The supply chain dance is a lot like the game red rover.
For as much as executives representing the rail, truck, exporter, importer and ports talked about working hand in hand with labor at the Port of Long Beach’s 12th annual Pulse of the Ports forecast Wednesday morning, the elephant in the room was the fact that labor wasn’t even in the room.
So as speaker after speaker went up to give their thoughts on the year during the presentations and whether the ports of Los Angeles and Long Beach are ready for peak season, the subject of what was learned from the slowdown at the West Coast ports that began in 2014 and bled into 2015 didn’t arise until the end of the day’s presentations.
“What we all learned from last year is we all need to work together,” said Seana Fairchild, senior director of international intermodal sales for Union Pacific Railroad. “We need to have open communication between all of us. Without that direct communication we fail.”
Fairchild, in remarks made during her presentation, gave a resounding yes that Union Pacific was indeed ready for peak season, tacking on a “bring it” in her assessment of the railroad’s capacity abilities.
Her remarks come at a time when the industries involved in moving goods for companies are seeing a host of shifting dynamics and issues ranging from larger vessels arriving at the ports, consolidation among maritime operators, fragmentation in the way trains are packed and the conversation around misclassification of truck drivers that pulls labor laws into the conversation.
“The way things are today might need to be adjusted,” said Phillip Wright, vice president of sales and marketing at terminal operator Total Terminals International.
That’s putting it mildly.
Money is being poured into large-scale port infrastructure projects, such as Long Beach’s $4.5 billion capital improvement program that includes a new bridge, street modernization, terminal redevelopment and a pier modernization.
As the ports make improvements, container traffic continues to shift.
Mario Moreno, senior economist at IHS Maritime & Trade, attributed continuing effects of the Great Recession for the shift in what’s now considered “normal” trade patterns. The month of August has been the peak month for container traffic at the ports in four of the five years between 2010 and 2015, according to Moreno. That’s a shift from when October was the busiest month in 10 of the 18 years between 1990 and 2007.
“As long as the global economy continues to grow at a sub-par base…we’re very unlikely to see a normal peak season in the years to come,” he said.
The question then becomes a matter of whether the players involved in that logistics dance have the capacity to handle inbound and outbound cargo for their customers, who demand speed and reliability.
Where Johnson & Johnson Consumer Inc. may have perhaps been going only through California to move certain goods, it may now be looking at alternatives in the Gulf and East Coast ports, pointed out Lori Smith, ocean sourcing lead at Johnson & Johnson division CLS Regional Transportation Organization. That disruption—caused by a work slowdown as new labor contracts were being negotiated, created unpredictability — one reality no one likes.
“When I’m looking at [ocean] carrier selection, I’m looking at the overall picture,” Smith said. “So it’s the overall picture of service cost and reliability. If the Suez [Canal] is offering a faster service, then that’s where I’m going. If Panama [Canal] is offering a faster service, then that’s where I’m going.”
Smith stressed the need for key performance indicators as one way of mitigating the challenges that come with so many moving parts.
“I think having true KPIs that show turn times that everyone can agree to,” she said. “I think that is the hardest part — getting everyone to agree to what a true turn time is. How is that measured? Does it include the [truck] line…so, for me, if we could get everyone to agree on that at any port, having good KPIs would be a best practice.”
Vic La Rosa, chief executive officer and president of logistics provider Total Transportation Services Inc., perhaps said it best when he pointed out the supply chain, in its current state, is conflicted, fraught with “different business models with different interests.”