The Rusty Chain
September 29th, 2004

“Trade within the United States, both that of domestic and international goods, is dependent on the transportation system.” Angus Cooper, of Cooper/T. Smith, said that a few years ago.

“Making additional improvements to the cargo chain is a top priority, because building mega-terminals for ever-larger container ships won’t give a port an advantage if cargo can’t move efficiently to its final destination.” Mr. Dinsmore, the Port of Seattle’s Executive Director, was almost prophetic when he issued this warning some months ago.

Mr. Vickerman of TransSystems Corp. was in a position to be even more direct. He has stated that, “With limited financial funding resources, it is not feasible to develop two to four times the U.S. port infrastructure needed to serve this demand. Terminals must change the logistics cost-to-value relationship and become dramatically more productive quickly.”

These knowledgeable men weren’t alone in their thinking. For a number of years all eyes have been focused upon the incredible growth of containerized imports and the scarcity of waterfront acreage. Officials at Oakland, for example, citing the conditions in LA/Long Beach, revealed their intention almost four years ago to spend $1 billion on terminal expansion. “Oakland is betting the lines will hit a brick wall in Southern California,” said Douglas Tilden of Marine Terminals Corp.

Nowadays the lines seem to be hitting brick walls everywhere. Could it be that the demanding American consumer is at fault, by requiring so many container ships to seek berthing in our ports? No, that can’t be so. Maybe the port authorities are at fault because they failed to anticipate this demand? No, that can’t be so, either. The port director can hardly be blamed for the lack of waterfront acreage ... and what about the other roadblocks he’s running into ... if only the Unions would be more cooperative ... and if the drivers could be more reliable ... and if communities could have foreseen the need for better roads ... and if the railroad people had only been able to see into the future ... Which of these is the weakest link in our logistics chain, anyway?

Instead of looking for a culprit, the industry should acknowledge what Mr. Vickerman has been trying to point out. Where others must spend their working hours in a cubby-hole, relatively speaking, his position enables him to survey the entire field. Be assured that he recognizes, first and foremost, the pressures placed upon personnel at every level and not just upon those who’ve gathered the headlines. Teamwork counts for something, we must admit, and when dissension exists in a clubhouse, there is a pronounced and noticeable drop in performance and efficiency on the playing field. So maybe there isn’t a single weakest link in the chain. Maybe every link is rusty. Maybe Mr. Vickerman is trying to tell us that the chain needs change.

Unless you think the situation is hopeless, please feel free to submit your observations, inquiries and recommendations.

The Weakest Link?
September 30th, 2004

The AAPA’s America’s Ports: Gateways to Global Trade stated that: “For some ports, the weakest link in their logistics chain is at their back doors, where congested roadways or inadequate rail connections to marine terminals cause delays and raise transportation costs.” Admittedly, that’s a weak link, but those faced daily with congestions and inadequacies in surface transportation see things differently. They correctly point out that had they been properly forewarned by port authorities with respect to the rate of annual growth, then certainly things would be running more smoothly in their domains.

But again, in fairness to port authorities, their planning has depended on those international consulting firms that are expected to have all the answers. The consulting firms, however, can only produce information by relying upon data gleaned from retailers, brokers, carriers, terminal operators, truckers, the railroads, and from the whole supply chain, in fact. But there is no crystal ball available. Not to the consultants nor to anyone else. The result, of course, is that the industry is repeatedly put in the position of reacting rather than acting. Everyone in every phase of container transport is playing the game of “catch up”... and in some places it’s already critical.

For example, look at what truck drivers are enduring. Look carefully at the burdens they’re required to shoulder, and consider the possible consequences of their reactions. Rick Knapp, the GM of Virginia International Terminals stated at the Trans-Atlantic Maritime Conference that: “The Achilles Heel of the maritime industry is the truckers’ ability to deliver product to the door.” Events testify to the accuracy of that statement and dire warnings have been issued in the past by Labor and Industrial Relations authorities. Recall, if you will, the words of Michael B. Belzer, of the University of Michigan’s Institute of Labor and Relations. In February 2000, at a seminar sponsored by the Transportation Research Board, he cited the low wages, long hours, unsafe working conditions and recent rise (even back then) in fuel costs. He went on to emphasize that because harbor truck drivers are paid by the trip, rather than by the hour, and because they were not being compensated for the time spent waiting at congested marine terminals, many owner-operators have left the industry and have contributed to the severe driver shortage at our seaports. “It doesn’t take a rocket scientist to figure out why there is a labor shortage”, he said.

We expect to be forewarned so that we can be forearmed. That has been the demand (or alibi?) from each segment of the supply chain, but could any warning be clearer than the one issued by Mr. Belzer more than four years ago? “Low wages, long hours, piece work and unsafe working conditions. You have working conditions that I believe can be characterized as sweatshops ... If the problem is not resolved soon, you won’t have to worry about gridlock because there won’t be any trucks on the road ... I cannot comprehend why people don’t respond to this as a national crisis”.

Could non-union owner-drivers be the weakest link in our rusty chain?

A House of Cards
October 1st, 2004

Because maritime consultants may never be in a position to predict the numbers of incoming containers with any degree of accuracy, systemwide breakdowns will continue to call for emergency stopgap measures all along the supply chain. In the last few months, for example:
• More than 1000 unskilled casuals were forced into the breach in late June and July when an unexpected surge of containers engulfed the LA/Long Beach complex. By mid-August, in spite of the fact that more than 60 ships were berthed, approximately 20 more were anchored and waiting.
• When Local 13 in Southern California rejected a request by the PMA to make an exception over Labor Day and permit longshoremen to work, the resulting backup of vessels exacerbated the crowded conditions in the complex to the extent that an additional 3000 unskilled longshoremen had to be hired. Because so much time is required to train these newcomers, however, little relief even now is being felt.
• An already burdened Union Pacific Railroad was further stressed in mid-August when a fire in a 3100 foot tunnel rerouted trains until the end of the month.
• A BNSF washout in mid-August interrupted all rail traffic to and from Long Beach for a 24-hour period.
• Two other UP and BNSF derailments in the Long Beach and Oakland areas also brought about costly delays.
• The derailment of a 98-car train in Alabama shut down the major UP and CSX rail route servicing New Orleans and the Texas Gulf Coast.

Could any of the instances cited above have been foreseen and provided for by those engaged in forecasting supply chain developments? Not a chance. There are no safety valves available in the present scheme of things. There are ways, however, to prepare and provide for emergencies and even prevent those crises which have plagued the industry from time to time. The 2002 shutdown of the 29 West Coast ports serves as a pretty good example of an avoidable crisis. Is this the sort of event that deserves some thoughtful consideration? What about the “sweat shop” conditions that were described by Mr. Michael Belzer? Just recently, Ron Carver of the Teamsters’ port division addressed this situation again and referred to owner-operated trucks as “rolling sweatshops”. Instead of waiting for the other shoe to drop, and as long as so many people are directly affected by truck transport, isn’t it time to bring some relief to that segment of the delivery system?

Chuck Mack, director of the Teamsters union’s port division, sees it this way: “Conditions are so bad that the turnover rate among these port drivers exceeds 150 percent per year as they cycle in and out of the industry ... It’s perplexing why no one is stepping up to the plate. Everyone is afraid to make the first move.”

A Shared Crisis
October 4th, 2004

Any number of authorities can be cited who are waving red flags at the “rolling sweatshop”issue. Paul Heylman, an attorney specializing in waterfront labor problems, stated that; “The current economic model with drivers is probably not sustainable. Truckers are making practically nothing compared to the ILA and the ILWU”. Instead of appeasement in any form, however, these truckers are now faced with longer turnaround times, chassis shortages, and sections of terminals that are closed off to traffic without prior announcement. Because of these costly delays disgusted drivers are quitting and not being replaced. John Drewes of Devine Intermodal recently said; “This is the first time since I’ve been in trucking that I don’t see new drivers coming into the industry”. This may be the onset of that “national crisis” Mr. Belzer was visualizing.

Ron Carver as well as Mr. Belzer were correct when they cautioned against conditions that can be characterized as “sweatshops”. But what produces the longer turnaround times, the chassis shortages, and the unexpected traffic tie-ups within the terminals? The drivers themselves are not responsible for these difficulties but they’re the ones that seem to be holding the bag. The actual causes are known and can be described by almost anyone engaged in terminal operations, so there’s no point in dwelling upon them in this column. We know for sure that water transport is highly efficient, though; so efficient, in fact, that on any given day anywhere from 60 to 80 ships can be seen treading water while they wait to berth at the LA/LB complex. That particular link in the delivery chain is quite sturdy and will become even stronger in the coming years.

Heed what Chuck Raymond, CEO of Horizon Lines LLC, has to say in this regard. He issued this warning in the form of a rhetorical question recently; “By 2020, every major container port in the United States is projected to at least double the volume of cargo it will handle, with selected ports tripling or quadrupling in volume. In fact, there are many warning signs that point to serious shortfalls in our intermodal freight capacity, and that future cargo volumes may very well overwhelm the nation’s infrastructure. This impending freight capacity crunch, therefore, leads us to one overriding policy question – what will happen if plans are not made today for tomorrow’s freight realities?”

What Mr. Raymond is asking you to consider is this. What kind of an effect will this steady increase in the number of container ships and containers have in the coming years upon the turnaround times, the chassis shortages and the traffic obstacles that are almost unmanageable in today’s container ports? He has a dog in this fight, he is acutely aware of the other problems in the supply chain, and he fully expects to hear some brainstorming from other concerned officials. Band aids won’t do at this late date. This illness could be terminal and requires the kind of treatment Kurt Nagle has suggested. Kurt has reminded us that the AAPA’s SHARE initiative (Seaports of the Hemisphere Allied in Relationships for Excellence), “...promotes both the principle and the process of banding together and pooling resources for greater muscle, which will serve to the greatest benefit for each of us individually and the entire industry collectively”.

The commentaries appearing on this website are being offered with exactly that purpose in mind.

On Track
October 5th, 2004

The sketch at the top of this website depicts a container ship with containers on board. Some of those boxes are destined to be freighted by truck and some by rail. Prior comments in this column dealt with hurdles facing truckers, but only if railroad problems can be adequately funded and managed will a plan be formulated that will bring timely and cost-efficient delivery to end users. But the obstacles are considerable. “The rail infrastructure is a critical problem”, says John Bowe of APL.

One of the problems that may never be overcome is the general feeling among investors that the rate of return on invested capital is unacceptable. In his recently released annual study, transportation specialist Wendell Cox stated that; “In order to carry increasing freight volumes, railroads need more capacity. Rail capacity depends on investment returns. Since railroads are not meeting their cost of capital, government policymakers may want to consider investment incentives to help meet the growing demand for freight rail”. Raising rates in order to fatten up the bottom line for investors, however, may not be possible because these rates are controlled by powerful shipping lines. These lines negotiate long-term contracts in order to keep prices at a level that generate profits for the shipping lines, albeit unattractive returns to potential investors, and because the rate of return is in low single figures, potential investors are not likely to materialize, with or without tax incentives.

The surge in cargo, however, has placed great strain upon railroads, and the amount of spending required to keep pace is almost mind-boggling. “ Keeping pace” means that BNSF, for example, is investing $ 1.9 billion in 2004 in order to add some 400 locomotives and thousands of railroad cars to its inventory, along with more than 2,000 train-operating personnel to its roles. “Keeping pace” means that Union Pacific has added 500 locomotives to its fleet in the past year and hired and trained over 3,000 train-operating personnel as well. “Keeping pace” in NY/NJ means proposing a two-track tunnel to carry intermodal trains under New York Harbor at an estimated cost of $ 7 billion, according to Rep. Gerald Nadler of Brooklyn. The wily Everett Dirksen once said that; “A billion dollars here and a billion dollars there and pretty soon we’re talking about real money”, or something to that effect. More recently, Chuck Raymond reminded us that many transportation planners acknowledge that the national highway and rail systems cannot build themselves out of this impending trade explosion.

Bear in mind also that a seagoing vessel can steer any course desired and even be redirected to an alternate destination because there are no barriers at sea. A trucker can likewise elect to take a detour because of the millions of miles of roads and highways that crisscross the nation. Trains, however, don’t have the luxury of being able to alter course. Trains are restricted to travel along existing railroad tracks, but communities will eventually put limitations on new track construction, and no amount of capital, even if it could be made available, will remove that natural barrier.

On A Tangent
October 6th, 2004

Within the past few days an announcement from the U.S. Senate requires that I digress. Senator Charles Schumer’s proposed amendment to the National Intelligence Reform Act is being opposed by everyone in our already distressed supply chain. No one questions the good intentions of Senator Schumer because all agree that the present rate of random scanning of all containers landing in U.S. ports (about 4%) just doesn’t cut it. 100% scanning of all containers, including empty ones, would provide the peace of mind we need, but simply and candidly put, the chaotic operations within conventionally-structured terminals will not permit anything higher than the 4%. There’s not enough space, there’s not enough time, there’s not enough personnel, there’s not enough money, etc., etc. ... There’s no shortage of problems, though. Senator Schumer, however, has attempted to take the bull by the horns by legislating manual inspection of 10% of landed containers, and although he deserves an “A” for effort, his proposal has hit raw nerves. Rather than being a step in the right direction, such a requirement would adversely affect our troubled delivery chain and could very likely bring operations to a grinding halt.

Fourteen of the leading trade groups contacted members of the Senate advising them in writing of their opposition to the amendment. These signatories cited traffic problems at ports, delayed deliveries, and subsequent shortages and price increases for consumers. An even more important consideration would be the additional stress placed upon personnel in the supply chain and their normal reactions to such stress. If Senator Schumer’s time-consuming amendment were to become law, the response by encumbered employees along the entire supply chain would amount to a “national crisis” and would elicit a noisy response from all quarters.

Please review item #6 on this website’s Problems and Solutions page. The problem side clearly but briefly acknowledges that inspections are severely hampered in container terminals because of hasty and random stacking. This is a result of what has been stated above and needs to be repeated; “There’s not enough space, there’s not enough time, there’s not enough personnel, there’s not enough money, etc., etc. ...”. On the solutions side of that ledger it states that our patented system assures that inspections will be smooth, efficient and unhampered. Our system requires that each container, assigned to a predetermined slot prior to arrival, must first pass through an x-ray scanner. Then it is stored in its programmed slot. Because our system utilizes a small fraction of the acreage now committed to present day terminal operations, there’s no lack of space for scanning procedures. Because our system does away with unnecessary repositioning moves, there’s no lack of time for scanning procedures. Because our system permits timely hiring and training procedures, there’s no shortage of personnel. Because our system requires so little in the way of material handling equipment and general maintenance, there’s no lack of money. It boils down to an equation:

Sufficient space + sufficient time + sufficient personnel + sufficient money = 100% scanning

Senator Schumer has our best interests in mind, and he sure knows how to get our attention.

A Ticking Clock
October 7th, 2004

At the Los Angeles/Long Beach complex, where approximately 12 million TEU were handled last year, facilities for managing close to 33,000 TEU daily are required. At least those are the estimated numbers we get from the maritime journals. But things are not going very smoothly right now, and they’re about to get a lot worse. At the AAPA convention last week, Robert West of Global Insight noted that container trade will grow at twice the originally predicted rate of 4.3% next year.

Supposing ... just supposing ... that all containers were being hauled from those ports and no traffic tie-ups existed, in or outside the ports. Sounds like a perfect world. But let’s make that assumption for a moment. In such a situation nothing would hamper offloading operations, except for the lack of space within the ports. But let’s also suppose that operating space wasn’t a problem. If this dream could ever come true, then ships would be coming and going like clockwork.

Referring to the animated graphic in this website’s Method of Operation, note that the automated facility stores, retrieves and delivers 1920 TEU per day. At that rate, 17 of these structures would efficiently deal with the containers passing through. Note also that each 1920 TEU facility requires only 25 acres, including the delivery system. Instead of the several thousands of acres now being used at these ports, the patented systems, with dramatically simplified operational procedures, would require less than 425 acres. And ships would indeed be coming and going like clockwork.

These patented storage and retrieval systems will provide other benefits as well. Consider for a moment the impact that PostPanamax container ships will have upon our environment as well as our pocketbooks. Conrad Everhard, as moderator at the Port Industry Day symposium four years ago, reminded those in attendance that massive and costly dredging will be required in order to accommodate those giant vessels. He stated that public funding of these dredging programs amounted to a subsidy for those companies building those vessels. In support of this position, at a Capital Hill briefing sponsored by the AAPA in June of 2001, James Hartung advised that dredged deep-water ports used as hubs by these giant vessels in a hub-and-spoke system of operation would actually, “... decrease the efficiency of the marine transportation system and skew the economic benefits”.

On the other hand, when the 17 facilities described above are in operation, only small-to-medium sized vessels will be required for the annual 12 million TEU throughput. Let’s do the arithmetic. On a daily basis ... and these are approximations ... eight 3840 TEU ships plus one 1920 TEU ship would carry 32,640 TEU. Over the course of a year the number of TEU adds up to 11,913,600. That’s pretty close to the estimated 12 million TEU running through Los Angeles/Long Beach now. And how many vessels are backed up today because of the insurmountable problems within these terminal operations? 40? 50? 60? Wouldn’t the nine smaller vessels be a lot more manageable?

And Mr. West, recall, has just revealed that the forecasts have turned out to be too low again.

Casual(ties)
October 8th, 2004

On Capitol Hill this past Tuesday the Senate excluded Senator Schumer’s proposed container inspection amendment from the National Intelligence Reform Act. Although the trade groups strongly opposed his suggested amendment, Senator Schumer can’t be faulted for his attempt to get something done about this Achilles heel. 4% random scanning leaves much to be desired, as all readily admit, but the reaction from the intermodal industry served to play the spotlight on more than just security concerns. The spontaneous protest of the trade groups is an indication that the element of time has become the primary concern all along the supply chain. In this respect, the Senate’s rejection of Senator Schumer’s proposal can be looked upon as a plus for the industry, but the question of security cannot be sidetracked much longer. Unwelcome and sudden legislation could be imposed without warning, if those in authority felt it to be for the common good. It wouldn’t be the first time emergency legislation was enacted.

On a negative note, the PMA/ILWU program for hiring casual workers at LA/Long Beach is meeting with little success. The hiring and training of these part-timers was thought to be the best way to reduce the backlog of vessels at that complex but, as it turns out, these “casuals” have been aptly named. These temporary workers are paid lower wages and receive no benefits, and because some have full-time employment elsewhere, attendance at the terminal is not a top priority. The naysayers remind us that; “You get what you pay for”, and sadly, the truth in that maxim has never been more obvious. Absenteeism in significant numbers of these casuals has become a painful headache for authorities at the ports and has provoked reactions from importing companies and shipping lines. A number of vessels are known to have been diverted to Oakland, to Seattle, and even directly to East Coast ports. Pat Moffett of New York-based Audiovox states that alternate routes of delivery have already been decided upon by his firm as a result of the lengthy delays at LA/Long Beach. Rather than suffer through these costly delays, Mr. Moffett revealed that Audiovox has opted for all-water deliveries from Asia to the East Coast, and for sea-truck service to the East Coast originating from Seattle instead of from LA/Long Beach. Oakland, said Doug Tilden a little while ago, “ ... is betting the lines will hit a brick wall in Southern California”. It’s happening.

James McKenna acknowledged last week that as many as 400,000 applications were received when it was decided to put those casuals on the payrolls at the LA/Long Beach complex. That’s evidence of a sizeable labor pool and a positive indication that full-time longshore gangs could be readily organized, trained, and made available, if a way could be found to utilize them efficiently. As everyone now knows, however, dozens of ships have been forced to sit and wait for servicing because of the many uncertainties within congested terminals. This raises the questions; How can those stalled ships and their cargos be placed in the hands of this anxious labor pool? What is it about these spacious terminals that hinder the efficient flow of goods?

