Chassis Shortages Hit Hard: Is There a Long-Term Solution?

By Sheila Hewitt, Vice President, International, Transplace and Mollie Bailey, Director, LCB International Logistics, Transplace

As we discussed in our previous post, chassis shortages continue to cause significant issues at a number of U.S. ports and throughout many supply chains, perhaps even threatening the holiday shipping season. In light of these continuing problems, it’s time to take a close look at these issues and discuss some possible long-term solutions.  

The fallout from the winter’s polar vortex continues to be a large factor in these shortages, and with another hard winter likely ahead, it’s important to consider that long periods of bad weather require a number of months for some areas to recover from imbalances and be able to handle volume increases. To top it all off, increased fees in the supply chain ultimately get passed on in the retail price of the goods, directly affecting consumers - especially if these chassis shortages continue throughout the holiday shipping season.

Because of the time it takes to source and move large equipment like chassis, short-term solutions simply aren’t going to happen easily. While market forces could change and improve the situation, in the meantime, several large importers are experimenting with their own chassis fleets to protect themselves against these issues. However, that’s an extremely expensive investment that many companies simply can’t afford!

So what can shippers do to mitigate the risk brought on by chassis shortages, in both the short-term and the long-term? Whether a company has its own chassis pool or not, there are a few important things to consider when it comes to minimizing the effect of chassis shortages:

  • Creating strong relationships with carriers and other parties that manage chassis pools is key, and will help lessen potential problems.
  • Building in cost and time contingencies for potential delays in the supply chain is vital, as chassis shortage issues, in addition to driver shortages, are having a compounding inflationary impact on the economy.
  • Realizing that additional changes need to be made in how chassis are managed, and that technology has to be a critical part of the solution to provide universal visibility for all impacted users.

When dealing with these shortages, the most important thing to remember is to proceed with caution. Be aware of the current market situation. These shortages can and will happen again in the near future, and everyone involved in international shipping needs to be actively monitoring the situation and working with trusted partners in order to minimize the negative effects. 

To take a closer look at what factors are impacting these issues and the effect they have on shippers, carriers and consumers, check out Part 1 of our chassis shortage posts, “Why Are Shortages Such a Persistent Issue?”

How do you plan deal with possible chassis shortage issues in the future?

Chassis Shortages Hit Hard: Why Are Shortages Such a Persistent Issue?

By Sheila Hewitt, Vice President, International, Transplace and Mollie Bailey, Director, LCB International Logistics, Transplace

Left to right: Sheila Hewitt, Mollie Bailey

Left to right: Sheila Hewitt, Mollie Bailey

As chassis shortages continue to plague a number of U.S. ports, perhaps even threatening the holiday shipping season, it’s important to understand all of the factors impacting these issues and consider the huge effect they have on shippers, carriers and consumers.

Fundamental changes in recent years to the ownership and management of chassis have significantly contributed to the ongoing problem of shortages. These changes include a complete shift from the traditional model in which the ocean carriers that owned or leased containers managed all of their own chassis, to chassis pool operators and equipment leasing companies taking the role of third parties that own, lease and maintain the entire supply.

With so many changes occurring, the U.S. has been essentially seeking a global methodology of chassis management – countries outside the U.S. have always had a system in which third parties have managed chassis, not ocean carriers. And while ocean carriers have historically struggled with equipment imbalances, the U.S. third parties with these newfound chassis responsibilities have not been overly successful or organized with their management, and chassis management models also vary widely on a regional basis.

When chassis are not properly managed or repositioned, shortages and dislocations become a recurring problem in the highest volume marine terminals such as New York-New Jersey and Los Angeles-Long Beach. And it’s not just coastal ports seeing the effects of these shortages — Midwest ports, specifically Detroit, Chicago and rail container yards in the Ohio Valley, have also been heavily impacted.

But what parties in the transportation industry are the most affected by these shortages?

  • Shippers are bearing the brunt. Ocean contract holders get only so much free time before storage begins at the port or inland container yard – if draymen cannot source an available chassis, the container sits, and storage fees begin to accrue. When this happens, the shipper has no choice but to pay demurrage before the carrier will release the container.
  • Exporters struggle as well, particularly when product is not shipped in a timely manner and begins overflowing their staging areas — or they are forced to lease additional storage space. This also impacts inventory carrying costs, lead time and transit times, as well as required delivery dates.
  • Carriers do not make revenue if their equipment is not in use, and this shortage has continually added increased inefficiencies into the supply chain cycle. In order to maximize revenue, carriers need to have equipment turned as quickly as possible.

Additionally, in LA-Long Beach, the port terminals are simply running out of space. Ocean carriers are being forced to seek space in overflow yards, which brings about additional issues of tracking and security. Many port terminals have even resisted having to give up valuable container space for chassis storage.  With all of these factors exacerbating the problem, the shortages continue.

