The Problems Facing Drayage Companies
Container drayage costs are increasing and expected to continue rising. Marine terminals continue to be a problem. Highway congestion seems to still be affecting distribution. Major port complexes along both coast lines are struggling due to chassis shortages and huge railway delays. These carriers and the companies they represent either have poor communication or have implemented cumbersome, difficult-to-understand software that makes communication difficult, slowing down the entire supply chain.
Problems are happening at major ports, too. Southern California has the largest port complex in the country, the Los Angeles-Long Beach complex, and still it suffers the longest wait times due to a variety of factors. As the problems conflate with industry changes, ports and the transportation industry are beginning to suffer.
Reasons for Drayage Cost Increases
One of the biggest reasons ports experience intense slowdowns is because most ocean carriers have left the chassis business entirely. The rest are expected to leave within the next twelve months. Multi-carrier ships and off-site chassis operations save companies money in asset utilization and turns. It significantly reduces their capital expense. Despite ocean carriers pulling out of the business, there is actually increased demand for port-wide chassis pools.
Why are the carriers leaving? The biggest reason is due to FMCSA regulations asking far more of ocean carriers. They increased their oversight, established a stringent repair and inspection program, forced companies to implement new response measures to equipment deficiencies, and more.
As a result, in 2010 the largest ocean carriers pulled out. The mainland industry lost Yang Ming, OOCL, NYK, Evergreen, and others, deciding to focus their efforts on floating containers instead. Wait times at ports increased dramatically. Truckers spend anywhere between 3-5 hours waiting at harbor terminals, which significantly reduces transportation time and forces a market cap on the products they ship.
Companies are no longer able to pool through multi-carrier steamships, so chassis is less consistent. This means less promise on product delivery and increased costs as companies are forced to return to multi-source solutions for the products they require.
Despite the increased FMCSA regulations and industry need for more chassis control, software development has not caught up to all the industry changes. This means logistics is quickly becoming a nightmare. Companies that rely heavily on their software for shipping are using old, outdated models. Many supply chain professionals are returning to the phones to get business done. This means more time is required to get the job done, and companies need to hire more people to smooth out logistics.
Add to that there is no uniform tariff for chassis rental. This is a problem because companies have a difficult time finding the best deal for incoming chassis. Chassis rental companies are in turn charging daily rental rates for their services. As supply chains are increasingly volatile, these rates increase, causing some frustrated companies to simply give up.
Labor shortages in both the drayage and trucking industries is slowing down the process. Companies on both sides are forced to increase their wages and compensation in order to retain talent. This in turn is passed along to the company and, ultimately, the consumer.
These intermodal difficulties are compounding as companies begin competing for railway space and ports are more congested. Still, companies in cities with heavy congestion use two sets of drivers. The first brings containers between trucking yards and the customers’ locations, while the second set deal with congested ports.
Other companies are putting pressure on the ports themselves, who up until this point have acted as passive observers. Some ports have agreed to upgrade their infrastructure by adding cranes and more space to accommodate the increased activity. Increasing delivery and pickup windows will also spread business out, alleviating total port stress.
These are all important, but small, steps. It seems for the foreseeable future, container chassis prices will continue to rise at an constant and alarming rate.