Common Ground
October 11th, 2004

We should thank our lucky stars that cooler heads prevail in this country. Last Wednesday, dock workers at the Port of Iquique, Chile, who had organized a peaceful demonstration with the intention of pressing for a fair conclusion to a wage dispute, were assaulted by units of the Chilean armed forces. In what appears to be an unprovoked attack, six workers were severely injured. Jorge Silva Beron, the General Secretary of the union, was singled out, severely beaten, and remains in intensive care in a Santiago hospital. His very survival is in doubt.

We have wage disputes in this country, too, but at least our chosen representatives have the good sense to sit down and compromise. The recent tragedy in Chile should remind us how much risk we take when little or no consideration is given to an opponent’s position. Long-lasting animosities develop and even encourage further disagreement. The AAPA’s S.H.A.R.E program stands in sharp contrast to attitudes that prevail in other parts of the world, and is a clear demonstration of the willingness and good will that exist between the opposite poles of labor and management. Is there any way, do you suppose, that the S.H.A.R.E. principles could be instrumental in establishing a common ground for these two entities? This is more than just wishful thinking, and it’s a question that merits our attention.

But first, let’s deal with the two questions that were raised last week in this column regarding the backlog of vessels at LA/Long beach: “How can those stalled ships and their cargos be placed in the hands of this anxious labor pool?”, and “What is it about those spacious terminals that hinder the efficient flow of goods?”. The obvious answer, up to this point anyway, has been that these “spacious” terminals are already overcrowded. This congestion generates traffic tie-ups, longer turnaround times, disgruntled drivers and longshore workers ... and around and around we go in this vicious cycle. It’s redundancy ... it’s deja vu all over again. Mr. Vickerman and others have stated repeatedly that sufficient expansion is not feasible, and that terminals must change. No one, however, has been able to put forth a workable suggestion for the required change, and the situation is now becoming explosive. This website has been established to illustrate that the many difficulties encountered in the intermodal supply chain can be remedied by one single step. All the serious problems in this gasping pipeline can be eliminated when the patented system described by this website is fabricated and installed at the site of each existing terminal. Review once again, if you will, the Problems & Solutions page. The very first benefit to be seen is the reduction in the amount of space presently required for operations. The resulting creation of generous amounts of usable space then makes it possible to place those stalled ships and cargos in the hands of an “anxious labor pool”, because even though the system itself requires much less in the way of material handling equipment and maintenance, eliminates container repositioning, simplifies operational procedures and training procedures, etc., etc., the hiring of many more longshore workers will be absolutely necessary in order to handle efficiently the unimpeded growth made possible by this new installation.

New Discoveries
October 12th, 2004

Thus far this column has been concerned with the infrastructure of the intermodal supply chain and the operational breakdowns along that chain. What most of us fail to notice, however, as we scan the daily reports dealing with these logistical problems, is the affect these pressures have upon those who make up the human element in this infrastructure. The recent tragedy in Chile should alert us to our own trouble spots and to the need for some immediate damage control. It would be incorrect, however, to assume that those in overall authority in our ports have the wherewithal to repair the cracks in the system and provide comfort zones simply by acquiring acreage for expansion purposes. More than three years ago, for example, Mr. Richard Steinke, Executive Director of the Port of Long Beach, subtly hinted that the land needed for expansion was no longer available. “ I’m here to tell you, the land will run out”, were his exact words.

As congestion becomes more and more acute because of this inability to expand, port drivers, the lowest ones on the totem pole, incur further delays and even more costly income reductions. To make matters worse for these poorly-paid drivers, Teamster officials warn that relief is not likely to be forthcoming until these drivers are able to become unionized employees. But the law won’t allow that. So, what does the future have in store for these terminals and especially for the independent drivers? What recourse would be available to these drivers? Was Mr. Belzer right when he warned that if the problem is not soon solved, there’ll be no trucks available for deliveries? That would be a tragedy, but not as dire as one along the lines of what took place in Chile last week. A comfortable working environment and a living wage will elicit positive responses instead of negative ones from terminal workers and lead to the kind of cooperation Mr. Nagel hopes to see. But the favorable working conditions must first be in place.

In theory, free-flowing, unimpeded container terminals would allow for systematic berthing and servicing of manageable numbers of container ships each and every day. Unhampered storage, retrieval, and delivery of these containers presuppose congestion-free passage in and around these terminals, and such utopian conditions would provide the comfortable working environment required for all personnel. Immediate and serious consideration, therefore, must be given to the pages in this website which describe the space-saving/creating features of these patented storage, retrieval, and delivery systems.

Designed to assure free-flowing and unimpeded operations within container terminals, these systems would also reduce operating costs and increase profits significantly. This financial windfall, unavailable in conventionally-structured terminals, would allow for permanent employment of port drivers for these in-house delivery systems. Employment by the terminal delivery systems would thereby qualify these drivers for union membership, and an important step in accordance with the S.H.A.R.E. principles will have been taken.

Charting the Course
October 13th, 2004

Based on what authorities continue to report, none of the nation’s container ports will be able to handle the projected increase in container volume in the foreseeable future. Mr. Norman Y. Mineta, Secretary of the U.S. Department of Transportation, and certainly one of the best known of these authorities, stated about a year ago, that of the 361 ports in the U.S. only 60 are presently equipped to handle containers. He predicted, however, that another 200 ports will be handling containers in the pressing years to come. From his vantage point he is able to survey and evaluate the entire length of the nation’s stressed out supply chain, and his unique position enables him to see more clearly not only the hurdles that must be overcome, but also those that must be sidestepped.

As an example, the AAPA began studying capacity limitations long before the general public became aware of them, and its advisories, recommendations and admonitions are widely distributed and respected by maritime interests. In March of 2003, in a letter to the House Appropriations Subcommittee on Energy and Water Development, the AAPA pointed out that the $ 179 million requested by the administration for deep-draft construction projects (dredging) was far less than the hoped-for minimum of $ 459 million. Two years earlier, however, in his criticism of the “hub-and-spoke”concept, James Hartung of the AAPA had wisely alerted officials to some of the problems in that concept, and cautioned against the use of large container ships. He said that concentrating truck and rail traffic at a few ports would worsen congestion, and pointedly asked, “If you took the traffic of Philadelphia and Baltimore and other ports and shoved that into New York, what kind of issues would we be dealing with?” To deal with those “issues”, as we now know, would require a price tag that neither the taxpayer nor the Office of Management and Budget (also the taxpayer) would consider acceptable. Mr. Neil Davidson of Drewry Shipping Consultants in London was even more direct a few months ago when he stated that; “The bigger the ship, the more transshipment and feedering you need, and that costs money ... With ports under pressure to reduce air pollution and traffic congestion caused by trucks, they will not, as they did in the past, automatically build bigger terminals and dredge their harbors deeper each time carriers introduce a new generation of ships. Eventually ports will say, ‘We can’t do it anymore.’” That’s the double-edged sword Mr. Everhard was warning us about at Port Industry Day back in July of 2000. “Public funding of dredging amounts to a subsidy of shipping companies building such vessels”, he said. Mr. Everhard’s assessment was an accurate one. First, we pick up the tab for the dredging, then as a result of this dredging we’re forced to eat the added costs of transportation from faraway “king ports”.

If we read between the lines, this is what Mr. Mineta was implying. By offloading container ships at ports closer to the end user, instead of at distant “king ports”, the industry will reduce traffic congestion, vehicle pollution, and across-the-board expenses for the taxpayer and consumer. Smaller, shallow draft ships, readily available at a lower cost to shipping lines, will service these conveniently located ports and require no dredging. Mr. Secretary foresees a win-win scenario.

Plus Signs
October 14th, 2004

Let’s examine that win-win scenario closely. The corrective measure proposed would:

• Allow ships unhampered access to and from preassigned berths,
• Provide for quick and efficient servicing of these vessels by longshoremen,
• Scan every container,
• Eliminate expensive container handling equipment,
• Position every container in a preassigned slot,
• Require no repositioning of containers prior to retrieval and delivery,
• Allow for an in-house, programmed delivery system by salaried drivers,
• Require no gates,
• Release valuable acreage for other uses (or for future expansion),
• Provide valuable acreage for warehousing and cross-docking facilities,
• Eliminate traffic tie-ups within terminals and in surrounding communities,
• Reduce pollution caused by idling vehicles and outmoded material handling equipment,
• Eliminate long distance delivery,
• Ease the burden on truck drivers,
• Ease the burden on railroads,
• Reduce costs to the end user,
• Increase profits for terminals and port authorities,
• Eliminate the need for dredging,
• Eliminate the need for taxpayers to assume dredging costs,
• Create employment opportunities presently restricted by cramped operations,
• Create employment opportunities in those 200 additional container ports,
• Provide lower costs and higher profits to shipping lines,
• Require the development of short-sea shipping,
• Increase the need for Jones Act ships and barges,
• Revive U.S. shipbuilding,
• Create employment opportunities in U.S. shipyards.

In fact, no stone would be left unturned. Not only would business entities benefit by the ability to expand and embrace new opportunities, but the various unions would also see unexpected and unopposed growth and influence in this unusually favorable atmosphere. Bearing in mind the win-win opportunities indicated above, along with the cooperative attitude of the AAPA as seen in its S.H.A.R.E. principles, as well as the plea from Chuck Mack ( “It’s perplexing why no one is stepping up to the plate. Everyone is afraid to make the first move.”), allow me to put Chuck’s question to you in another way. “Why isn’t everyone stepping up to the plate?”

Another Plus Sign
October 15th, 2004

Now that things have quieted down in our Southeastern States to the point where recent hurricane damage can be assessed and repaired, an ancillary benefit of the patented storage and retrieval system can be evaluated. As the recent storms approached and evacuation orders were issued by civil authorities, those not in a position to comply with those orders were required to seek shelter wherever protective cover could be found. One of the humanitarian announcements given wide publicity was the offer from officials at the U.S.S. Alabama Memorial to open its doors to any and all who sought refuge from the onslaught of those impending storms. A number of local residents no doubt availed themselves of this thoughtful invitation, and these present day ancient mariners who opened their arms and their hearts to the those in danger deserve to be recognized and remembered.

Recall, if you will, that more than half a century ago hundreds of sturdy young men boarded a much younger U.S.S. Alabama (BB-60), and together, this ship and its crew conducted themselves admirably in naval campaigns aimed at assuring the security of this nation and its people. It comes as no surprise then, that this magnificent vessel and its not so young crew should once again take the lead in efforts to provide protection and shelter for those exposed. U.S.S. Alabama, one of the four innovative South Dakota-class battleships commissioned during World War II, is a 680-foot long, 35,000 ton steel structure built to withstand the most severe assaults, and in battle conditions and in typhoons as well, its walls (bulkheads!) shielded all those who manned this mighty ship. At the conclusion of hostilities the nation paid tribute to this great ship and to those men whose dedication and devotion to duty is still much in evidence. The walls of this mighty ship have yet again given protection and solace to threatened occupants. Par for the course.

The ancillary benefit mentioned above merits comment at this point. The coincidence should be noted that both the U.S.S. Alabama and the structure depicted in this website’s illustration are both 680 feet in length. Like the U.S.S. Alabama, these mobile storage and retrieval facilities, of whatever length, would be made available as Civil Defense Shelters during emergency situations. Although the designers had threats of terrorism in mind when designing this website, the administration building shown between the two mobile carriage sections would be made available to serve as temporary living quarters for several thousand refugees in any sort of emergency. The recent weather conditions along the Gulf and South Atlantic Coasts has prompted the design of units for use as additional shelters in these structures, and these specialized units will be on standby in those ports exposed to adverse weather conditions.

Because technology and reconnaissance provide us with advanced warnings of approaching storms, Mother nature’s assaults are somewhat manageable. There are no fail-safe methods as yet for predicting acts of terrorism, however, and concerted efforts must be directed to those dangers. Senator Schumer’s proposal was unacceptable because it was unworkable. It required time, and there is no time to spare in the present scheme of things. The scheme requires amendment.

Eureka! We've found it!
October 18th, 2004

When Frank Divona of Metropolitan Stevedore Co. said; “It’s the perfect storm”, he wasn’t describing one of the hurricanes that besieged the Southeastern States this past month. “Everywhere you turn around, some group is having a problem”, he said. He was referring, of course, to the disruptions at every point in the supply chain caused by congestion all along the chain. Jean Godwin of the AAPA summed it up nicely when she stated that, “It’s like trying to fit a 16-inch pipe into a 4-inch opening”. She said that about four years ago, by the way. She’d probably describe it as a 24-inch pipe nowadays, and she could hardly be accused of exaggerating because one of the news services just issued this discouraging report about the hopeless conditions on the West Coast:

“US West Coast Ports - Congestion: No relief is in sight from the heavy congestion at the ports of Los Angeles (LA) and Long Beach (LB). Although more than 2,000 casual workers have been hired, most ships are sitting idle through 7 or 8 shifts (3 - 4 days or more) before their allocation number comes up and labour can be assigned. As at yesterday, there were some 89 ships in port including around 45 at anchor. LA/LB ports are currently using the USCG-approved ‘contingency anchorages’ located off Huntingdon Beach, where there is room for 12 ships to be anchored. If the harbour runs out of room at these ‘contingency anchorages’ they will begin assigning ships to occupy ‘drift boxes’ located south of the Precautionary Area - where ships will be instructed to maintain their position inside the boxes. These ‘drift boxes’ have been approved by the USCG. All ships assigned to such boxes will be officially logged in as having ‘arrived’ by the Marine Exchange just as if they had anchored offshore in one of the USCG-approved anchorages. Port time at present is averaging 8 days, with some vessels showing a 10-day turnaround time.”

Vessels encounter no delays when crossing the Pacific. They arrive at their destinations right on schedule, but then they’re forced to wait for a week or more before they can be serviced. Mr. Nicola Arena, President of Mediterranean Shipping Co. in the U.S., noted that where projections were inaccurate in other areas of the supply chain, shipping lines correctly forecasted this growth and were able to introduce the appropriate amount of capacity to accommodate this growth. “Now”, he added,“it’s time for other entities to do the same.”

Because there’s no reason to doubt Mr. Arena’s statement, let’s give some thought to his reasoning. If the shipping lines could predict exactly the rate of growth; and if the shipping lines could prepare in advance the amount of capacity required to accommodate this volume of shipping; and if the shipping lines own the major terminals in the U.S.; and if the shipping lines, therefore, are in a position to make the necessary adjustments within these terminals to enable terminal operations to accommodate the increasing volumes ... then why don’t the shipping lines step up to the plate and relieve the incredible pressures that are straining every link in our delicate supply chain?

Our search for the weakest link has ended.

Cause and Effect
October 19th, 2004

This column attracted some attention yesterday. Trucking companies and railroad companies are now wondering why shipowners continue to absorb the $ 30,000 to $ 50,000 daily cost of waiting for berthing spaces in congested ports like Los Angeles and Long Beach. Some of those shipowners, though not all of them, own terminals, and the operations within these terminals can only be described as primitive. Except for some pretty expensive container handling equipment, these terminals stack, search for, retrieve and deliver boxes exactly the way it was done forty years ago. But ports are handling much, much more now than had to be handled back then. Trucking companies and railroad companies are expanding and will continue to expand as long as they have the space and the resources to do so, but container terminals have already come to the end of the line ... as far as space is concerned, that is. There is an abundance of financial resources and brainpower available, but no space. Meanwhile, yard workers, truck drivers, independent terminal operators and the railroads are being blamed for all the hangups that occur along the supply chain even though the cause of the problems, as well as the solution, lies elsewhere.

When seeking a solution for an unacceptable effect (the congestion), one must first consider the cause (the growing volume). Those who are in authority in those shipping companies that own container terminals have given every indication that, no matter what the cost, they’ll find a way to solve the problems besetting the supply chain. Their ships are offloading ever increasing amounts of profitable cargo at their own terminals, and this is what’s causing the delays and breakdowns all along the delivery chain. Failed efforts to speed up the handling and delivery of this cargo in congested terminals subtract great sums from the bottom line as a result, but what can be done about it? This brings us again to the financial resources, the brainpower, and the “no matter what the cost” issues. Millions, no ... billions of dollars have been spent in sincere attempts to make life easier for those in the delivery chain and, according to the maritime journals, billions more have been set aside to continue this uneventful search. It’s obvious that there’s no lack of funding here, and it’s also widely known that there’s no lack of will power and no lack of brain power. But no matter the degree of mental acumen, the old, old adage still holds; “You don’t know what you don’t know.”

The purpose of this website is to introduce and describe a patented system for storage, retrieval and delivery of containers. If anyone at all, regardless of his/her IQ, could have anticipated this system beforehand, the patent would have been unobtainable. This absolves from blame, therefore, all those who haven’t solved our congestion problems because they had yet to learn of this patented system. But with this new knowledge, the available funding, and their ever-present determination, what is standing in the way of implementation? The cost, maybe? That’s the rosy part of the picture.

[If you made an attempt to reach us and received no response, it’s because your inquiry didn’t get through. The fault was at this end and has been corrected by our programmer. We regret the delay and respectfully request that you resubmit your transmission. Thanks].

On Deck
October 20th, 2004

Here’s a scenario, using some round numbers and some familiar numbers. Let’s say a small port in Southeastern New England decides to import and export containers. Permission is granted by the community for Deepsix Shipping Lines to own the terminal and deliver 3,600 TEU per week, or approximately 180,000 TEU per year. If Deepsix knew ahead of time that each of its vessels had to tread water for ten days before being allowed to dock, however, the deal would fall through. Deepsix is incurring costs of about $ 36,000 per day to operate each vessel and the ten-day waiting period would not only put them in the red, but it would also disrupt their delivery schedule. Instead of turning around one 3,600 TEU vessel every week, the ten-day turnaround time for each vessel would force the company to restrict operations to one ship every ten days, and would thereby reduce the annual volume to less than 130,000 TEU. The CEO at Deepsix, knowing ahead of time that this would be a lose-lose situation, would wisely look elsewhere.

The shipping line/terminal owner in this fictitious Southeastern New England scenario is in a much better position, however, than the shipping line/terminal owners in not-so-fictitious Southern California. Commitments were made several years ago by these latter shipping lines, long before the flood of imports could have been anticipated, and now each of the lines finds itself in desperate straits. How do they bail out? The noose-like bottleneck gets tighter every day. As an example, and using round numbers, if one of these shipping lines had planned to be offloading 14,400 TEU per week at its terminal in 2004 (about 720,000 TEU annually), and it intended to utilize vessels each having a capacity of 3,600 TEU, then each of these vessels at $ 36,000 per day would be treading water for ten-day periods. That’s a lot of money being divested. Better it should be invested.

Here’s how. Instead of frittering away the $ 36,000 cost of operation (approximately) per day for each waiting vessel, the shipping line should opt for the efficiencies provided by our patented system. Installation of these facilities would be completed and in full operation within months, and the investment would be considerably less than the daily losses the line is now being forced to assume. The income flow would be reversed, and the many disadvantages that were inherent in their conventionally structured terminal would no longer be present. Relief would be felt all along the supply chain and everyone would benefit. Refer once again to the commentary dated October 14th, 2004, entitled, “Plus Signs”. Every one of these improvements and benefits will be realized as soon as someone, some entity, “steps up to the plate”. That someone, that entity, will make a heckuva lot of money and a heckuva lot of friends.

The decision to make this innovative move cannot be made by longshoremen, truckers, the railroads, brokers, or political entities, however. The decision to introduce this necessary and cost-effective system of operation lies in the hands of shipping lines and terminal owners because they are the ones who unintentionally created, but now prolong, the shortcomings impeding our supply chain.

Mother Knows Best
October 21st, 2004

Our mothers, our wives, our daughters ... efficiency experts. Every one of ‘em. They wasted nothing. Not a minute of time, not an inch of space. They saw everything, they heard everything, and they could even read our minds. They ran the show. They got results. Who can deny it?