Stay tuned for Part 2, “Is There a Long Term Solution?” to find out more about this ongoing problem and discuss what those in the transportation industry can do to help turn things around!

What are some other factors from chassis shortages that you’ve seen affect your organization?

The Bottom Line? Benchmarking Is Where It’s At

As the end of 2014 nears, many may find themselves evaluating results from this year and planning new goals for the upcoming year. For shippers, an important yearly goal is to optimize cost-effective procurement efforts in the freight marketplace. One way is by benchmarking your organization against the market to create an action plan that can put you in a better position to control accessorial costs.

Our annual accessorial benchmarking survey resulted in some substantial insight into the changes and trends in transportation accessorial charges. The study, which included data from more than 150 shippers, identified the customary types of charges and rates implemented by shippers beyond the basic line-haul fees in order to help organizations better understand how their accessorials compare to market competitive standards.

Common accessorials revealed in the survey include detention with power and stop-off charges – both of which contribute to and affect the bottom line to a shipper’s costs. However, the survey showed that 93% say fuel surcharges (FSC) is the most common accessorial they have to deal with. One way to minimize FSC spend is to utilize intermodal solutions – an optimized intermodal FSC is generally half that of the truckload FSC, and can help put a stop to bleeding costs to your bottom line. In fact, getting the right action plan in place by benchmarking can help you uncover up to 12% savings of your total freight spend. 

So, where does a shipper go from here?  Try answering these questions to help you get headed in the right direction:

  • Do you know where your accessorials and rates stand in the market?
  • Do you need a current benchmark on market data?
  • Do you know your competitive landscape and are you optimizing freight flow and shipping modes for savings and efficiency?

So what’s next? Check out these important steps to start benchmarking your accessorials to uncover savings:

  • Compare your spend to the market rate and receive comprehensive reporting that outlines rates and accessorials. There could be other areas of opportunity where you can optimize and plan out your next steps.
  • Identify gaps across your supply chain and be armed with a prioritized action plan to save on your total freight spend.
  • Stay on top of the market with frequent benchmarking reports, whether quarterly or annually for continuous optimization.

You can read more about the Transplace Accessorial Benchmarking survey results here!

How do you plan to reduce costs and increase efficiency across your transportation network this upcoming year?

Retail: Maybe it’s Not the End of the World as We Know It… A Snapshot of Trends & Opportunities

By: Brent Hudspeth, Vice President Business Development & Consulting, Transplace

The band R.E.M. crafted many a catchy tune.  One that always sticks in my head is “It’s the End of the World as We Know it (and I Feel Fine).” While I cannot today remember every line of that fast-paced song, it always made me think of big changes coming in the world around me.  While most folks do not connect REM and retail in the same thought process, I think that the song actually does apply for practitioners in retail supply chains.  Why?  Well, to read most supply chain articles that touch on retail these days, one would be led to believe that “the end of the retail world” as we know it – an unavoidable black hole that is going to suck in brick and mortar stores and replace nearly all consumer transactions by e-commerce.  While I freely admit that a viable omni-channel strategy is certainly a key piece of the puzzle for many a retailer, the REM “I Feel Fine” phrase resonates since brick and mortar is here to stay for a wide swatch of retail sectors for decades to come.  This means that supply chain best practices will also lift up many a retailer long into the future.     

Even as Hollywood continually bombards us with apocalypse movies, we can embrace the fact that many retail futures are bright.  With many retail concepts adding stores in new and established markets (including most cities in my home state of Texas), thoughtful and analytical consideration of your supply chain network will directly contribute towards store level EBITDA and positive WPSA comps.  Grounded, programmatic transportation management programs will continually drive lower delivered costs per case, high in-store availability rates and manageable inventory levels. 

Signs are pointing favorably for retailers heading into the holiday season and 2015. We highlighted key trends and opportunity areas to consider when it comes to supply chain and transportation optimization in the infographic below.

Note: Originally posted by Logistics Viewpoints on October 9, 2014.

Oh My Gourd! “Scary” Halloween Statistics

For things that go bump in the night, hearing the familiar sound of a train whistle or truck horn would be welcomed during this spooky time of year. But instead of filling your head with logistics insight, we decided to take a day off to deliver some Halloween-inspired data “treats” that just might “trick” you into eating some candy.

Can a pumpkin weigh over a ton? Find out in our Halloween infographic below!

Are you surprised by any of our Halloween statistics? What’s your favorite thing about Halloween?

Sources:
http://marketwatch.com/story/halloween-cand-beats-the-market-2013-10-30
http://www.cnbc.com/id/102083439#
http://www.syracuse.com/news/index.ssf/2014/10/one_ton_pumpkin_in_north_california_sets_record_for_worlds_largest_pumpkin.html