 1, 2015, made great strides in relieving the chassis mess that resulted when ocean carriers exited the business of providing chassis to BCOs. They launched the grey chassis arrangement known as the pool of poolsso that now the equipment in each of their individual pools is interchangeable. This means that a chassis used to carry a container for one shipping line at one location could be reused to carry a container belonging to another line at another location.
Possibly if 100 percent of all of the chassis in Southern California were pool of pool chassis and shipping lines and BCOs all maintained the same business practices, there would be no problems today, but in the complex harbor environment that is not the case. Some terminals hoard chassis. Most ocean carriers give preferred BCO customers extended free time for holding on to chassis at their distribution facilities. Most lines also designate a specific chassis provider that must be used by BCOs for “store-door” moves on through bills of lading to the customers’ warehouses. Chassis maintenance and repair practices vary from terminal to terminal.
Shea therefore urged all of the industry sectors to work through the supply-chain optimization task force formed by the two ports to come up with standardized business practices in which each party may have to give up something for the greater good of the harbor complex. At a pool of pools meeting last week in Long Beach, the IEPs, terminal operators, and ports formed a smaller steering committee to push the process along more quickly.
Shea cited hard numbers on problems the port community faces. He said 67 percent of the BCOs remove their inbound containers from the terminals on the fourth, or last day, before storage charges are assessed, creating truck surges in the harbor. Terminal operators keep more than one-third of the entire chassis fleet on their facilities to ensure sufficient equipment for their customers, and this artificially reduces chassis availability throughout the harbor. About 8 percent of the entire fleet is out-of-order for 60 days or more. “This number is too high,” he said.
Greg Moore, senior vice president of Flexi-Van, said chassis repair strategies at the 13 container terminals are a “mixed bag,” ranging from terminals that want as little as possible to do with repairs to those that look at M&R as a source of revenue.
The single biggest problem in the harbor, which could get even worse beginning April 1 when the carriers’ vessel-sharing alliances are restructured, is the repositioning of empty containers and the chassis that carry them, Shea said. The IEPs reposition 2,000 to 3,000 chassis a week in Southern California at a cost of about $14 million a year, he said.
Moore added that the situation is quite complex because shipping lines, terminal operators, BCOs, and IEPs have different strategies designed to address their individual operational needs, so a change that helps one sector of the supply chain might adversely affect another. “There is no single solution,” he said.
Keeping track of where each chassis is once it is pulled from the marine terminal is very difficult. The trucker has the appropriate information while the chassis is in its possession, but then loses track of it when the container/chassis unit is dropped off at the distribution facility. It has been suggested that each chassis be tagged so it can be traced via GPS, but that is costly and begs the question of who will pay for it.
Some motor carriers across the nation have purchased their own chassis or taken the equipment out on long-term leases from the IEPs. Shea advised that at least in Southern California, truckers may consider controlling 25-30 percent of the chassis they use and get the rest from the pool of pools.
The supply chain optimization task force will continue to address these issues in regular meetings. The group does not aim to develop a single strategy that addresses all of the issues at once, but rather it will continue to tweak the system issue by issue to bring about overall improvement in the pool of pools, Moore said.
Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter: @billmongelluzzo