Now look at the way men manage an operation. Go back three, five, even ten years, and you’ll recall the authorities enthusiastically forecasting a highly profitable future for the intermodal industry. Everyone could see that growth was inevitable but no one seemed to be concerned about its unexpected rate or about managing it and providing for the day when we’d run out of coastal acreage. But that day of reckoning has been drawing closer and closer and those in the trenches are seeking relief from any source. A lot of money is being thrown around, but the ever-threatening Sword of Damocles is becoming nightmarish.

The periodicals are rife with critical commentaries, but the criticisms are always about the other guy. Nothing positive is being offered by spokesmen beyond the repetitious reminders that channels must be dredged deeper, productivity per acre must be increased, the railroads need to be improved, highway congestion must be addressed, terminal gate hours must be extended, rail shuttles are needed to move containers to inland yards, more manpower is needed in terminals, more technology is needed and less manpower, etc., etc. None of these recommendations have anything to do with what causes delays in the supply chain, and amidst all the hand-wringing Jean Godwin’s warning rings clearer than ever; “It’s like trying to fit a 16-inch pipe into a 4-inch opening”.

Are workable and affordable solutions being proposed by authorities? Well, no, because only two solutions were ever available, time and space, and they’ve already been used up. But aren’t efficiency experts supposed to be able to make more time and more space available when the need arises? In times past, when living quarters were not as spacious as they are today, our mothers, the epitomes of efficiency, never seemed to run out of space. And they’d find more than 24 hours in a day, too. Or so it seemed. This pickle of ours would be a perfect setup for them. If ever they caught sight of the recent comment that between $ 50 million and $ 60 million worth of technology was a worthwhile price to pay “to have the location of containers available at the click of a mouse”, couldn’t you just hear their reaction? “Open your eyes! If it got any closer it would bite you!”, they’d say. Losing track of anything was absolutely forbidden. It was their very nature to familiarize themselves with those methods that gained and preserved time and space, and if ever they had been exposed to the travails of a congested terminal operation, they would long since have recognized and utilized our patented storage, retrieval and delivery systems. If it meant a saving in time, a saving in space, and a saving in cost, it would get the immediate attention of these efficiency experts.

And when you couldn’t see the obvious, remember the put down? “College education! Humph!”

A Way Out
October 22nd, 2004

The Coalition for Secure Ports was formed about a month ago by maritime interests in order to lobby for enhanced maritime security. Mr. Basil Maher, President of Maher Terminals and President of the National Association of Waterfront Employers, stated that, “Too much is at stake for the nation to be lulled into a false sense of security”, and he called for the government to focus as much attention on maritime security as it has on aviation security. The coalition has for its purpose to make policymakers aware of the progress that has already been made in marine cargo security, and to avoid actions that merely impede the flow of commerce, creating that false sense of security without delivering real container security.

A number of influential members of Congress continue to remind us that a mere 4% or 5% of containers are now able to be scanned at our terminals. Senator Chuck Schumer even went so far as to file legislation that would require manual inspection of at least 10% of all incoming containers. The suggestion was roundly shouted down, however, because it was considered to be a definite impediment to “the flow of commerce”. To add emphasis to the general feeling that little has been done with respect to the inspection of containers, President Bush signed the $ 28.9 billion Homeland Security Appropriations Act on October 18th, which includes funding for radiation detection monitors to screen cargo at ports.

Mr. John Kerry, the Democratic presidential hopeful, in a recent speech accused the Bush administration of settling for a security policy that screens only 5% of the cargo that comes into U.S. ports. He quite accurately echoed all the information that has been made known on this matter. Almost immediately Customs and Border Protection Commissioner Robert C. Bonner took Mr. Kerry to task. Mr. Bonner stated; “It’s terribly misleading to say you’re not inspecting 95 percent of the containers, and leave out the fact that for the first time since 9/11, we get information, and we do a risk assessment of every container that’s heading to the United States ... The containers we identify, 100 percent of them are inspected using large-scale x-ray machines and radiation detection equipment. We have implemented CSI (Container Security Initiative) to be able to screen the highest risk containers before they leave the foreign port”. (So, take that, Senator Kerry!)

Unless Mr. Bonner is resorting to double-talk, therefore, Senator Kerry, Senator Schumer, and many others in Congress are way off base. But let’s look at what Dennis Eng wrote on October 18th in “The Standard”, a newspaper of the Sing Tao Newspaper Group and Global China Group. He’s closer to the action than we are and reports that Daniel Wagner, senior co-financing specialist at the ADB (Asian Development Bank) states that about 90 percent of all goods transported into or out of the United States occurs by sea but only 5 percent of this is inspected. This is a statement that’s difficult to ignore because the threat of terrorism is just as important to the Asians as it is to us. Mr. Wagner makes it clear that, “When one considers the extent to which Asian economies are dependent on exports to the U.S. [and Europe] for their livelihood, the risk that a terrorist attack on the transportation infrastructure of the U.S. would impact Asian countries is profound”. Mr Wagner makes it perfectly clear that the Asians aren’t playing games with security issues.


Back in the first paragraph, you’ll recall, we related the purpose of the Coalition for Secure Ports. The intention of this Coalition, it was stated, is to lobby policymakers to avoid actions that merely impede the flow of commerce ( which is why Senator Schumer’s amendment was defeated last week) and also to avoid creating a false sense of security without delivering real container security. ( For any policymaker to give knowingly a false sense of security to the people in this country would be nothing short of criminal.)

Senator Kerry is striking for the presidency, and although his statement could be taken with a grain of salt, there’s no denying that it was in line with everything else that has been said or published about the amount of container scanning being done in our ports.

Mr. Bonner has just as much at stake because he holds a position in the challenged administration, but his statement, with regard to our security, our livelihoods, and quite possibly our very lives, is supposed to be the gospel truth. His obligation is supposed to be to us, not to any political agenda. Mr. Bonner was emphatic when he added, “We have done an amazing amount of things to better secure cargo containers that are being shipped to the U.S. And at the same time do it beforehand, and in a way that’s consistent with security, and doing it without shutting down our economy, and the economy of the rest of the world”.

Mr. Wagner of the Asian Development Bank assesses the situation differently, however. He is at the scene, and because his position in the ADB requires first hand knowledge of high risk situations, it doesn’t seem likely that he’d be in the dark on this matter. Neither is President Bush in the dark apparently, else why would he appropriate more than $ 28 billion for the problem? Hasn’t Mr. Bonner advised him yet that container inspections are being adequately handled in Asia? Do you suppose someone is pulling Mr. Bonner’s leg? Or do you suppose Mr. Bonner is pulling ... Nah!

There’s a way out of this quandary. We can dispense with all political agitation, labor disputes, unemployment problems, and yes, even security concerns by reviewing some of the previous commentaries offered by this website. For a fraction of that $ 28 billion just appropriated, a small fraction, this whole question of container scanning and guaranteed security can be put to rest. Everyone would come out a winner. The patented system this website is touting is the answer to everyone’s concerns, whether they be economic concerns, safety concerns or political concerns. Inevitably it will come to pass, but as we all know, “the first step is the hardest”.

It's About Time
October 25th, 2004

Yes it’s about time, but it’s about space, too. The money has never been a problem, though, because there has always been plenty of it around by the sound of things. Just last week $ 28.9 billion was appropriated by the administration for security problems, and a sizeable chunk of that is destined for use in container yard operations. And several years ago, as a matter of fact, you may recall Chris Koch, CEO of the World Shipping Council, stating that an investment of more than $ 34 billion would be needed in order to expand the transportation infrastructure. Here are his exact words; “Liner shipping moves roughly two-thirds of the value of America’s international commerce, yet for most Americans, the industry is out of sight and out of mind ... Another challenge is upgrading the nation’s transportation infrastructure to handle the forecast doubling of containerized trade by the end of the decade. It has been estimated that our industry must invest over $ 34 billion in additional operating assets to service this growth”.

No one in the industry flinched at Mr. Koch’s statement because the shortcomings that are plaguing the intermodal supply chain have been recognized, acknowledged, and acted upon in a variety of ways for the last decade. In fact the “Kipplinger Letter” of February 16, 2001, contained the following advisory:

[“Heavy investment in unsnarling cargo traffic is a sure thing in Uncle Sam’s next big funding bill, coming in ‘03. About 60% of $ 200 billion plus will be earmarked for projects all over the U.S. Aim is to smooth out the transfer and flow of cargo between ships, railcars, trucks, planes and intermodal connection points. Spending is seen as critical to productivity in the years ahead. Without breaking logjams where goods intersect, just-in-time deliveries and many other innovations intended to shave business costs won’t work.”]

Please note that the above forecast was given out months prior to the September 11th World Trade Center disaster. That unfortunate event put a much higher price on the cure-all for our supply chain delays and also assured that no longer would it be true that “ ... for most Americans, the industry is out of sight and out of mind”. Not a day goes by that newspapers and TV channels fail to devote media time to events and even to documentaries about container ships, container yards, and the personnel that are concerned with the handling and delivery of containerized goods. Nor have political personages failed to notice how easy it has become to draw attention to themselves by involving themselves in transportation and security issues. Some 22 existing government agencies and an estimated 170,000 employees, in fact, have been transferred to the Department of Homeland Security. With so much attention being given to the plight of containerization, and with so many learned minds involved, and with so much funding available, what is our fretting about?

Oh, yes, that’s right. It’s about space, and it’s about time.

Wishful Thinking
October 26th, 2004

“Wishing will make it so ...” is a line from an old song, but in leaner times those words were wisely denied by our parents. Wishful thinking never worked for them and they strongly advised us to avoid the pitfalls brought about by complacency. A number of influential analysts, who should know better, are on record as having said that the influx of containers will slack off early in 2005 after the peak holiday period, and also because of annual Chinese New Year celebrations. These analysts assure us that U.S. ports will then clear up their congestion and logjams. Yeah, right.

If our elders were alive today they’d be reminding us of their admonitions about wishful thinking. The Chinese have no intentions of halting or even slowing down their rate of production, nor do the shipping lines have any intention of reducing any phase of their operations. China’s Minister of Communications, Zhang Chunxian, revealed that his country’s containerized trade will grow from this year’s 60 million TEUs to 100 million TEUs by the year 2010. That works out to a little less than a 10% annual growth rate, in line with World Bank forecasts which have been badly underestimated of late. Mr. Chunxian also revealed that total tonnage during the coming six-year period will increase from this year’s one billion tons to 3.5 billion tons. But that doesn’t reflect a 10% growth rate, it reflects a growth rate in excess of 20%, and this is what should concern those in the U.S. who are expecting a slowdown. The significant difference in Mr. Chunxian’s figures cannot be accounted for in breakbulk and automobile shipments. Simply translated, it means that the 10% rate of growth for container estimates is far too low, especially when one considers that Chinese output has tripled in the past five years. China makes no secret of the fact that the biggest obstacle to their plans for continued growth are the inadequacies in the infrastructures of foreign transportation systems, especially those in the U.S. Here’s a true ripple effect. What we are putting off is causing sleepless nights for analysts on the opposite shore of a 7,500 mile wide ocean.

Let’s hear it from another authority ... someone who has “put his money where his mouth is”, so to speak. Mr. Nicola Arena, the U.S. President of operations for Mediterranean Shipping Co., expressed confidence in the forecasts of continued and rapid growth of international trade and he chided others in the international supply chain to do some homework and acknowledge the investments that carriers have made in their fleets. His 8,130 TEU MSC Texas is the first of some 30 vessels recently ordered by MSC, now the second largest carrier in the world, and while 60, 70, and even 80 vessels are regularly backed up in LA/Long Beach, we talk about an impending slowdown and restful interlude. That won’t happen because there are no time outs in this game. If the peak periods, the holiday weekends, and the terminal slow downs are more than we can handle now, what will it be like next year, or the year after that? Mr. Arena reminds us that it took just six months to build the Texas, and the other 30 vessels are soon to follow. He also reminds us that it took just 11 days for the Texas to cross the Pacific, and that vessels lose almost that much time waiting in line for a berthing space in LA/Long Beach. He and many other maritime authorities have issued repeated warnings that the U.S. supply line needs an immediate transfusion or transformation.

It’ll be a transformation, not a transfusion. We don’t need more of the same, we need changes.

Prophet Margin
October 27th, 2004

As long as we’re talking about change, let’s look at how long we’ve been talking about change. Respected names in the industry long ago recognized that the status quo could not be maintained for any length of time without disastrous consequences. That’s what Douglas Tilden said about four years ago, and this is exactly how he put it; “For our industry to continue to serve U.S. foreign commerce and not become an obstacle to economic growth, we must implement new processes and technologies that allow greater utilization of our resources ... The status quo will not do”.

Ron Brinson, the former CEO at the Port of New Orleans, also had his eye on the troubles ahead when he stated a while back, “Waterborne trade is the currency of the global economy; more than 90% of global trade moves via water carriage. Therefore America’s successful participation in the global economy depends upon the capacities of U.S. ports and related infrastructure”. Mr. Brinson didn’t have a crystal ball at hand, he was just stating the obvious. “Most trade routes will experience a doubling of containerized cargo volumes during the next 12 years. Some trade routes will double within the next 6 to 8 years”, he added. Crystal ball or not, his words back then were right on the money.

Here’s what was really prophetic. A panel of logisticians at “Transcomp 2000", a conference that was held in Fort Lauderdale in November of 2000, identified these upcoming problems:
• The lack of available real estate for expanding facilities.
• Shortages of equipment and personnel.
• Environmental constraints.

Sound familiar? These problems were presented to the attendees at that Fort Lauderdale conference by a panel of experts, remember, and not by an individual. It’s an indication that these concerns were being widely studied, but in the intervening years no one has been able to come up with workable and lasting solutions. Damage control has been attempted wherever breakdowns occur in the supply chain, and the ongoing crisis in LA/Long Beach is just one more example of a complex system being held together with bailing wire. At this writing the logjam of vessels at that port has forced authorities to hire more than 5,000 additional workers, but this and similar emergency repairs amount to locking up the barn after the horse has been stolen.

Three years ago Mr. Vickerman stated that, “Even with conservative 2020 econometrics, cargo forecasts call for two to four-fold increases in demand at key U.S. container ports”.

Three weeks ago Mr. Tilden stated that, “We have to find a different way to operate, or else we are not going to be able to handle the trade”.

A “different way” to operate is the way he put it. Now we’re getting somewhere.

The Future Is Now
October 28th, 2004

Whenever reports are issued about congestion and logjams in and around container terminals, the cause of each crisis is laid at the feet of rapid and unexpected growth. The consequent lack of storage space in these hard-pressed terminals, the time-consuming nature of offloading and storage operations, and even the diminishing ability to retrieve and deliver offloaded containers all contribute to the many unnerving delays in this 21st century system of distribution. In the present scheme of things, however, except where labor disagreements arise, hardly anyone could criticize port authorities and terminal personnel in their efforts to introduce efficiencies and acceptable innovations in order to avoid or untangle inevitable tie-ups.

A century ago, when people relied upon horse and wagon for highway travel and transport, there was never a lack of attention to innovative measures in an effort to make this mode of conveyance more efficient. Upgrading, improved designs, new ideas and inventions were everyday occurrences in those days, just as they are today. There was always opposition to change, and there was always derisive criticism, but practical and cost-effective innovations eventually held sway. The term now given to those advancements and developments in years past is ... progress.

When you nodded in acknowledgment to those difficulties mentioned in the first paragraph above, had you forgotten the words used in the opening paragraph of the “Home” page of this website? There it is stated that, “ ... the most efficient, space saving, timely and cost effective transport of goods to the consumer is achieved by creating space, eliminating most of the steps required in traditional methods of handling containerized goods, and introducing an entirely new method of product distribution and delivery”. That statement spells out exactly what is required to eliminate the obstacles being encountered daily in every container yard in the U.S. Something new and different must be introduced. Something like an upgrading, an improved design, a new idea, or even a new invention ... something like the invention described and pictured in this website, for example. By retrofitting this patented system in space-starved terminals, every one of the sought after benefits referred to in the opening paragraph above will be realized. Relief will be provided to every link in the supply chain and goods will flow uninterruptedly and at reduced cost to the end users. Years from now our children and grandchildren will look back with gratitude upon our persistent efforts to improve the distribution system and chalk it up to ... progress.

Advancement almost always entails heavy costs and personal sacrifice, and such was the case in the slow and steady changeover to steam and gasoline power. Unlike the expensive transition to the horseless carriage, however, retrofitting our condensed storage, retrieval and delivery system into existing terminals will be relatively quick and inexpensive. In most instances, if not all, the entire facility will be fabricated and put into operation at no cost to the community or to the port authority ... and none of the existing expansion plans now on drawing boards are being offered in this way.

Caution Flags
October 29th, 2004

This column on September 30th quoted Mr. Belzer of the University of Michigan’s Institute of Labor Relations as saying; “Low wages, long hours, piece work and unsafe working conditions. You have working conditions that I believe can be characterized as sweatshops ... If the problem is not resolved soon, you won’t have to worry about gridlock because there won’t be any trucks on the road ... I can’t comprehend why people don’t respond to this as a national crisis”. You’ll recall that he was talking about non-union owner-drivers.

So was John Drewes of Devine Intermodal whom we quoted in our October 4th column. He was waving a caution flag when he said; “This is the first time since I’ve been in trucking that I don’t see new drivers coming into the industry”.

The Teamsters’ Chuck Mack also issued a warning in this regard when he said recently; “Conditions are so bad that the turnover rate among these port drivers exceeds 150 percent per year as they cycle in and out of the industry ... It’s perplexing why no one is stepping up to the plate. Everyone is afraid to make the first move”.

At MARAD’s Short Sea Shipping Conference held in New York on recently, one of the most influential of our maritime authorities was taking a broader view and was quoted as saying; “The U.S. has yet to achieve a truly intermodal national transportation system. The system today represents an aggregate of public and private modes of freight and passenger delivery, each with its own stovepipe areas of interest and funding”. There could be no more accurate way to describe wasteful and costly overlapping procedures than the use of the synonym, “stovepipe”. The speaker citing this comparison, you may have guessed, was Chuck Raymond, CEO of Horizon Lines. Stressing the importance of coordination in the transfer of goods, he had stated at an earlier conference; “In my opinion, there isn’t a greater challenge facing our economy today than the challenge of safe and efficient movement in an ever expanding global market ... The impending freight capacity crunch, therefore, leads us to one overriding policy question — what will happen if plans are not made today for tomorrow’s freight realities?”.

The four officials quoted above, along with a number of others cited in these commentaries, are giving us a preview of the disastrous conditions that await us. For the better part of ten years these admonitions have been directed at every segment of the supply chain, because each link, as in any chain, depends on the reliability of every other link. But it might be time to take a closer look at this analogous terminology we’ve been using. Mr. Raymond’s concept, the “stovepipe”, more accurately describes the loose-fitting, ragtag arrangement that makes up our intermodal system of product transfer. And he’s right. What we have is nothing like a functioning chain linkage. Strikes, slowdowns, harbor congestion, shortages of owner- drivers and other personnel ... you name it. Almost every day a breakdown in one of these independent segments is making the headlines. Integration of these segments, as Mr. Raymond has recommended, would solve all our problems.

"Run To Daylight"
November 1st, 2004

Vince Lombardi coined the expression “Run to daylight”, and because of him and his champion Green Bay Packer teams the meaning behind those words will never require further clarification. Coach Lombardi and his offensive coordinators wisely directed running backs away from those areas of congestion which, as every fan knew, would impede the team’s progress and lead to a shut down rather than a first down.

Why don’t port authorities, terminal operators and ship owners recognize the logical philosophy employed by successful coaches at every level? Some of the ship owners do, of course, by diverting their ships away from bottlenecks such as the one prevailing at LA/Long Beach. Most shipping lines, however, have no safety valves in their game plans and have no recourse other than to add their vessels to the pileup. The result? No gain. Back to the drawing board. In a football game the assistant coaches “up in the booth”, a vantage point providing a bird’s-eye view of the congestion down on the field, sense that in their arena of operation an end run might be just the right call at this point. Although they can only speculate how much yardage will be gained by this stratagem, they’re assured of one development at least; the congestion will no longer be in the middle of that line of scrimmage.

A coaching staff would see the obstructions hindering the movement of our cargo containers and would react by calling for some kind of an end run, or a spread formation, or anything that would dilute the congestion in the middle of our scrimmage line. These tacticians would never lay the blame for a pileup on a flanker or a wide receiver far removed from the logjam. Maritime consultants and logisticians, on the other hand, in casting about for the culprits responsible for supply chain backups, have repeatedly done just that. In placing responsibility on the shoulders of truck drivers, or on rail systems, or on outdated or inadequate highways, these analysts do a disservice to those at every point in the supply chain. Who gains? No one. Who loses? Unlike the game of football, where a winner almost always emerges, everyone is a loser in today’s unsuccessful efforts to solve our supply line and security problems.

After studying the many and varied reports about the unequaled and overpowering tie-ups in the LA/Long Beach complex these past months, could there be any doubt in anyone’s mind that the source of these worsening conditions lies within the terminals and not anywhere else? It has long been evident that if terminal operators could disgorge containers through the gates at the same rate that longshoremen offload vessels, then there would be no logjams, no tie-ups, no congestion. Conventionally-structured container yards have already reached the point where their operational capabilities restrict container deliveries to a number far below the number of container arrivals. This deficient condition has been anticipated for the past decade and although logisticians and maritime interests have devoted unlimited time, money and space to this threatening eventuality, every effort made so far has turned out to be nothing more than a stopgap measure. Let’s admit that desperate times call for desperate measures. Let’s try something logical.

A Fitting Solution
November 2nd, 2004

Here’s a question that requires logical analysis. Why should containers carrying products destined for U.S. consumers be diverted to container ports in Canada and in Mexico? This diversion extends delivery time, increases the cost of these goods to the end users, and also deprives our trucking and railroad systems of the opportunity to deliver these goods. The shipping lines show little concern for the consumer’s added burdens, however, because these detours save time and money for them, and like any well-run business entity, shipping lines will gladly accept whatever subsidies the consumers and taxpayers unwittingly grant them. Let’s put the pieces of this puzzle together by reviewing some of what we’ve heard from transportation authorities, and let’s begin at the very top.

1. Mr. Norman Mineta, secretary of the DOT, stated a while back that the 60 container handling ports in the U.S. will not be able to handle the increase in volume projected for the foreseeable future. Mr. Mineta stated that another 200 of the country’s 361 ports must be converted to container handling facilities and the logic of his assessment becomes more and more apparent as time passes. To pay added fees for transshipment from Mexico to the U.S. consumer and to deprive U.S. workers of the opportunity to service these vessels in U.S. ports amounts to a lose-lose situation. The majority of the 29 West Coast ports participating in the 2002 shutdown are not container handling ports and a number of these should be equipped to handle containers in order to service those vessels now being “diverted”. When Mr. Mineta’s logic begins to sink in, considerable financial benefits will be realized by these new container handling ports and by communities adjacent to these ports.

2. Mr. Chuck Raymond has endorsed short sea shipping as an efficient and cost-effective way of transporting containers from one U.S. port to another, and from one U.S. coastal region to another. Mr. Raymond’s reasons for taking this position are obvious and commendable. He has in the past directed our attention to the unacceptable levels of pollution generated by truck traffic as well as to the heavy cost of building new highways. As opposed to inexpensive coastal waterways, Mr. Raymond reminds us that new highway construction costs $ 32 million per mile. Increasing the number of container handling ports will not only remove unacceptable levels of pollution but will also provide more efficient service and lower costs to a greater number of end users. Until we embrace the logic behind Mr. Raymond’s reasoning, and until more ports are equipped to handle containers, problems with our infrastructure and the cost of goods will continue to mount.

3. At Port Industry Day sponsored by the Port Authority of NY/NJ four years ago, moderator Conrad Everhard questioned the wisdom of expensive dredging projects in order to accommodate mega-ships. He noted that larger vessels cause increased traffic congestion and higher levels of pollution because of the additional trucks required to deliver containers, and that public funding of dredging amounts to a subsidy of shipping companies building these large ships. Establishing additional container handling ports, and locating them closer to end users, would provide relief to those large port communities now forced to contend with unhealthy pollution levels and unacceptable highway congestion, and would also eliminate the need for expensive dredging projects and costly transshipment from distant hub-ports to end users.

4. Mr. James Hartung, when speaking on behalf of the AAPA, stated that port officials would oppose a hub-and-spoke system as a solution to congestion. At a Capitol Hill briefing sponsored by the AAPA in 2001, Mr. Hartung affirmed that concentrating truck and rail traffic at a few ports would worsen congestion and create extraordinary logistic challenges. “To king-make and favor a few ports would decrease the efficiency of the marine transportation system and skew the economic benefits,” he said. Conversely, it should be apparent that increasing the number of container handling ports, and even reducing the size of our largest ports, would increase the efficiency of the marine transportation system and generate more favorable economic results.

5. In discussions about the cost of dredging to accommodate the new generation of oversized container ships, the U.S. Office of Management and Budget has cited the prohibitive cost of such projects and is even now objecting to current dredging projects. This reluctance reflects extensive study on the part of the OMB and a determination to exercise fiscal responsibility with respect to the development of marine transportation issues. Additional ports servicing smaller vessels, rather than hub-and-spoke ports catering to mega-ships, will serve the interests of all U.S. consumers and taxpayers, and the OMB seems to be well aware of this.

6. Mr. Nolan Gimpel of Axiom Consulting has stated that mega-ships strain the capacity of inland infrastructure, terminal operators and rail and truck carriers. As terminals run out of space, he added, ports will be required to seek alternate ways of expanding their operations. The most logical and least costly way to expand without straining the capacity of inland infrastructure, terminal operators and rail and truck carriers is to establish smaller container ports closer to end users. The benefits, as stated above, will accrue to all taxpayers and consumers.

7. Neil Davidson of Drewry Shipping Consultants at Navis World 2004 in San Francisco called attention to the operational and commercial limitations that reduce the effectiveness of mega-ships. Mr. Davidson foresees carriers having a more difficult time filling these large vessels, thereby cancelling out the economies of scale these ships are supposed to produce. He also cites the limited number of ports able to service these larger vessels because of harbor depths, and the inability of these vessels to accommodate importers and exporters who prefer more direct, less costly service. “The bigger the ship, the more transshipment and feedering you need, and that costs money,” Mr. Davidson said. This is another example of an unwitting subsidy paid to shipping lines by consumers, and emphasizes the need for smaller container handling ports in closer proximity to end users

The close-fitting pieces of this puzzle, when interlocked, reveal a very simple solution to what has been looked upon as a very complex problem. Every projection and every prediction put forth by analysts point to chaotic conditions for the supply chain, and maritime authorities have yet to propose a viable solution. The patented system described by this website is a viable and logical solution and can be retrofitted wherever needed at no cost to port authorities or taxpayers.

Our “Problems & Solutions” page and our October 14th commentary offer quick reviews of the benefits and advantages provided by this viable, logical and inevitable solution.

A Bridge Too Far
November 3rd, 2004

Ordinarily it wouldn’t be fair to pick out and pick on just one of the U.S. container ports, but since the Port of Long Beach plays such an important part in the movement of containers in and out of the country, and because so much is being reported about congestion and other newsworthy happenings in and around the port, this commentary will be devoted to that San Pedro location.

A few years before container terminals gained prominence, National Steel was busily scrapping decommissioned Navy vessels at the site, and the owner of National Steel, Mr. Joe Shapiro, would often go out of his way to teach and even treat the “navy guys” who hung around to pick his brain. Meetings convened in time for lunch at the “Princess”, a much smaller regent than the Queen now reigning, and sea stories were swapped. Real sea stories. As each vessel was being dismantled Mr. Shapiro made certain that the name plates of each of the heroic naval ships were preserved and mounted in his office, and his sentimental visitors spent long hours reminiscing about service aboard those valiant warships. Some of us had even experienced the euphoria of watching those ships as they were being built. And then we were forlorn as we watched them die.

One of the most remarkable structures in all of Southern California in those days was the imposing Gerald Desmond Bridge. It took your breath away. It was state of the art and almost brand new. It would outlive us all, we thought, and our suspicions in this regard were assured when seismic improvements were undertaken and completed just a little while ago... we thought. Well, maybe it won’t outlive us after all. Word of the Gerald Desmond Bridge Replacement Project have begun to make the rounds, and it appears as though port authorities are quite serious about the endeavor. When a figure of $ 700 million is published, then you know the authorities are quite serious. The funds are not yet in the bank, however, so until that date arrives there’s still time for more analysis.

So now another man-made historic wonder is slated to be dismantled. Not scrapped, mind you, but dismantled. Those storied navy vessels were never scrapped either. That word, “scrapped”, is now and always was an indignity. Like the Gerald Desmond Bridge those vessels rendered a service to society, and with the passing of those valiant ships memories of their service are fading away.

But with respect to (and for) the Bridge, let’s wait a bit. Let the jury sit a bit. There are a few things to be considered that might sway them. San Pedro has seen the final days of many steel giants, and those moments were mostly sad ones. Don’t stand by and watch this one die. You’ll feel it in the pit of your stomach. It was born in 1968 and has yet to see its fortieth birthday, so it’s still young. The heavy burdens imposed upon it in recent years were not anticipated back in its planning days, but seismic stresses weren’t considered back then either. Accommodations for these seismic stresses were made, though, so quite possibly accommodations can be made in this present situation as well. Let’s look at a replay. The officials can reverse their decision, you know.

$ 700 million is a lot of money.

Look Before You Leap
November 4th, 2004

Some of the figures being published with respect to the Gerald Desmond Bridge are typos. They must be. When the MSC Texas was passing under the bridge on the 15th of October, it was reported that the vessel’s height of 196 feet came within six to ten feet of the bridge. But the Replacement Project published on the port’s website lists a clearance height of only 156 feet, so there’s a misprint somewhere. Which of the quoted measurements is accurate and which is inaccurate is immaterial in this discussion because a number of important factors mitigate against the unnecessary expenditure of the $ 700 million estimated to be the cost for demolition and replacement of the bridge. ($ 700 million is a lot of money!) The point is, that complete and accurate information should be made available to all residents so that the community can properly determine the correct course to steer. The details being presented in this website must especially be disseminated, and for starters the following points should be emphasized.

1. A total of 29 West Coast ports participated in the 2002 shutdown. Along with LA/Long Beach, Oakland, Seattle, Tacoma, Portland, San Francisco and San Diego, some of the other ports involved were; Richmond, Port Hueneme, Stockton, Redwood City, Coos Bay, Bellingham, Everett, Kalama, Longview and Olympia. Most of the ports in this group not already equipped to handle containers soon will be. Secretary Minetta tipped us off about that. The Office of Management and Budget has likewise given us a hint or two about its reluctance to fund dredging projects that benefit only mega-ships but increase port congestion. Remember also that these mega-ships aren’t Jones Act ships, so why should this nation’s taxpayers and consumers subsidize offshore owners by funding dredging projects and demolishing and rebuilding bridges, especially if it can be shown that there is a more efficient and profitable way to handle the increased volumes of TEUs in the coming years.

2. This alternative won’t cost the taxpayers $ 700 million either. The progression from chaos to order will be quick, smooth and profitable for everyone, from the beginning of the chain to the end, and it won’t be an expense to the port or to taxpaying citizens. As an added bonus, valuable and unneeded coastal acreage will be returned to the community for more practical uses.

3. Shipowners will find a use for the mega-ships already in service. In the future these owners will have a more difficult time filling these ships, warns Neil Davidson, and would realize far greater profits if they used smaller, more manageable vessels. These smaller vessels, easier to fill and costing considerably less to build, will serve the Port of Long Beach as well as the new container ports. So save the bridge and the $ 700 million.

4. A profitable, programmed and orderly distribution of containers in widespread localities will generate more employment opportunities and eliminate the friction that exists between management and labor. The friction, after all, boils down to money. It has always boiled down to money because the bottom line has always been a sparse one. But that was then, and this is now. With our patented systems in place up and down the coast, all shortcomings, drawbacks, obstacles, confrontations, etc., will no longer be a concern.

Daydreaming
November 5th, 2004

What’s wrong with this picture? The Long Beach Skyway (where the Gerald Desmond Bridge used to be) provides a welcoming archway high above the steady flow of incoming vessels. The ever increasing annual volume of the port has just passed the 15 million TEU mark and the “Santa Clause Sleighs”, the late season mega-ships, are pushing the envelope again. The year is 2020, by the way, and approximately 275 vessels are in offshore “drift boxes” each awaiting berthing space at the 6,000 acre port complex.

It won’t happen that way, that’s what’s wrong with this picture.

1. The Gerald Desmond Bridge will still be in place because updated studies revealed that there was no need to replace it after all. In addition to that, the initial cost estimate of $ 700 million for demolition and replacement was determined to be far less than what the project’s ultimate cost would be. That was the eventual result of other ambitious project around the country, such as the Alameda Corridor and Boston’s “Big Dig”, and an open-ended gamble of this nature was not an appealing one to the port authorities and the Long Beach community.

2. Any thought to doubling the size of the port area from 3,000 acres to 6,000 acres in order to accommodate the 150% increase in TEU volume turned out to be a daydream. The community had nothing left to give and the sea could surrender only so much.

3. Three week waiting periods in offshore “drift boxes”, at a cost of $ 50,000 per day per ship, adversely affected the profit picture of shipping lines and this loss of time and money led to drastic increases in shipping costs. Ship owners followed the advice of disgruntled shipping agents and end users, and began to direct smaller, less expensive vessels to smaller, more efficient ports.

4. Congestion and time-consuming breakdowns throughout the length of the supply chain and the unforeseen expense of container transshipment eventually convinced consumers, shipping agents, railroad and trucking authorities, and even port officials and shipping lines that the hub-and-spoke concept was proving to be a dismal failure.

5. In actuality, the patented storage, retrieval and delivery systems, retrofitted in almost all West Coast ports, generated unexpected ease and profit for all. Annual volume in the Port of Long Beach has been arbitrarily limited to 6 million TEU and a relaxed atmosphere prevails. The efficiencies of the installed systems and the income generated to the port authority has eliminated the need for the usual $ 450 million annual budget and has created employment opportunities and an atmosphere of good will between union and management. Less than 200 acres are now used for container handling operations and more than 2,500 acres have been made available for other uses.

6. In the year 2020 there is now general agreement that the number of TEUs handled in the course of a year is not what’s important, it’s the number of $ $ showing on the bottom line.

Quotable Quotes
November 8th, 2004

Here are some of the statements that may have come to your attention in the past few months.

“In the U.S. we are severely challenged. What’s happening in Southern California is not sustainable. We need more productivity per acre. We need to move vessels faster. It’s not enough just to dredge channels and develop efficient shoreside terminals. We must address the rail infrastructure issue. We need to address highway congestion.”
— Peter Keller, COO of NYK Line North America

“Working 24/7 is not going to solve our problems. We will need major infrastructure improvements.”
— Gill Hicks, Former GM of Alameda Corridor Transportation Authority

“Terminal capacity and rail capacity worldwide are growing more slowly than vessel capacity. The rail infrastructure is a critical problem ... Trade is growing at 10 percent a year. Where are we going to have the capacity to handle that? What does supply and demand matter if I can’t get my ship alongside a berth?”
— Ron Widdows, CEO of APL, Ltd.

“There is more container availability than there is transportation capacity. Trucking has gone way up, but that supply is limited, too.”
— Captain Ivan Lantz, Operations Manager, Shipping Federation of Canada

“It’s like trying to fit a 16-inch pipe into a 4-inch opening.”
— Jean Godwin, Senior VP at the AAPA

“We’re not going to double the space for container terminals ... We need to find innovative ways.”
— Rick Larrabee, Port of NY/NJ

“Without aggressive modernization of facilities and operations, U.S. seaports risk losing business not only to other modes of transport but to other foreign ports.”
— Daniel Griswold, Director, The Cato Institute

“The West Coast cannot get enough gangs to unload vessels, there are not enough chassis to go around in many ports and inland facilities, the rail carriers are full, truckers are having a tough time keeping drivers, and the roads to the docks are overloaded every day.”
— John T. Hyatt, VP of Irwin Brown Co.

“We’re falling about 25 to 30 gangs short ... We must never get in this position again.”
— James McKenna, President of PMA

“In my opinion, there isn’t a greater challenge facing our economy today than the challenge of safe and efficient freight movement in an ever expanding global market.”
— Chuck Raymond, President and CEO of Horizon Lines

“Member lines and their customers are grappling with transit time delays of eight to nine days that are largely beyond their control, and infrastructure gridlock that will easily take more than a year to fix.”
— Brian Conrad, TSA Director

“The Southern California ports in the last few years greatly expanded their terminals, but the supporting infrastructure wasn’t expanded in step with that capacity increase.”
— Brendan Dugan, Port of Tacoma Senior Director

“Ships calling at Los Angeles-Long Beach must wait anywhere from two to four shifts before being assigned labor. Once the containers are taken off the ship, they may sit for two or three days because the Western railroads lack the locomotives, railcars and staff to handle the demand.”
— Jim Andrasick, CEO, Matson Navigation Co.

“We’re looking very hard at the Gulf because the West Coast is extremely congested ... it is something many of the major lines are considering.”
— Howard Finkel, Senior VP, Cosco’s American Trade Division

“We have serious intermodal problems and we need collective solutions, rather than individual finger-pointing. We want to bring everyone to the table to find solutions – the shipping lines, the ports and their terminals, the railways, trucking, importers and exporters, warehousing, and the federal, provincial and local governments.”
— John Bescec, VP of Canadian Association of Importers and Exporters

Mr. Bescec isn’t proposing something that hasn’t been tried before. His suggestion that everyone be brought to the table again should be given serious thought, however, because this website is adding a new dimension to terminal operations. Rational discussion about the system described in this website by authorities from every link in the stovepiped supply chain will lead to widespread understanding and acceptance of these patented systems.

Mr. Douglas Tilden, CEO at Marine Terminals Corp., summed everything up when he offered this advice; “We have to find a different way to operate, or else we are not going to be able to handle trade.” What could be clearer? Every step, every modification, every innovation introduced so far has provided nothing more than temporary relief at one point or another in the supply chain. This patented system is the “different” way of operation required by the containerization industry, and the longer it takes to make this changeover, the more trade we lose to our friendly neighbors to the North and to the South.

Even if we continue to ignore the admonitions of the authorities quoted above, Mr. Bescec, one of our friendly neighbors to the North, may have just provided us with an unintentional push.

How Do You Spell "Relief"?
November 9th, 2004

Today’s commentary is directed to shipowners serving the West Coast. “We feel your pain”, is what you’ve been hearing nowadays, and because no relief of any kind is in sight, nothing but sympathy has been available ... until now, that is. This website, and the company sponsoring this website, has been asked to locate one or more shipping lines interested in bringing containers from Asia to a more efficient and less costly U.S. West Coast port. Discussions have been held with port authorities at Grays Harbor, on the coast of Washington, and a program has been arranged whereby our systems will be installed at that site. Three of our systems, with an approximate annual capacity of 2,000,000 TEU, are in the initial planning stages, and one of the world’s largest real estate developers has shown an interest in developing the adjacent 400 to 500 acres at the port.

Until recently the Port of Grays Harbor was dedicated to the logging industry, but little activity is seen at its 2,000 feet of berthing space today. Both UP and BNSF provide service to the terminals with direct rail connections to destinations throughout North America. Here’s what the port’s attractive literature states:

• Deep-water shipping terminals only one and a half hours from open ocean.
• Direct rail connections to destinations throughout North America.
• Only four lane highway to the coast north of San Francisco.
• Transportation routes that by-pass heavy congestion areas.
• Telecommunication system with excess capacity and redundancy.
• Large and small industrial and commercial parcels available for development.
• Reasonably priced commercial and industrial land.
• Regional jet capable airport with full ILS.
• Foreign Trade Zone designation.
• Low cost natural gas, industrial water and power.

The literature also describes the Coastal Super Corridor as, “ the fastest route from the West Coast to your market. Located in the innovative Pacific Northwest, Grays Harbor County and the Coastal Super Corridor is the West Coast’s newest hub for business development and international trade. Positioned centrally between the markets of Seattle and Portland, the Coastal Super Corridor provides road, rail, telecommunications and marine transportation routes to deliver your products to market without facing the everyday congestion of the urban areas.”

The Marine Terminals are further described as being the closest U.S. multi-modal port to the Pacific Rim, with a channel depth of -36 feet MLLW from Port docks to open sea, and a U.S. Foreign Trade Zone (#173) covering 587 acres of land and buildings.

Mr. Leonard Barnes is the Director of Trade and Development and can be reached at (360)533-9515.
Arrange a meeting with him and Gary Nelson, the Executive Director. They’d love to hear from you.
Or you could hit the [CONTACT US] button on this website if you like.

A Haven
November 10th, 2004

More on Grays Harbor ... the best-kept secret in the world of shipping.

“Grays Harbor County has a dedicated and stable work force that enjoys the quality of life in their communities. Community governments are appreciative of businesses that create jobs and are readily accessible for assistance. Good training programs are available through Grays Harbor College and the CELL Technology Center.” — Commissioner Isabelle Lamb, Port of Grays Harbor.

SEAPORT — The gem of the County is its deepwater Port. Grays Harbor is maintained at >36 mllw (mean lower low water depth) in the main channel. It is the only deep-water port located on the Washington Coast and the only one on the Pacific north of San Francisco. The Pacific Ocean is only two hours sail from the private docking facilities located on the Chehalis River. The Port boasts 4 marine terminals: three have full docking facilities, two have warehousing, one has cargo cranes and one has a tie-up area for barge loading.

HIGHWAYS — Grays Harbor County’s uncongested transportation routes deliver your products to market without the congestion of urban areas. There are 218 miles of state highway in the county. State Hwy 8/U.S. Hwy 12 connecting the Port with Olympia at I-5 is at only 20% capacity as compared with I-5, which is often over 90% capacity in many areas of Puget Sound. Five major highways converge within the county to provide easy, uncongested access to all communities.

TRUCKING — There are 14 trucking firms offering long-haul service and another 6 that provide local cartage. With the heavy volume of lumber shipped to and from Grays Harbor, numerous independent truckers also serve the area on a regular basis. Grays Harbor is served by United Parcel Service, Federal Express and other overnight and ground shipping companies.

RAIL — The Puget Sound and Pacific Railroad is a Washington shortline that operates daily on 60 miles of track in the county and interchanges with both Burlington Northern and Union Pacific Railroads. Having the capability to interchange with both these railroads provides very competitive freight rates to destination service throughout the United States. Puget Sound and Pacific is a subsidiary of RailAmerica, which owns 39 railroads and controls 11,000 miles of track in four countries.

AIRPORTS — Bowerman Airport, located on the bay in Hoquiam, has a 5,000 foot jet-capable runway and full ILS navigational services. Other public airports include one in Elma, which is adjacent to the Satsop Industrial Park, one in Ocean Shores and one in Westport. Major airport facilities and commercial airlines are available at Seattle-Tacoma International Airport, an hour and a half from downtown Aberdeen, and at Portland International Airport, which is less than 3 hours by Interstate 5.

[If two ships per week docked at this port this year, there’d be no backlog in LA/LB! Do the math.]

Doing The Math
November 11th, 2004

It has been estimated that “9 million containers enter U.S. seaports each year”. At least that was the estimate for this year. It’ll be higher next year and still higher the year after that. But for now let’s use the 9 million figure. Stephen Flynn, who knows something about maritime security, tells us that to equip containers with “smart box” technology would cost between $ 10 and $ 20 per use over the life of a container. So at a minimum, 9 million containers per year at $ 10 per container comes to $ 90 million dollars per year for “smart box” technology ... assuming that we’ll never see more than 9 million containers each year and that the cost will be kept to $ 10 per use.

Heritage Foundation Defense and Homeland Security Senior Researcher, James Carafano, must have done the math already. He stated that spending money on smart-box technology would not give shippers the most bang for their security buck and isn’t the most logical next step in security.

Deputy Homeland Security Secretary James Loy didn’t even mention smart-box technology at the Washington Conference on Maritime Counter-Terrorism on October 14th. He was concerned with the volume of containers and the several “programs” being used to monitor maritime cargo.

Customs Commissioner Robert Bonner was mistakenly advised recently that a risk assessment is done on every container heading to the U.S., and that 100 percent of those identified are inspected using large-scale x-ray machines and radiation detection equipment. Because of information that has since been brought to his attention he can now state that, although there are plenty of technology initiatives being studied, there isn’t enough being done to produce workable tools to combat terrorism. In other words, Senator Schumer, Senator Kerry, and a number of others, were correct when they were criticizing the inadequacy of our container inspection/scanning program.

So here’s what we can gather from these authoritative reports:
• $ 90 million per year is too much to pay for ...
• ... “smart box” technology that isn’t effective and isn’t logical ...
• ... and is just one of the programs now in use ...
• ... in a failed effort to deal with a situation that places all Americans at risk.

Please review our “Method Of Operation” and our “Homeland Security” website pages. In our patented system every container must pass through an x-ray scanner before it can be stored. This existing scanner technology is already in use, its cost is widely known, and for much, much less than the conservative estimate (above) of $ 90 million per year for questionable “smart box” technology, every incoming container will be inspected/scanned. There should be no room for speculation where the threat of terrorism is concerned. The perfect solution is available and affordable.

With respect to the lack of success with smart-box technology, Mr. Bonner stated that, “This is the one gap that has been very vexing in terms of getting it done ... I don’t know why we can’t do that to a container”.

Pier Pressure
November 12th, 2004

Because of cargo delays, traffic congestion, air pollution and a shortage of longshore workers, the marine terminal operators’ group in LA/Long Beach, known as PierPass Inc., proposed to initiate a program calling for extended gate hours. This plan, outlined this past August, gained the approval of the Federal Maritime Commission and was intended to encourage the movement of exports and imports during off-peak hours making it possible for trucks to move faster over less crowded highways. The plan called for one extended gate per month to be phased in for five consecutive months. As a further inducement, PierPass proposed to impose a fee, or a fine, of $ 20 per TEU on any importer or exporter who preferred to move cargo during the hours of 8 a.m. and 5 p.m. The program was to go into effect on November 1st, and support was immediately forthcoming from some of the large retailers. Rick Gabriel, of Target Corp., stated; “No one likes to see transportation costs increase, but our industry felt it was best to work together to develop a private-sector program to reduce day-time traffic”. Working together sounds good .

Late in September, however, the target date of November 1st had to be moved back a few months because the difficulties that inspired this good sounding idea in the first place, delays and a shortage of longshore labor, also turned out to be the hangups which stood in the way of the idea’s implementation. There were no personnel available and no electronic means of collecting the fees, or fines. How ironic.

Now it’s November and the truckers are having their say. They’ve said that opening just one gate would not provide them with enough flexibility to adjust their weekly schedules. They’ve insisted on five extended gates per week and participation by all of the harbor terminals. Scott Smith of Eagle Marine Services is quoted as saying that, “Truckers made it clear that a sufficient number of evening shifts must be available to them each week before they will adjust their lives to working nights”. PierPass agreed to speed up the program and phase in the five gates within the first month.

Time to do some more math. PierPass Inc. proposes to collect the fees and administer the program, and along with an advisory committee from the shipper and transportation community, PierPass will evaluate the program to determine if the fees being collected cover the true costs incurred by terminal operators for running extended gates. Here’s where it gets tricky. More truckers conforming produce less fees, right? More truckers conforming require more gates, right? More gates in operation require more money, right? So where’s the money for the increasing cost of gate operations coming from if fewer fees are being collected from truckers?

The terms “helter-skelter”, “willy-nilly”, “topsy-turvy”, “herky-jerky”, all come to mind when flip-flops (there’s another one) are executed. What sounded like a good idea in this crisis is just another unworkable stop-gap measure. Owner-operators will resent being herded like cows, and Mr. Belzer made that perfectly clear when he characterized the present working conditions as “sweatshops”.

Back to the drawing board.

Sharing The Load
November 15th, 2004

Too bad Bill Mongelluzzo’s reports aren’t available to the general public. Last week in the PACIFIC SHIPPER he summarized the situation in and around the LA/Long Beach complex and the contents of his well-written and concise article provided a lot of food for thought. One wonders, though, if the residents (read, “taxpayers”) in Southern California are ever told about the “solutions” that are about to be thrust upon them.

Here’s what the authorities know:
1. 15% of all international containerized seaport freight travels on the I-710 Freeway.
2. Trucks hauling these containers cause bumper-to-bumper traffic tie-ups.
3. Taxpayers will be told to pay $ 4 billion to rebuild the route so that this truck traffic can be accommodated.
4. Other projects will include around the clock gate operations, busier on-dock railyards, new shuttle-train service to offsite distribution centers, and even an additional near-dock rail intermodal yard.
5. These costly projects, along with the $ 4 billion I-710 project, will only reduce traffic flow by 20%, however.
6. In spite of these expended billions, this 20% reduction will be more than offset by the predicted 150% increase in container volume between now and the year 2010.

A few weeks ago Mr. James Carafano of the Heritage Foundation criticized an unwise expenditure of funds at Homeland Security as being “not the most logical next step in security”. He readily saw that the considerable funds proposed to be spent would never catch up to the developing problems. Mr. Carafano would be horrified if he could see the amount of money authorities are planning to spend in this malignancy and he would surely question the logic of the proposed measures. It isn’t a question of logic, though, it’s a question of awareness, and the same lack of information that has muddled the thinking of security experts has made it impossible for port authorities to solve the problems encumbering U.S. ports because of the unexpected volumes passing through these ports.
And what about the average citizen? Or the average freeway driver? If the general public, as well as the authorities, could be given the opportunity to evaluate the congestion in Southern California and to consider all the proposals (ALL the proposals), isn’t it reasonable to assume that a true and affordable solution, as opposed to another stop-gap measure, would be preferred? Where will this headlong flight end? Bigger isn’t always better. Spending enormous amounts of money to bring in enormous amounts of TEUs just adds to the enormous problems already facing this community. A relatively small amount of the imported containers are for local consumption, anyway, so why foot the bill? Didn’t LA/Long Beach get some relief recently when a few dozen ships were “diverted” to other ports? Why not divert as many as possible? An unused West Coast port in the state of Washington (Grays Harbor) would be thrilled to relieve LA/Long Beach of about 2 million TEU every year, and the Welcome Mat is out. Shipping lines, the port authorities and the taxpayers would all benefit from a move in that direction.

The Ideal Scenario
November 16th, 2004

If you drove a trailer and you were told that hauling a 40-foot container from LA/Long Beach would entail a deduction of $ 40 from your paycheck that day, what would you think? Your thoughts couldn’t be spoken aloud in mixed company, no doubt, and you’d be considering your other options. And what would your wife think when she heard that the alternative was to make your runs during off-peak hours instead of during normal working hours? She’d have to keep her thoughts to herself as well, not because she’d miss you at night, but because you’d be underfoot all day. That’s the extent of the humor in this sorry dilemma.

Here’s another scenario for you. Suppose you were a full-time employee of a transportation company, at union wages and under favorable HOS conditions, and no fees, or fines, were imposed when you were hauling 40-footers during daylight hours, would that be a more desirable situation? You’d feel like a human being again.

This website is describing and proposing a system whereby order would replace chaos, elbow room would replace congestion, living wages would replace penury, and good will would replace animosities. The efficiencies within this patented system would eliminate the costs now committed to the failings of conventionally-structured terminal operations, and would relieve the financial drain on the community by freeing up and converting valuable acreage to more practical and profitable uses. Recent proposals requiring billions of dollars for the demolition and replacement of bridges and highways would be set aside. Taking land by eminent domain, filling in harbor waters, dredging existing channels, building more railroads (and rail crossings), and putting more trucks on the roads would no longer be a required burden for taxpayers. Gains would be seen in the uphill battle against air and noise pollution. The work would be steady for everyone. The normal increases in late season imports would be distributed to those ports nearest to the ultimate destinations of the cargo, and no longer would 15% of containerized freight moving into the U.S. be traveling on I-710.

Here’s another scenario for you. Suppose all the proposals being considered were acted upon over the next few years and billions of dollars were actually spent on this expansion program. The problems still wouldn’t be solved because it’s impossible to solve them using conventional means. The “expansion” would only serve as an invitation to direct more volume to the LA/Long Beach region, and the problems would be multiplied. What then? Spend more billions in the never-ending game of catch-up? That route short-changes everyone. The LA/Long Beach complex is not a publicly-held corporation. Too bad. Publicly-held corporations are accountable to stockholders and every move made comes under their scrutiny as well as the scrutiny of accountants, auditors, creditors and even customers. No such anxiety exists where ports are concerned. When a few million dollars is required for this or that project, the public treasury rather than a corporate one is tapped. When the pursuit of a goal turns into a futile and costly faux pas, c’est la guerre.

But it doesn’t have to be that way, nor should it be. Please take the time to review our website narratives and operations again. Your questions are most welcome.

"How To Win Friends And Influence People" - Dale Carnegie
November 17th, 2004

Except for the Holy Bible this book was probably the most widely-read book of the 20th Century, and years ago almost every aspiring young salesperson took the time to study it. Some of us even attended the Dale Carnegie Courses, and no one ever felt shortchanged. The words in the title have become a popular figure of speech in our language, and even now those words may be heard being mumbled by someone who has just been slighted in one way or another.

Although the event didn’t get much of a play in U.S. periodicals, much is being written in overseas journals about alleged inappropriate behavior of US Customs & Border Protection personnel during a boarding of a ro-ro vessel in Los Angeles Harbor on September 27th. The international maritime community is directing criticism at U.S. inspectors because a ship operator has once again accused border inspectors of abusing their powers. Based on the report of Captain Ove Overgaard, the Master of Wallenius Wilhelmsen’s “Tampa”, Chairman Wilhelm Wilhelmsen provided a litany of complaints to the media, and when presented with denials by Customs, a Wilhelmsen spokesman affirmed that the Captain’s “description of the situation is accurate”. There’s a standoff in the matter and it’s being said that this won’t be the last occurrence of this kind. It seems that ship captains and U.S. Coast Guard and Customs officials don’t see eye-to-eye in this sort of a confrontation. Too bad Dale Carnegie couldn’t be here to put in his two cents worth. Our guys don’t seem to be winning too many friends for us. We could get a lot more flies with honey.

There’s a much simpler and surer way to settle security matters, and we’ve been touching upon it for the past few weeks. Instead of the guesswork called for by our present system of inspection — something akin to the racial profiling so deeply resented in this country — why not take another look at the method of scanning/inspecting in our patented system? Without exception every container is placed on a conveyor and passed through an electronic scanner before being picked up and stored in a preassigned slot. With a 100% rate of inspection, rather than a 4%, or 5%, or even a 10% rate, there would no longer be a need for boarding parties, strip-searches, or any such allegations of inappropriate behavior. Knowing in advance that every container will be placed under electronic surveillance will deter smugglers as well as terrorists. The cost of these scanning systems is known and the number of these affordable systems required can readily be determined.

On the other hand the cost of increasing the number of vessels and manpower required by the Navy and Coast Guard for interdiction will mean that billions of taxpayer dollars must be appropriated in order to erect a shield of enormous proportions and questionable effectiveness. It is generally known that Lloyd’s Registry tracks approximately 85,000 registered seagoing vessels, and on any given day, about 55,000 of them are at sea. It would be unreasonable, therefore, to think that our Coast Guard and Naval vessels could ride herd on this many ships, and it would be the height of fantasy to think that we could devise a clairvoyant tracking system that would allow our ships to zero in on only those vessels that pose a threat to our security.

This is what the kids would call a “no-brainer”.

Keep It Simple, Sweetheart!
November 18th, 2004

We keep hearing that the delays and other problems brought on by congestion at LA/Long Beach will soon be cleared up, and by the looks of things it’s seems to be happening. One of the complacent reports accounted for this development by stating that a number of factors, including diverted vessels, has eased the congestion. More than just the 100 or so vessels have been diverted, however. Blame has been diverted, as well. Rail congestion has been cited as the cause of the port’s problems, and if you believe that you might well be in the market for one of Saddam Hussein’s WMD’s.

This website has been suggesting:

1. ... that the only way to deal with the steadily increasing congestion in and around embattled ports is to direct, deliberately, the ever-increasing number of container ships to ports closer to the end user. At the present time, the diversions of these vessels at LA/Long Beach are an emergency diversion on the part of shipping lines, not a planned diversion on the part of port authorities, so criticism rather than praise is in order. More than a year ago Secretary Mineta suggested that dispersion would be required, and he stated that 200 more ports must be set up as container handling ports in order to deal with projected increases in volume. Ever-increasing volumes, he knew, would require ever-increasing numbers of vessels, which is why he didn’t in any way infer that railroads would be the cause of the chaos in our container ports. Mr. Mineta made it quite clear that a blizzard of cargo was en route and that 60 ports wouldn’t suffice. Dozens of authorities have cited the lack of coastal acreage, as well as the numerous inefficiencies of conventionally-structured terminals, and have alerted authorities to strangled port facilities. But these messages have yet to be fully understood.

2. ... that the only way to speed up storage, retrieval and delivery of these increasing numbers is to abandon the primitive, costly, and unwieldy practices used in today’s container operations. Mr. Tilden, who at one time stated prophetically that the Port of Oakland is, “... betting the lines will hit a brick wall in Southern California”, warned us once again just a few weeks ago that, “We have to find a different way to operate, or else we are not going to be able to handle the trade”. Is he the only one on the West Coast with foresight?

3. ... and that Mr. Belzer was right when he stated that low wages, long hours, piece work and unsafe working conditions imposed upon truckers are forcing them to leave the industry. “If the problem is not resolved soon, you won’t have to worry about gridlock because there won’t be any trucks on the road,” was the way he put it.

This website has quoted the concerns and the consternation of some of the foremost maritime and terminal authorities. These officials, under the gun day in and day out, seem to have the impression that some kind of yet-to-be-discovered “rocket science” will be the way to overcome the many obstacles facing container handlers. But that isn’t so. Remember the K-I-S-S principle. “Simple”, is usually quick and affordable, and our retrofitted systems illustrate that principle perfectly.

A Cure For Congestion
November 19th, 2004

Recent interviews of port officials in LA/Long Beach reflect a lessening of concern with respect to the vessel backlog at those ports and tell of “rapid improvement” and “regaining control” of operations. They insist that the situation is improving and that congestion is gradually easing. The attendees at the Textile and Apparel Trade and Transportation Conference held on Tuesday, the 16th of November, were nowhere near that optimistic, however. When polled, 74% of them considered the congestion at that complex to be the most important issue facing them. Which of these opposing views has more substance? Consider the following, then decide for yourself.

• Citing the adverse effects on business, Long Beach Mayor Beverly O’Neill and Los Angeles Mayor James Hahn convened a joint task force a few weeks ago in order to seek solutions to the problems of congestion and inaccessibility.

• Projects already under consideration include; around the clock gate operations, shuttle-train service to off-site distribution centers, added near-dock rail intermodal yards, filling in harbor waters, acquiring more land by eminent domain, demolishing and replacing bridges and highways, and, of course, dredging.

• Just yesterday, Lloyd’s Register reported that delays at LA/Long Beach have caused major toy distributors to cancel orders for this Christmas season and are seriously considering joining the other lines that have already diverted to other ports for next season.

• Hamburg Sud has announced an adjustment of vessel rotations at LA/Long Beach because of continuing congestion problems and delays at dockside vessel servicing.

• At Tuesday’s conference Ron Widdows, CEO of APL, chided port officials for failing to understand the adverse effects inadequate terminal capabilities are having upon carriers. He warned that port and rail congestion here and in foreign ports as well are threatening the growth of world trade.

• Mr. Widdows has spent much of his time addressing this country’s growing congestion problems and seeking support in his search for infrastructure solutions, but he took this opportunity to express his dismay over the labor/management relationship at LA/Long Beach and the consequent low rate of productivity. “It needs to change”, he said.

Mr. Widdows is giving every terminal operator and every port official fair warning, and forewarned is forearmed. He made a point of emphasizing the infrastructure crises in all the principal ports of the world and not just the U.S. ports, and this worldwide problem makes it obvious that no one knows of a solution and that the many costly attempts at buying time have proved to be futile. Our patented system solves space problems, labor problems, money problems, employment problems, distribution problems, delay problems, etc., etc. Or are we waiting for government intervention?

Hazy Daze
November 22nd, 2004

Some of the information and calculations being disseminated by PierPass, Inc., a program created by the marine terminal operators in LA/Long Beach, needs clarification. Bruce Wargo, the general manager of PierPass revealed that a “consultant” hired to study the costs of operating weekend and night gates at the 13 terminals determined that the annual “cost” will be $ 156 million. In order to arrive at that odd-looking number some very complicated math must have been involved. No wonder they hired a “consultant”. Mr. Wargo also let it be known that “if” the terminals handle 4 million TEUs a year in off-peak hours, (another odd-looking number), “simple” math indicates that “their cost” would be $ 40 per TEU. (That’s odd, too. Even before the “consultant” was hired, port officials had already decided upon a fee, or fine, of $ 40 per TEU.) But why should it “cost” the terminals any money? When the program was announced some weeks ago it was stated that its purpose was to encourage off-peak use of the terminals in order to cut down on congestion, pollution, worker dissatisfaction, and just about every other problem that’s surfaced in the past few years, and that in order to offset this cost, a fee, or a fine, of $ 40 per TEU would be imposed on importers and exporters who use the gates during peak (daytime) hours. This provides PierPass with the income stream they wanted, thereby avoiding an out-of-pocket “cost”. The importers and the exporters, the ones paying the fees, or fines, are the ones actually shouldering the “cost”.

Mr. Wargo’s views on terminal congestion and vessel backups are equally puzzling. In the past month more than 100 vessels have diverted to other ports in order to avoid the costly and time-consuming chaos at LA/Long Beach, and because the extent of the congestion was not anticipated by port officials, a number of these carriers will seek out, and develop, alternate West Coast destinations. At any rate, less reliance will be placed upon the port’s future advisories, and carriers will prepare for future logjams by arranging well in advance for alternate ports to be available as safety valves. Once burned, twice shy. But Mr. Wargo is reported to have said that while some cargo owners may decide to divert in order to avoid the $ 40 per TEU day-use fee, a significant diversion of cargo is not practical. Try that one on a carrier paying $ 50,000 for each day his vessel is stuck in a “drift box”.

Those other ports, he said, are “likewise” operating at close to their physical capacity so they are not able to accommodate a massive diversion of cargo from Southern California. If “massive” cargos are acknowledged to be a future problem, and if LA/Long Beach is operating at close to its physical capacity right now (that’s what he’s saying, isn’t he?), then why isn’t he, and others, preparing for this future inundation? Instead of planning to spend billions of taxpayer dollars to demolish and replace bridges and highways, and instead of deluding themselves by thinking that disenchanted truckers will go along with graveyard shift schedules, why don’t responsible logisticians recommend spreading the load among all available West Coast ports? After all, the basic thinking behind the PierPass program is the idea that “spreading” trucking operations over a 24-hour period will relieve some of the congestion within the port’s operations; isn’t that what we were told? But in the next breath, we hear that future diversion of cargo away from LA/Long Beach shouldn’t really be considered. He’s concerned about the possible “gridlock” ... in those other ports, mind you!

Ready, Willing and Able
November 23rd, 2004

With respect to reports emanating from port officials at LA/Long Beach stating that other West Coast ports are also operating at close to their physical capacity, a cursory examination will show the inaccuracy of that assessment.

The Port of San Diego — “We are troubled that Los Angeles and Long Beach are experiencing some problems, but we are pleased that we have the capacity here in San Diego to handle additional business. It is only natural that shippers have come to see the benefits of loading and offloading goods at the Port of San Diego. We welcome the business and we will do everything in our power to keep the business here. In San Diego, they don’t have to wait four to fourteen days to unload. We have the capacity. We can get the ships into our port today.” — Stephen P. Cushman, Port Commissioner

Port of Hueneme — There are more than 4,000 feet of wharf space in use and some 250,000 feet of warehousing available. The port is called “Ventura County’s Gateway to World Trade” and is also known as “The Southern California Alternative”. (Now what do you suppose they mean by that?)

The Port of San Francisco — Goals specified in the Strategic Plan clearly state the port’s intention to increase the volume of cargo shipping and to make the necessary infrastructure improvements to make cargo terminals more efficient.

San Francisco Bay and San Pablo Bay — The Port of Oakland has been vociferous in its comments about the conditions that have been developing in the LA/Long Beach complex these past few years. A significant number of vessels diverted from LA/Long Beach to Oakland this past month and were welcomed with open arms. “Frisco”, a term of endearment among Navy personnel years ago, has been a haven for seamen and their ocean going vessels for centuries. It would be a lot less trouble and a lot less expensive for shippers and terminal operators to set up new container terminals in old Navy facilities at Mare Island, Alameda Point, Treasure Island, Hunter’s Point (and the Annex), FISC Oakland, and even areas within San Pablo Bay. Space isn’t in short supply in this region.

The Port of Portland, OR — There isn’t a more aggressive port on the West Coast. A void was created when “K” Line and Hyundai Shipping departed but it didn’t take long for Hanjin to leave LA/Long Beach and tie up at Terminal 6. Bill Wyatt, the port’s Executive Director, called it a “solid start” for rebuilding capacity, and insisted that the port would continue to look for additional carriers. “Portland is a competitive port, and this gives us even more optimism for the future,” he said.

Grays Harbor, WA — On the 9th and 10th of this month this column provided some descriptive material on this port, (“How Do You Spell Relief” and “A Haven”). Until recently this logging port’s four terminals and 500+ acres were going full tilt, but now that lumber operations have been scaled back the port’s future lies with container cargos. The infrastructure is in place, it is operational, and it is used infrequently.

Happy Thanksgiving
November 24th, 2004

We devoted a few lines yesterday to the Port of Portland, but there’s still more to be said. Toyota’s newly erected $ 40 million facility will handle more than 175,000 vehicles annually at the port and will require at least 200 employees. At a media showing on Tuesday, the port’s Executive Director, Bill Wyatt, stated that, “Beyond the direct jobs Toyota brings to Portland, their operation supports hundreds of other family-wage jobs in our region’s truck, rail and maritime industries”. In spite of Toyota’s sizable presence, there’s still a lot of elbow room at the port.

The port heard some further encouraging news when it was announced that Congress passed a bill over the weekend authorizing an appropriation of $ 9 million for deepening the Columbia River channel serving Portland. Hanjin had already announced its commitment to include the port in a new 12-vessel rotation utilizing 5,500 TEU post-Panamax vessels, in place of the previously used 4,024 TEU Panamax ships, and this is the “solid start” Mr. Wyatt was anticipating. The Port Commission had adopted a strategic plan identifying key issues and objectives, and in conjunction with this plan, the Marine Department’s Marine Terminals Master Plan 2020 (MTMP 2020) will serve to guide the port staff in its decision making. Chief among the goals of the MTMP 2020 are;
1. Improving, maintaining, redeveloping and building-out existing Terminals 2,4,5 and 6.
2. Creating a 10-year Capital Improvement Plan.

Some less-than-encouraging news has been received by the Port of Los Angeles, however. London-based P&O Nedlloyd has taken legal action against the port claiming that port officials’ bias towards a competitor has cost the company a desirable harbor lease. Here’s how an overseas journal had it.

“P&O Nedlloyd filed a petition in Superior Court on Thursday, asking a judge to halt the bidding for a “green” terminal site at the Port of Los Angeles, claiming port officials had changed anti-pollution standards, rejected all existing bids (four), and opened negotiations with Evergreen Marine Corp.

“P&O Nedlloyd is questioning the reasons for a second bid, particularly as its own bid is believed to have complied with all the port’s requirements. The line also claims that the port had backtracked on tentative agreements made.

“According to media reports, several clean-air and community groups have rallied behind P&O, saying that its bid indicated that it would be the least polluting tenant. The Port of LA is Southern California’s biggest culprit of air pollution.

“According to an article in the Los Angeles Times, this is just the latest in a string of twists in finding a suitable “green” tenant, and the situation has caught the attention of federal investigators who are looking into alleged irregularities in city contracting processes.”

And that’s as much as we’ll say on that subject. [Enjoy yourself tomorrow.]

The Whole Picture
November 29th, 2004

A week ago we suggested that decision-makers on the West Coast should turn to “responsible logisticians” for assistance. Perry Trunick of “Logistics Today” is just one of the many specialists in that field who could make some sense of the problems facing the maritime community, and he’d be a great starting point. He has a habit of looking at the whole picture rather than the wheel that’s squeaking the loudest, and it’s this kind of an approach that has been lacking. But it’s not only Perry who’s scrutinizing the logistic breakdowns at terminals, this bottleneck has been repeatedly identified by some of the most respected authorities along the supply chain, like Kurt Nagle, Chuck Raymond, John Vickerman, Douglas Tilden, Ron Widdows, and almost everyone else whose operations have been adversely affected by supply line congestion. The rigid and primitive mind set of those putting the game plan together, however, is the biggest hurdle to be overcome.

Mr. Trunick’s article in the November issue of “Logistics Today” raises some serious questions about the steps being taken to deal with security issues. He points out, first of all, that although no accurate estimate of the cost of maritime security is available, the Port Security Council of America estimates that the port industry will require $ 7.4 billion over the next decade just to comply with mandates contained in the Maritime Transportation Security Act of 2003, and that’s just on the port and infrastructure side. Dawn Russell, a professor at Penn State, cited an additional price (or loss) of more than $ 150 billion annually to the U.S. economy.

It doesn’t stop there, however. The IMO, the International Maritime Organization, requires the governments, port authorities and shipping companies of its 164 member countries to comply with the ISPS, the International Ship and Port Facility Code. The IMO states that, “The whole idea of the ISPS Code is to reduce the vulnerability of the industry to attack, thus countering the threat and reducing the risk”.

“Reducing the risk”?? Earlier this month the $ 28.9 billion Homeland Security Appropriations Act was signed, and Mr. Trunick noted that it’s still not clear who is supposed to be paying for this heightened security. Well, we know exactly who’ll shoulder the cost of the $ 28.9 billion. John and Jane Doe, of course, will foot that bill as taxpayers, but they’ll also pay the cost, as consumers, for whatever overseas security measures are taken. And this financial burden does nothing more than “reduce the vulnerability”? We’re entitled to more than that.

To begin with, we’re entitled to know why no definitive steps are being taken to combat threats to our nation’s security. Enormous amounts of funds are being appropriated for indefinite and questionable procedures, but the only visible results are escalating costs and a waste of precious time. In spite of all this indecision and guesswork, those who should know better continue to insist that 100% scanning/inspection of containers is not possible. That just isn’t true. This website describes, and offers, a system which makes it possible to scan/inspect, with existing technology and for a fraction of the appropriated funds, every container passing through U. S. and foreign terminals. Wouldn’t it be worth our while to call upon responsible logisticians to evaluate this system?

Family Feud
November 30th, 2004

Competition is a pretty good thing. More often than not it brings out the best in us. But not always. U.S. West Coast ports appear to be rivals for the growing west-to-east volumes of TEUs, but maybe they should give serious thought to settling their family feud before some serious damage is done.

In our commentary of November 22nd we took issue with the general manager of PierPass, Inc. for his attempt to convince carriers that it would not be practical to direct their vessels to other West Coast ports. Those carriers were exercising that option because of the unmanageable congestion at LA/Long Beach, of course, and those carriers chose to take that step because of the heavy cost incurred during the extended delays at the port. Had the general manager taken the time to look at the whole picture, he would not only have understood the problems that his port has created for the shipping lines, but he would have also seen how impractical it would have been for those carriers not to divert their ships. And he would have been dismayed to see that not all those vessels were diverted to our sister ports up north.

A number of those vessels diverted to ports in Mexico. Governor Schwarzenegger must have been thrilled when he heard that. If cooperation, encouragement and support had been the order of the day, most of the 100+ diverted ships could have docked at other ports in California, or even farther north in Oakland, San Francisco, Grays Harbor, Seattle or Tacoma. It doesn’t look as though any thought had been given to these beneficial alternatives, though.

It doesn’t look as though any thought had been given to what’s developing South-of-the-border either. That’s where an undetermined number of diverted vessels actually were serviced. LA/Long Beach may well have seen the last of those vessels because of that service. Those terminals on Mexico’s West Coast are enjoying the presence, and the stature, of one of the most ambitious and aggressive forces in the world of containerization. Hutchison Whampoa Ltd. owns and operates terminals in Ensenada, Manzanillo and Lazaro Cardenas, and instead of seeking constraints against U.S. competition, officials at LA/Long Beach should be looking over their shoulders. There’s where the real competition is.

Hutchison Whampoa’s holdings and operations are so widespread that it would take a ream of paper just to list them. Their worldwide terminals will handle more containers this year than all the U.S. ports combined. Wal-Mart and a number of other large U.S. retailers, TFM Railway in Mexico, and Kansas City Southern Railway, with the backing of influential Mexican officials and businessmen, are working with the three above-named Hutchison-owned terminals to establish a trade corridor from those ports to the heart of the U.S., and unless port authorities on the U.S. West Coast are awakened to this eventuality (because it’s pretty much a done deal) there will be a negative effect on the economies of the Western Coastal States. That wouldn’t be nice.

MARINE LOG, in its November issue, devotes an article to one of Chuck Raymond’s recent addresses. The title of the article is, “Time to work together”. Now that’s what would be nice.

Critical Sector
December 1st, 2004

Why do you suppose folks do so much pushing and shoving when it comes to moving containers along the supply chain, or protecting them while en route? Americans just like to be disagreeable. Time and time again Chuck Raymond and Kurt Nagle, among others, have asked for cooperation in these difficult times but their pleas have fallen on deaf ears. Contentious attitudes have prevailed, and consequent disagreement and outright hostility have replaced open minds and rational thought. Will we ever learn to support one another? Transportation authorities who have failed to deal with the growing volume of imported cargos have no qualms, however, when it comes to criticizing the honest efforts of those attempting to design security measures for this nation and its citizens.

The publisher of a popular logistic journal recently took author Dr. Stephen Flynn to task because of suggestions put forth in his new book, “America The Vulnerable”. Dr. Flynn is the Senior Fellow in National Security Studies at the Council on Foreign Relations, and he warns us of the inevitability of another attack on American soil. This is what convinces him:
• The Coast Guard does not have enough personnel to verify that all foreign vessels are in compliance with Security Codes.
• Foreign-based inspectors are not being adequately trained by Customs and Border Protection personnel.
• Customs and Border Protection is not adequately staffed to review the nearly 5,000 initial C-TPAT (Customs-Trade Partnership Against Terrorism) applications it has received.
• Foreign-based inspectors are able to inspect “only the tiniest of percentages of containers”.
• The federal government is fighting terrorism in foreign lands while refusing to provide adequate protection to the vulnerable infrastructure at home.
• Instead of providing a general report of our vulnerabilities, the government has refused to be candid with its citizens.
• The intermodal transportation system and the more than 6 million containers that arrive in U.S. ports each year pose the greatest vulnerability, but not enough is being done to respond to the terrorist threat in this critical sector.
• Technology must be strengthened from the foreign manufacturer to the U.S. port of arrival and the number of scanning devices in foreign ports must be increased.

The critic mentioned above disagrees with Dr. Flynn’s conviction that the administration is not spending enough on security at home and is “delusional” in thinking that the real fight against terrorism is overseas, but the writer ran out of column space and provided no supporting documentation.

Tom Thompson, the president of Analytics Inc., a Seattle consulting firm, had already revealed last month, however, that the government spends more every three days on the Iraq war than it has spent over the past three years for port security. Looks like Dr. Flynn has all his facts straight after all.

Dr. Flynn, in fact, said nothing that wasn’t true. His critic, on the other hand, said nothing.

"Nobody goes there anymore ... it's too crowded." - Yogi Berra
December 2nd, 2004

Two days ago we mentioned the presence of Hutchison Whampoa Ltd. in three of Mexico’s West Coast container terminal ports. Hutchison positioned itself in those locations because of the inability of LA/Long Beach port officials to overcome the self-imposed obstacles that have had a nasty ripple effect on much of our nation’s distribution chain. Because of the foresight and aggressiveness of Hutchison’s management teams the company has a history of being in the right place at the right time, and its track record proves it. Only a Rip Van Winkle could fail to see the intent behind Hutchison’s strategy to set up shop in those Mexican ports, and to dispel any doubt, it has been announced by the president of the Baja California House of Deputies’ Commission for Economic Development and Port Affairs, Deputy Antonio Rodriguez Hernandez, that Hutchison will develop a new $ 1.2 billion container terminal in the Ensenada area, and that the new port is intended to be competition for LA/Long Beach and will become “the primary port of the Asian Pacific”.

The deputy went on to say that a railroad would connect Mexicali with Yuma, AZ, new highways would connect Punta Colonet with Ensenada and Tecate, and he revealed that other investments would be required during the construction period. His reference to investments may have been prompted by an announcement that a group composed of Chinese government officials and 23 people from China’s business world will be visiting Baja California next week to look into investment possibilities. Sergio Tagliapietra, Baja California’s Secretary of Economic Development, when discussing this upcoming visit by the Chinese, stated that economic indicators point toward an explosion in Chinese investment in Baja California. Sure looks that way.

About a month ago the cat was let out of the bag when we heard that officials from the State of Missouri, from Kansas City Southern, and from SmartPort in Kansas City were cozying up to Mexican government officials with the intention of establishing a major trade corridor from the Mexican West Coast terminals to Laredo, TX, and into Missouri. These entities knew of Hutchinson’s wide coattails and sensed the sure-fire successes awaiting them because of the woes brought to mid-America’s supply routes by those repeated breakdowns in the Southern California port complex. The U.S. Surface Transportation Board, being well-aware of the critical nature of the failure of LA/Long Beach to handle the growing east-west volumes, on the 29th of November approved Kansas City Southern’s May 14, 2003 application for authority to control the Tex Mex Railway and the U.S. portion of the International Rail Bridge at Laredo.

Relief is in sight, but it isn’t exactly what Californians were hoping for and it will cost the West Coast economy a lot of jobs, a lot of money, and a lot of prestige. It’s never too late to act, of course, but the intransigence of port and terminal officials on the West Coast must be dealt with before any economic threat can be met. The overly optimistic Yogi Berra would put it this way: “It ain’t over ‘til it’s over”. Yogi said something else, though, that has pessimistic implications because of recent conditions in the LA/Long Beach complex.

“Nobody goes there anymore ... it’s too crowded.”

"California Dreamin'"
December 3rd, 2004

West Coast port congestion has been the chief topic at almost every maritime or transportation conference this year. Trends and developments within the maritime and transportation industry are always the chief topics in this “Trends and Developments” commentary, naturally, and most of the time West Coast congestion is the topic being discussed. Let’s take a few minutes to see if there are identifiable trends as a result of the logjams, and if these trends have led to specific developments.

It wasn’t too bad up until the Fourth of July weekend, but because of some serious miscalculations with respect to expected container volume, everything seemed to fall apart. The backlog of vessels in LA/Long Beach increased to the point where, on any given day, seven to eight dozen ships could be seen idled and committed to “contingency anchorages” and “drift boxes”. This embarrassing situation persisted throughout the rest of the summer, through the month of October and into mid-November. As a result of these unscheduled waiting periods carriers saw millions of dollars disappear from the bottom line, and delayed holiday season shipments will likewise result in severe financial losses for major retailers.

The headlines in maritime and logistic periodicals now boast, however, that ... “U.S. West Coast backlog cleared”... “Congestion over at LA-Long Beach”... “LA-Long Beach overcomes pier pressure”... “San Pedro ports work off backlog” ... “LA-Long Beach works off backlog”. It’s as though a miracle had taken place. Well, if it wasn’t really a miracle, what did happen?

First of all, several thousand new hires were added to the payroll, and that’s probably the only worthwhile development in the whole scenario. Secondly, more than a hundred vessels diverted to other West Coast ports in order to avoid heavy financial losses, and this is a development that cannot be described as worthwhile. A significant number of shippers have planned to avoid LA-Long Beach whenever delays seem to be a likelihood, and some of these carriers have decided to make this diversion permanent. This year’s miscalculation brought about a costly and unforeseen challenge which will forever haunt those who had become complacent because of the port’s overall good fortune. There was a sleeping giant South of the border in the form of three slowly emerging container ports. But another giant ... this one from overseas and very much awake ... stepped in and began to operate those relaxed ports. A goodly number of diverted vessels were seduced by these Mexican ports and it’s highly unlikely that those diverted ships will return to the hustle and bustle of Southern California. Hutchison is a big time operator with incalculable assets and properties, and those whose laxity opened the door for this competitor will experience many a sleepless night.

Could this situation have been prevented? Of course it could. For the last ten years maritime consultants have been enthusiastic in their predictions about container port growth. It isn’t as though port authorities lacked the time or the money to act accordingly. They lacked the space. And they lacked common sense. Well, the space is gone because God made just so much real estate. But He also provided us with common sense, and the failure to make use of it is the reason why shortsighted port officials will be held accountable for the pressures now being felt in the distribution chain.

A Tribute
December 6th, 2004

On more than one occasion in the past few weeks we’ve referred to Doug Tilden’s assessment of the frustrating congestion in and around container ports caused by the port’s conventional methods of operation. “We have to find a different way to operate, or else we are not going to be able to handle trade”, was the way he put it. Years ago someone else found himself in a position to make a similar comment. It was Malcolm McLean, and he was sitting in one of his trucks, waiting his turn at dockside, just like so many drivers are doing now. He had hauled bales of cotton to Hoboken and waited almost the whole day for his truck to be unloaded. “There’s gotta be a better way”, he must have been thinking, and those frustrating moments led to his determination to do something about the loss of precious time. He did exactly what Doug Tilden is telling us to do now. He figured out a different way to operate back then, and the entire world has cashed in on his concept.

Last year, FAIRPLAY, the British maritime journal, celebrated its 120th Anniversary by asking its readers to vote for the one they considered to be the most significant person in shipping in the last 120 years. You guessed it. Mr. McLean won, and it wasn’t even close. FAIRPLAY commented, “Televisions we can do without. Aircraft are useful, but not essential. Even 15 years ago, most business functioned perfectly well without computers. But take away containers, and the global economy would collapse overnight”. A pretty accurate appraisal of Mr. McLean’s contribution. A pretty accurate measurement would be the estimate that there are enough containers in the world today to build an 8-foot high wall twice around the equator.

The results of the poll and the comment by FAIRPLAY should tell us a thing or two about the shipping industry. Mr. McLean’s original concept would undergo subtle but necessary operational changes as time went on, and here in the 21st century, the rapid annual growth in cargo volumes demands an even more drastic change. At first, the whole truck trailer was loaded onto the container ship, wheels and all, until someone figured out “a different way to operate”. So they left the wheels behind. Then the spreader was invented ... again, another time-saver, and “a different way to operate”. Then twistlocks came into play, followed by the installation of gantry cranes at dockside and even aboard the vessel itself. “Different ways to operate”, but not complex by any stretch of the imagination.

“Necessity is the mother of invention”... most of the time, anyway. More often than not, though, it’s the frustration rather than necessity that leads to bigger and better things. All along the way, as you would suspect, there would be opposition to every one of the subtle alterations that have appeared in port operations because it’s part of human nature to resist change. It’s the frustration that eventually forces people to open their minds. Mr. McLean encountered more opposition in the transformation than anyone else because his idea was a momentous one. It was more than subtle because it called for wholesale change. Revolutionary change. Port operators saw only the new expense. Longshore workers felt their jobs would be eliminated. Few had the foresight to know what this revolution would mean to them and to the world’s economy, but Mr. McLean knew. He knew that frustration called for a “different way to operate”.

A Different Way To Operate
December 7th, 2004

The U. S. State Department submitted a paper at the OECD WORKSHOP ON MARITIME TRANSPORT, which was held in Paris on the 4th and 5th of November, and the paper made for some very interesting reading. It includes 29 numbered paragraphs and the brief contents of this paper serve as an exclamation point to what this column has been stressing. Here are samples from the 29 paragraphs:
1. While the nature of the immediate problem may be particular to the United States, all countries are facing the challenge of accommodating the substantial growth of freight moving along their roads, railways, and waterways. [Evidence that this website offers the only workable solution to this crisis.]
2. Beginning in June 2004, an unanticipated surge of import cargoes created backups in ports along the U.S. West Coast and has put the country’s entire intermodal transport network under strain ... By September, more than a third of the ships in the ports of Los Angeles and Long Beach were waiting for a berth.
3. Delays from congestion have a considerable economic cost ... the 85 largest metropolitan areas in the U.S. experienced 3.5 billion hours of delay, resulting in 21.6 billion liters in wasted fuel and $ 63.2 billion in associated costs.
4. Expansion of infrastructure has not kept pace with demand. Growing costs of infrastructure projects ... have slowed the development of infrastructure. At the same time, vehicle-miles traveled ... increased by 80% between 1980 and 2000 while lane-miles only increased by 4%. Truck mileage increased by more than 89%. New waterfront property suitable for port activities is frequently unavailable ... Communities surrounding U.S. ports often oppose expansion plans because of the congestion and pollution ...
5. The high volume of traffic on roadways and rail lines is one of the major causes of congestion ... Congestion in the rail system is acute.
6. Transfer facilities between different modes and crossings where railroads meet streets create frequent chokepoints.
7. Congestion is not a new problem ... Congestion will likely grow worse as traffic continues to increase.
8. While these factors illustrate the underlying trend in transport congestion, more recent shifts in international trade patterns triggered the growth in imports that has suddenly made a long-term concern into an immediate problem.
9. Generally, ocean carriers have been able to meet the increased cargo flows with additional services and larger vessels ... The additional cargo, however, is overwhelming other parts of the transportation network ... U.S. railroads lack sufficient rolling stock and crews to meet expected demands ... The railroads indicate that current rates of return cannot finance needed investments ... Trucking companies also need additional drivers.
10. As manufacturers and retailers increasingly use global sourcing and distribution networks, businesses rely less on inventories ... As a result, shippers are requiring more frequent services for smaller shipments. In addition to cost, reliability and transport times are becoming important criteria. Transport congestion undermines both.
11. (GAO) the U.S. Government auditing agency concluded that existing security requirements have not materially slowed freight movements but notes the widespread concern among freight industry stakeholders about the ability to maintain efficient operations under additional security requirements.
12. More efficient use of existing infrastructure, however, does not eliminate the need for additional capacity.
13. Changes to port operations can facilitate freight movement.
14. The OECD has suggested that increased security measures can yield benefits in the form of greater efficiencies through improvements to supply chain information technology.
15. Congestion tolls allow capacity to be more self-adjusting by rationing use ... Congestion tolls also help generate funds for expansion.
16. As observed earlier, U.S. railroads are also suffering from capacity restraints and could not easily carry a substantially larger share of freight without massive investments.
17. Part of the EU strategy of diversifying freight transport is its short sea program ... In the U.S., the Maritime Administration launched a Short Sea Initiative in November 2002 in an effort to alleviate U.S. freight capacity, highway congestion and environmental impact concerns, while using the underutilized assets of America’s waterways and revitalizing the U.S. maritime industry.
18. In the particular case of the U.S., some observers see little potential for additional productivity gains through further economic deregulation.
19. Many private and government observers agree that the planning process for freight transport projects needs improvement ... Public port authorities and public and private terminal operators share responsibility for seaports.
20. Public authorities typically plan for periods extending over decades. In contrast, private sector companies must react in a timely fashion to changes to competitive conditions ...
21. U.S. policy gives municipalities and states the primary role for planning improvements to the National Highway System, but many observers believe that the federal government has an important role to play in contributing to a wider perspective on the importance of the national and international cargo networks and in ensuring consistent planning approaches.
22. The Transportation Equity Act of the 21st Century ... the Borders and Corridors program ...
23. One of the key challenges is funding infrastructure needs. Neither the private sector nor the U.S. Government alone has the resources to meet the enormous financing requirements ...
24. Public support ... must minimize distortion of competitive conditions ...
25. The Alameda Corridor ... an innovative approach involving private sector interests.
26. ... the U.S. Government has recognized the importance of the intermodal freight network.
27. To replace TEA-21, the Administration has proposed the Safe Accountable Flexible and Efficient Transportation Equity Act, known as SAFETEA.
28. Secretary of Transportation Mineta is proposing a comprehensive next step that he is calling SEA-21 for the Maritime Transportation System.
29. Five years ago, transportation analysts in the U.S. predicted that the big problem was coming by 2020. It appears that the explosive growth in the trade between the U.S. and Asia, coupled with the accelerating reliance on imported goods throughout the U.S. economy have moved that problem dramatically forward.

We need a “different way to operate”!

Saturation Point
December 8th, 2004

Yesterday’s comment dealt with the OECD’s workshop that was held in Paris early in November. Hardly any space in U.S. maritime periodicals was devoted to this meeting, but the report submitted by MARAD’s Bruce Carlton merits a great deal of attention. We excerpted portions of the 29 points covered in this excellent document, and if any of our readers would like complete copies of Mr. Carlton’s submission, we’ll be happy to provide them. He was concise but he didn’t miss a trick, and it might be worthwhile to review a few of the more critical issues he addressed.

1. As one might suspect, the problems rampant in the U.S. distribution chain are not unique to this country. Transportation routes in all countries are being challenged in the same way.
2. Our entire country’s intermodal system has been strained because of the “unanticipated” surge of import cargoes at West Coast ports. [We’ve already stressed this lack of foresight.]
3. The Texas Transportation Institute calculated that the associated costs of West Coast delays and congestion in the 2002 disruption amounted to $ 63.2 billion.
4. Expansion of infrastructure has not kept pace with demand.
7. Congestion is not a new problem. [Someone’s been sleeping at the switch. See # 8, below.]
8. Recent changes in trade patterns has made a “long-term concern” into an immediate problem.
9. Unanticipated growth has overwhelmed the entire supply chain because of insufficient and untrained personnel and a shortage of equipment, among other things.
10. Global sourcing and distribution networks require more frequent service and smaller shipments, but transport congestion prevents just-in-time deliveries.
13. Changes to port operations can facilitate freight movement. [Where have you heard that before?]
15. Congestion tolls provide an incentive to avoid peak periods and generate funds for expansion. [Cf. PierPass. The jury’s out on this one.]
17. The “short sea” concept. The European Union is big on this because it works, and on this side of the pond we should be paying more attention to Chuck Raymond and MARAD. In the very near future we’ll be forced to rely on this measure in order to “alleviate U.S. freight capacity, highway congestion and environmental concerns, while using the utilized assets of America’s waterways and revitalizing the U.S. maritime industry”. [A head start in this area would be an enormous lift.]
23. One of the key challenges is funding the infrastructure. Neither the private sector nor the government can go it alone. But it has to be a co-operative, and concerted, effort.
25. The Alameda Corridor is one of the best illustrations of successful private sector involvement.
19. [... seems to fit here perfectly, because of the success of the Alameda Corridor.] Many private and government observers agree that “the planning process for freight transport needs improvement”.
27. SAFETEA focuses on intermodal connections and targets investments to the critical “last mile” of roads connecting to ports and intermodal facilities.
28. SEA-21 is designed to place more emphasis on marine transportation and to integrate it more fully into the national transportation system. [Short Sea Shipping!!]
29. “THE U.S. FREIGHT TRANSPORTATION SYSTEM IS MOVING RAPIDLY TOWARD SATURATION, AND CONGESTION IS HAVING AN INCREASINGLY NEGATIVE IMPACT ON THE DAILY TRANSPORTATION NEEDS OF ITS CITIZENS.” [A great last paragraph.]

In The News
December 9th, 2004

Item 1. A new chapter has been added to the history of container development. Although Malcolm McLean, in the mid-50's, was the original designer of intermodal containers, only recently has it occurred to enterprising minds to put these boxes to other practical uses. Quite early they were serving as improvised homes in underdeveloped countries, and shortly thereafter they rapidly caught on in the UK as storage units. Just recently, architect Mark Strauss won the national design award in a competition sponsored by the Boston Society of Architects. Built primarily of shipping containers, his crescent-shaped complex was built on an 18.6 acre site in the middle of Gloucester, Massachusetts, and consisted of 351 dwellings, each built from four containers, along with 170,000 sq. ft. of commercial space, a hotel, and 27,700 sq. ft. of community facilities. [Mr. McLean would have loved this guy.]

Item 2. In the very first paragraph of the U.S. State Department’s paper submitted at the OECD Workshop in Paris last month, this comment on congestion appears: “While the nature of the immediate problem may be particular to the United States, all countries are facing the challenge of accommodating the substantial growth of freight moving along their roads, railways, and waterways”. The Freight Transport Association in the UK, acknowledging that congestion in its ports is some of the worst ever experienced, has launched a new group which aims to unclog the logjams. Dr. Andrew Traill, the FTA’s Head of Maritime Cargo Policy stated, “This is something that cannot be resolved by any single group. Shippers, ports, shipping lines, rail freight operators, Network Rail, the Highway Agency, and others all need to work together to sort things out, planning together appropriate actions to ensure the traffic keeps moving.” [This echoes the advice each one of us is giving to the guy next to him. But as Chuck Mack wondered, “It’s perplexing why no one is stepping up to the plate. Everyone is afraid to make the first move.”]

Item 3. News Article Headlined: “‘Deutschland Shows Its Frustration’ — German cruise ship Deutschland became a symbol of the potential cost to US commerce resulting from the USCG’s strict enforcement of security rules last month when it bypassed the port of New Orleans. The 600-passenger capacity, Peter Deilmann-owned vessel was on the Caribbean leg of a round-the-world cruise when the decision was taken to miss out the US port rather than face delays that would result from a promised Coast Guard inspection. The cruise originated in Santo Domingo on 22 November and had made uneventful stops at Miami and Key West when the line was informed that the ship had become a “high interest vessel” and would be boarded and searched if it entered US waters again. The captain chose to bypass New Orleans in favor of the next destination in Mexico. That decision cost Louisiana tour operators, caterers, golf courses and other vendors thousands of dollars. The Coast Guard doesn’t have to explain why vessels are targeted except to say it was “routine”. The planned boarding was appealed but to no avail.” — End of news article. [The “Tampa” was boarded on the 27th of November, you’ll recall, and the Chairman of Wallenius Wilhelmsen accused USCG inspectors of inappropriate behavior. This latest event, though, has aggrieved the locals more than the intended guests. We said it before ... we could get a lot more flies with honey ... ]

Ups And Downs
December 10th, 2004

The “Up side”...
• South Atlantic ports focus on growth
• Bigger and better (More capacity expansion set for New York-New Jersey port)
• Portland, Maine, strives to diversify
• Growth is on the way (Savannah savors China trade, has room to expand)
• Double-digit growth for Savannah
• Trade growth to strengthen: WTO
• Lines shipping empty boxes to meet China demand
• Port of NY/NJ keen to attract more Asia-North America traffic
• Traffic grows for VA ports
• Box maker to double output
• China to keep good times for ocean carriers rolling
• CMA CGM orders 9,000-TEU ships
• New Jersey gets $ 103M for dredging, Halifax looks to China for business boost
• Box charter rates scale new highs
• Record month for GA ports
• NOL volume soars
• Growth to continue, say supply execs
• Sea giants get bigger
• New lease on life for New York port

Now here’s the “down side”... and here’s where it gets confusing.
• U.S. freight system “quickly becoming saturated” (U.S. State Department report to OECD)
• Rail issues pinch NY/NJ box handling
• West Coast ports address impediments to trade flow
• How to deal with West Coast port congestion (A report filed from NIT League)
• Miami seaport extends loading hours to ease backlog of cargo containers
• Port congestion plagues shippers
• LA-Long Beach volume overwhelms inland traffic
• U.S. port, rail congestion seen continuing in 2005
• Trade disruptions update
• Congestion in US ports worries Tirupur exporters
• Congestion makes for glum Christmas
• New UK group formed to fight port congestion

To make some sense of these conflicting and confusing articles, we suggest another reading of Ron Widdoes excellent treatment of the industry’s backed-up transportation system:
• Global congestion to slow trade: APL chief
[This article merits closer examination.]

A Familiar Ring
December 13th, 2004

Let’s hope that the OECD WORKSHOP ON MARITIME TRANSPORT was the catalyst needed to get things moving in the right direction. The most important piece of news generated at that meeting was the attention given to the inability of anyone, anywhere, to deal with congestion. It seemed that most of the port officials around the world, and especially those in the U.S. according to Mr. Carlton, felt that congestion and delays were a critical issue only at their port but just an occasional concern at other points in the supply chain. U.S. port officials should have known better. Time and time again warnings were issued by the most prominent men in the maritime world, and although most of the caution flags were about U.S. operational stumbling blocks, the international scene was being closely scrutinized by a number of highly placed and responsible shipping authorities. When one reads between the lines it becomes obvious that logjams are a worldwide bugaboo, and that the brightest minds in the industry are desperately looking to get over, or around, the hurdle. But all avenues have led to a dead end.

The extent of this congestion was made clear just last month when Ron Widdows, in an address to the Textile and Apparel Trade and Transportation Conference, openly criticized port officials for failing to understand the adverse effects that inadequate terminal operations are having on carriers. He clearly stated in that address that port and rail congestion here and in foreign ports as well are threatening world trade. “The problems of inadequate terminals capabilities are global and will be with us for years”, he said. Could he have said it more clearly? He even emphasized the point by citing the stress being placed upon the delivery capabilities at nearly all major load centers worldwide, with the UK and France especially burdened. Mr. Widdows identified the infrastructure problems as the factor causing the congestion and delays here in the U.S. and throughout the worldwide transportation chain, and as a result he has spent much of his time, along with so many others, searching for solutions. More dead ends.

Congestion affects every port of significance. The Kingston Container Terminal in the Port of Jamaica is one of the region’s busiest transshipment ports, but last Tuesday’s OBSERVER reported that congestion prevented the prompt servicing of Christmas cargo. The circumstances at the port and the comments by those affected have a very familiar ring:
• The port director’s solution for immediate relief was to extend the port’s operational hours and implement an appointment system for cargo collection.
• The president of the Customs Brokers Association said, “The measures are long-term and are not measures to deal with the situation as it is now.”
• A large retailer took issue with the port authority’s casual approach, saying, “I don’t think they understand the severity of it and the impact on the economy”.
• An executive of the Port Haulage Association said the backlog has cut haulage volume by almost 50%. “This is due to the fact that it takes three to four hours to get a container that is most times lost because of the congestion on the wharf.”

If Doug Tilden had been there, he’d have said: “We have to find a different way to operate.”

Forewarned Is Forearmed
December 14th, 2004

When West Coast congestion was at its worst a few weeks ago no one was exempt from criticism. Almost everyone had failed to project accurately the expected increases in cargo volumes, and because every link in the supply chain was affected by these miscalculations, officials are now making their customary vows to be prepared for next year. Last year saw similar congestion and delays, however, and similar pledges as well, but in the minds of most back then, the shutdown was to blame. Well this year there was no shutdown, but there was misjudgement on the part of management, so that will have to serve as a convenient alibi for this year’s logjams.

But what about next year? Present methods of operations guarantee congestion, delays and near chaotic conditions in 2005, regardless of preparations, and unless corrective steps are taken conditions throughout the supply chain will eventually become intolerable. Drastic changes must be made in container handling procedures because the projected infrastructure expansion, which is nothing but fantasy, could never accommodate the volumes being projected. If approximately 10,000 acres are now required to handle the approximately 12,000,000 TEU annually serviced by the LA/Long Beach complex, and if triple the volume is projected over the next 15 years or so, where will triple the acreage come from? Isn’t anyone doing the math? If authorities proceed with proposals now in the planning stages, taxpayers in the not too distant future will have laid out billions of dollars in a failed effort to achieve an unattainable goal. So it boils down to two questions: Where will the Port of Long Beach find the acreage for this expansion, and where will the authorities find the money? It’s obvious to the naked eye that the acreage just doesn’t exist, but what’s not so obvious is the possibility that the city may be a little short of funds at this time. The Long Beach Press Telegram recently published an article in connection with the Redevelopment Agency Board and inferred that the city is in financial trouble. [If that’s so then this would be a great time to contact us, through this website, and consider an offer we’d not hesitate to put on the table. We would quickly relieve the port, the city, and the taxpayers of all financial concerns, all acreage concerns, and all expansion concerns. We have good reason to be critical of the port’s modus operandi. There’s a method to our madness.]

Recall what Mr. Nicola Arena was saying about predictions and preparations back in October. He commented on the inaccurate estimates by officials all along the supply chain, but he reminded us that shipping lines had correctly forecasted the growth numbers and accordingly introduced the appropriate amount of capacity to accommodate that growth. Reports indicate that the shipping lines are projecting dramatic increases in volume for the next three to four years and are once again going all out to accommodate this growth. Asian shipyards are maxed out, and in this seller’s market anything with a bottom is being chartered. One can’t help being reminded of what Jean Godwin said about the 16-inch pipe and the 4-inch opening. Forewarned is forearmed.

[Correction: On November 17th we commented on the September 27th boarding of the “Tampa” by the USCG. In our December 9th commentary we again referred to that event but we mistakenly gave the date as the “27th of November” instead of the “27th of September”. Sorry about that.]

Gettin' Hitched?
December 15th, 2004

The Arkansas News Bureau reported last week that Wal-Mart is thinking about purchasing APL. Everyone in authority denies it, of course, but that’s par for the course. Denials almost always indicate that there’s truth to the rumor. David Sanders put an excellent report together at the News Bureau and made some telling points:
• Wal-Mart is the world’s largest retailer and gained that spot by looking toward the future.
• If it intends to retain its lofty perch it must continue to adapt to market pressures exerted by cost-conscious consumers, and by competitors in the retail marketing arena.
• Delays in the supply chain adversely affect even Wal-Mart’s ability to provide products to consumers quickly and cheaply.
• Increasing transportation costs have affected Wal-Mart’s prices to consumers.
• Cargo volumes worldwide are increasing at a more rapid rate than shipping capacity.
• Lack of sufficient and available shipping capacity results in delays and congestion.
• Marine trade, according to the U.S. Department of Transportation, is expected to double within 20 years, affecting even more drastically the availability of shipping space.
• Wal-Mart operates more than 60 distribution centers throughout the U.S., 36 transportation office terminals in 28 states, and its private fleet includes 5,600 tractor trailers in 48 states and 6,900 truck drivers.
• Because of these widespread and complex operations Wal-Mart must exert logistical control over the movement of cargo.

With increasing annual volumes of imported goods on the way, Wal-Mart must be in a position to guarantee that these products will arrive at ports early enough so that delays can be avoided, congestion can be circumvented, and goods will be provided to consumers, quickly and cheaply, by timely deliveries of these goods to distribution centers ... as advertised. With the transportation infrastructure in general disarray, however, what better way to guarantee timely movement of goods than to become, or at least control, the ocean carrier?
• APL was named Wal-Mart’s International Ocean Carrier of the Year in 2002.
• According to a company press release from 2002, “APL has been working closely with Wal-Mart for three years and provides services to Wal-Mart in 37 countries, shipping everything from electronic goods, footwear and garments, to household products and furniture.”
• With more imported goods arriving, Wal-Mart must be assured of getting the goods into port and into their outlets faster and cheaper than the competition, and acquiring a carrier like APL would give the company more control over that process.
• Such an acquisition would make Wal-Mart one of the largest shipping companies in the world and direct control over the company’s supply channels would further solidify its global position.
• Lastly, it’s not likely that K-Mart’s recent acquisition of Sears, Roebuck & Co. escaped the watchful eyes of Wal-Mart officials. 2,370 U.S. stores and a network of distribution centers and suppliers has vaulted the new combine into third place, just behind Home Depot. Stay tuned.

Supply and Demand
December 16th, 2004

This commentary has little to do with economics, but it has much to do with common sense. Let’s look ahead a little and see what might be in store for U.S. consumers/taxpayers, and we’ll begin at the start of the supply chain. Because inconsequential amounts of clothing, housewares, appliances, electronics, etc., etc., are being produced by U.S. workers for consumption in this country, the effects that American producers have on the U.S. economy won’t matter much. What counts will be the volumes of low-priced imports that pour in from countries that are now thought of as “third world” nations. These cargoes are offloaded, mostly by container ships, in some 60 container ports, according to Secretary Mineta. These container ships used to be manageable in every one of those 60 ports but that’s no longer the case. Just a few years ago, when “bigger is better” began to make economic sense to carriers, “PostPanamax” ships began to make their appearance. This transition was the natural response of suppliers to those doing the demanding, and further proof that the supply-and-demand concept in economics will always hold sway. Always.

But here’s what we seem to have forgotten. The U.S. consumers doing the demanding were not demanding goods that could only be produced overseas, they were demanding the lower prices that could only be produced overseas. We are a nation of cost-conscious shoppers, and because too many of our decision-making officials have lost sight of that basic fact this country and its consumers will pay dearly. Here’s how that’s about to happen. We go back to the “bigger-is-better” syndrome, and the logical evolution from “PostPanamax” vessels to “Megaships”. Why not? After all, the sheep ... oops! ... the buyers don’t seem to mind paying for it. Yes, that’s right ... the buyers are paying every step of the way. Little things, not initially noticeable, have a way of compounding themselves into intolerable situations and this is exactly the situation that is developing today. Two adages come to mind on this point. The first one is the caution about allowing the camel to poke his/her nose under the edge of the tent. Unless the animal is discouraged, the uncomfortable result for both the tent owner and the camel is that the whole camel ends up inside the tent. The other adage also has to do with the camel, and that’s the one about the straw that broke the camel’s back. This particular camel isn’t just uncomfortable, though ... this camel is dead. It makes for a good analogy.

Only last week the PACIFIC SHIPPER, one of the most reliable of all maritime journals, cited the strain already being placed by these megaships on terminals, truckers and railway systems in China and in Europe, and reminded readers that more than 150 vessels with capacities exceeding 8,000 TEUs will be in service within three years. In this regard some arrogance has begun to show up in the overconfident statements of some highly-placed transportation officials, and this will come back to haunt them. One such official “warned” that unless waterways were dredged to accommodate these megaships, these vessels wouldn’t service nearby ports. Guess who’s expected to foot the dredging bill? Right. The consumer/taxpayer. And guess who has to pay for the extra miles and miles of transportation costs from these megaports to the ultimate end user? Right again. The consumer/taxpayer. So guess who’s really bearing the construction costs of these “bigger-is-better” ships that are so profitable for shipowners?? Do the math. Gradually, cost-conscious shoppers, the “demanders”, will “Buy American” again. It’ll be more affordable.

Grant(ed)
December 17th, 2004

The Department of Homeland Security was established by H.R. 5005 when Congress realized that the initial approach in defending the U.S. from the threat of terrorists should be to ensure that our borders were secure, and because the longest borders in our country are our coasts, one of the first steps taken by Congress was to direct that the Commandant of the U.S. Coast Guard report to the Secretary of Homeland Security. The U.S. Customs Service is another of the primary enforcement agencies protecting the nation’s borders and was also directed to move to the new department. All told, some 22 existing government agencies and an estimated 170,000 employees were transferred to this new department because this new department was intended to have a clear and efficient organizational structure with four divisions. The order of importance was given as follows:
• Border and Transportation Security
• Emergency preparedness and response
• Chemical, Biological, Radiological and Nuclear Countermeasures
• Information Analysis and Infrastructure Protection

The entire country took note of this dramatic realignment of departmental authority and reacted accordingly. Much attention was paid to the stress placed upon Border and Transportation Security, and port officials fully expected that proper attention would be paid to their, and the nation’s, vulnerable underbellies.

Earlier this week, however, in his address to the Information Sharing and Analysis Center Council, Mr. Jay B. Grant, director of the Port Security Council, was quoted as saying that America’s seaports, “have been virtually cast adrift by the federal government when it comes to homeland security spending”. Mr. Grant went on to say that. “The U.S. Coast Guard’s own conservative estimates say that $ 1 billion was needed in port security funding for fiscal 2005, with a multi-year estimate of $ 7 billion”. Although he suggested that the actual number could be as high as $ 15 billion, he noted that the fiscal homeland security bill just signed into law only authorized about one-third of the $ 400 million estimated to be the absolute minimum required to protect port facilities.

Mr. Grant had the gumption to say all the things that the rest of us have been holding back.
• He called homeland security spending for port security a “band-aid approach”.
• He cited the failure of Congress and the Administration to make the kind of effort that is needed to protect our ports.
• He said that U.S. seaport problems are national problems, not just problems for the maritime community because, “The ports are protecting America’s commerce pipeline”.
• He said that Washington may have overreacted on aviation security funding, and that,”Spending billions of dollars on programs making all airline passengers remove their shoes at airports ... does not add any real value to fighting terrorism.”
• He said that the Department of Homeland Security should direct all its efforts to means-based risk analysis, ordering its priorities and spending its resources where the threat is most critical and where the challenge can be remedied. [Amen, Mr. Grant.]

Go Fetch!
December 20th, 2004

Someone offered the observation a week or so ago that as difficult as it may be to locate a large vessel on open water, locating a particular chassis in a 300-acre terminal facility can be almost impossible. In other words, terminal operations continue to be primitive. A half-century ago, in fact, it was much easier to locate a container, or a piece of equipment, because there was a lot less clutter in a yard.

So now we’ve gone “high-tech”. By resorting to tags, or transponders, or anything else that looks like rocket science, those in charge regularly point to upgrading measures in order that the operation can be made to appear almost workable. One system claims to cover 300 acres and enables the operators to locate equipment “within 10 feet of accuracy.” Primitive. The next step in today’s method of operation is to direct someone, in the right piece of equipment, to fetch the container, after someone in a more specialized piece of equipment has dug it out from the bottom of the stack in order to make it fetchable. After goodness knows how many moves have been involved, the container is presented to the waiting trucker, and we all know what the poor trucker has had to put up with in order to arrive at this tryst. Primitive.

Billions of dollars have been spent in order for terminals to progress to this stage of development. Progress?? The word “regress” more accurately describes the transformation. Cost, chaos, confusion, and congestion are the consequences of these enormous expenditures, and as the logjams increase in numbers and in size more demands are made for public funding in order to come up with still another idea. As long as the roll of the dice can be made with public funding, and as long as no group or association is in place demanding accountability, an elusive panacea will continually be sought. And why not? Regardless of the endeavor, it will always be funded by an unknowing public. Offers by the government to participate with port authorities in the funding of these frequent, but questionable projects, are pure and simple smoke screens. The public, the taxpayer, the end-user, the consumer are all one and the same ... and the many failed efforts to provide cheaper goods from overseas to our cost-conscious consumers are leading our cost-conscious consumers to pauperism.

But the maritime authorities are killing the goose that lays the golden egg. This column has openly criticized the shortcomings within port operations, and has offered to make available a patented system for container storage, retrieval and delivery. A close examination of the initial pages in this website will convince embattled officials at every point in the supply chain that the panacea, if you will, is truly at hand, and at an affordable price. If this cure-all is not adopted within a reasonable period of time, the financial burdens carried by the consumer will obviate the purchasing power of that consumer, and Asian manufacturers will be looking elsewhere for a market. Take a minute to think about it. Just think of the consequences to the maritime industry. Think of the numbers that will be added to the ranks of the unemployed. The rippling effect will build to tsunami-like proportions.

Anybody wanna buy a “megaship”? Cheap?

The Tail Wagging The Dog
December 21st, 2004

Everyone knows that container ships have grown to enormous proportions because of “economies of scale”. That’s a term that was originally applied to the truck transport industry. It all began when local producers began using panel trucks and pickup trucks to deliver goods to retailers, and logically, because more goods could be carried longer distances, stake trucks and finally trailer trucks were employed for these deliveries. The merchant making the deliveries reduced his overhead and increased his profit margin by cutting back on the number of trips and the amount of travel time, and in this position he was able to pass on some of the savings to the end user. Everyone benefitted from this economic metamorphosis. Maritime travel preceded wheeled travel by a few thousand years, of course, so it was inevitable that intercontinental delivery of goods would develop in the same way overland transport developed. It makes for a pretty good analogy, so far.

Take another look at it, though. The analogy limps. Did the delivery company demand that the end user, the customer at the point of delivery, build new roads to accommodate his newer and larger vehicles? Or else? Of course not. The delivery company relied on a suitably sized truck to accommodate the buyer, otherwise that customer would turn to a competitor. The tail didn’t wag the dog back in those days ... and it still doesn’t in the trucking industry ... so why should consumers/taxpayers knuckle under to those foreign shipping lines demanding that billions be spent in order to make way for their highly profitable juggernauts? This is the “camel’s nose” allegory we mentioned a few days ago. As long as the consumer continues to acquiesce, larger ships will be built and more and more demands upon the consumers/taxpayers will be made. In the megaships case, the reduction in TEU-cost isn’t passed on to the consumer because no threat from competitors is as yet foreseen. But it will happen. The well will run dry and things will come full circle.

Think about this. The very customers/taxpayers being asked to foot the bill for dredging, for the demolition and replacement of bridges and highways, for expanded ports and railway infrastructure, and, yes, even for the cost of the ocean-going behemoths, are the same ones who’ve seen their jobs farmed out to overseas firms. Simple math reveals that the water level in the well is already down to a critical stage. Every time a measure is taken to remove obstacles in the supply chain, or assure speedier transport of goods, or tightened security, or infrastructure upgrading, there’s always a fee tacked on to every TEU. Even each “smart box”, it’s being rumored, will require an extra $ 50 per TEU per trip price tag. With the per “TEU” add-ons we keep reading about, what will happen to the lower priced goods that were destined for retailers shelves? The “cost-conscious” buyer will soon be a thing of the past. With present levels of unemployment and the guarantee that many more of our citizens will soon be in that category, buyers of any description will be few and far between.

Chuck Mack wondered, “It’s perplexing why no one is stepping up to the plate. Everyone is afraid to make the first move.” And Doug Tilden said, “We have to find a different way to operate”.

We’re offering that different way. It looks more and more like a panacea every passing day.

By Leaps And Bounds
December 22nd, 2004

Some who’ve commented on the McKinsey Global Survey of Business Executives, published in the November 2004 issue of the McKinsey Quarterly, indicated that most responses were influenced by last month’s presidential election. Analysts reported that some 16,500 business people in 148 countries expressed declining confidence, citing the weak dollar, volatile oil prices, and geopolitical uncertainties, but they failed to report other aspects of the survey. For example, although pessimistic on the question of Trade Liberalization, responses were positive in the categories of Economic Growth, Global Business Climate, and Your Business. Did the analysts present an accurate interpretation of this global questionnaire to those in the transportation industry who may be required to make operating decisions in the coming months? Consider just some of the moves that have already been brought to our attention by maritime reporters.

• CMA CGM is increasing the size of several of the nine ships now on order, from 8,200 TEU to 9,163 TEU.
• NY/NJ Port Authority has embarked upon a $ 1 billion expansion program.
• NY/NJ Port Authority and army engineers have begun a $ 2.25 billion dredging project.
• 75% of the nation’s purchasing and supply executives surveyed in the 68th Semiannual Economic Forecast of the Institute for Management and Supply expect strengthened economic growth in the U.S. in 2005.
• Maher Terminals announced an agreement with the Prince Rupert Port Authority in British Columbia to create a new intermodal container terminal on Canada’s West Coast, to be called the Prince Rupert Container Terminal.
• A second port, Fraser Port, on the Fraser River close by Vancouver, is also being developed as a container port.
• Hutchison Whampoa has committed millions to the development of at least three container terminals on Mexico’s West Coast, in the ports of Ensenada, Manzanillo, and Lazaro Cardenas.
• The Port of Rotterdam, with government approval and partial financing has announced development of a multi-billion dollar 8.5 million TEU container terminal, with a scheduled opening date of 2010.
• Also in Holland, PSA International announced the development in Antwerp of a new $ 580 million 3.75 TEU container terminal.
• Le Havre is progressing on expanding its annual container terminal capacity by another 3 million TEU by the year 2006.
• A 15% increase in Europe-Asia volume in 2005 has been projected by the Far Eastern Freight Conference, and charterers are already booking for the year 2007.
• China, the dominant factor in the Asia-Pacific region, is exporting goods to Europe at an even faster rate than to the U.S.

Contrary to occasional pessimistic forecasts, none of the above steps indicate a weakening of resolve in the maritime industry. What is indicated is a growth rate of unmanageable proportions.

Merry Christmas
December 23rd, 2004

Truck drivers have been the whipping boys of late, but at least one company realizes how important these folks are in this country’s jammed up supply chain. Schneider National, Inc. is putting together a compensation package that will add significant amounts to the benefits provided to their drivers and owner-operators. The program is scheduled to go into effect early in February but the good news makes for a nice Christmas present to the drivers and their families. Although the exact details haven’t been made known yet, Scot Arves, Schneider’s National President of Transportation, said, “This investment lets our more than 15,000 drivers and owner-operators know that we’ve listened carefully to their concerns and are making investments that will impact their paychecks, careers and quality of life both at home and on the road”. Schneider National deserves a gold star for this move.

Let’s face it. Truck drivers are undeniably the most valuable asset we have in the logistics supply line. Regardless of the size advancements (?) made in container ships, the high-tech upgrades (?) in container yard operations, and the expanded railroad services throughout the country, all will be for naught if the drivers continue to leave the industry. No longer can we call upon nearby factories to provide goods for our consumption because we’ve allowed ourselves to be outbid by overseas manufacturing entities. In this country, because ports have taken the place of local manufacturing facilities as the sources of almost all our needs, drivers have necessarily become our lifeline. This link in the supply chain is the nation’s jugular. We may as well recognize that fact and do our utmost to keep it intact. Arterial, or venous, breakdowns tend to have an adverse and lasting effect on circulation. As examples:

• Last June and July there was a trucker stoppage in Miami. It didn’t seem like such a big deal at the time but the port still hasn’t fully recovered.
• Even though the seasonal vessel congestion in LA/Long Beach has subsided, transfers of containers by drivers from the terminal area to warehouse destinations are as much of a problem now as they were at the peak of the rush.
• In a survey conducted by Dr. Luiz Duarte and First Fleet Corporation, 77% of those polled said that a major shortage of qualified drivers is one of the most critical transportation issues.
• This year saw volume increases in the 10% to 15% ranges in U.S. ports, and the managing director of freight forwarder J.F. Hillebrand USA stated that this year’s port congestion was the worst he’s ever seen. 2005, according to all indicators, will see even greater volumes, yet drivers are leaving in increasing numbers.
• Hearken back to what Paul Heylman said this past May about the situation. “The current economic model with drivers is probably not sustainable. Truckers are making practically nothing compared to the ILA and the ILWU.” [More than 300,000 applicants showed up to apply for a few thousand ILWU positions in LA/Long Beach late this year. The pay is good, that’s why. Can you imagine how many applicants would show up if a call were to be made for truck drivers in today’s scheme of things? None. That’s how many.]

Merry Christmas, everyone.