Upon further review ...
Vol. II, Art. I

At Port Industry Day in June of 2000, Conrad Everhard, who was serving as Moderator, began warning us of the downside aspects of megaships. He reminded those in attendance that massive and costly dredging projects will be required in order to accommodate these giant vessels, and that those projects would require public funding. This public funding would amount to nothing less than an outright subsidy for those shipowners building and operating those vessels, he said, and he accurately predicted the increase in traffic tie-ups and the increased pollution generated by that traffic.

About a year later, at a Washington briefing sponsored by the AAPA, James Hartung cautioned that dredging deep-water ports to be used as “king-ports” by these megaships, in a hub-and-spoke system of operation, would “... decrease the efficiency of the marine transportation system and skew the economic benefits”. We never pay any attention at all to these local fellows, though. The real maritime authorities are the international spokesmen whose occasional pronouncements provide all the logistical guidance and advice we could ever need. They know their stuff.

Indeed they do. Just this week, in a FINANCIAL TIMES article summarized by an Asian reporting service and forwarded to us by e-mail, here’s what’s being said:

“Future Need of Mega Container Ships Questioned.

“Doubts have been raised about the future need for so-called mega container ships, capable of carrying more than 8,000 TEU.

“The doubts come at a time when industry insiders expect vessel capacity to increase faster than cargo volumes, the FINANCIAL TIMES reported.

“While giant container ships, which came into service in 2004, are expected to ‘revolutionize container trade between Asia and the US and Europe’, some shipping executives and analysts have questioned the apparent economies of scale offered by such vessels.

“The introduction of these large container ships will require shipping lines to reorganise their services to reflect the longer times these vessels will have to spend in port, the report stated.

“To maintain current schedules, such vessels will have to sail faster to make up for the extra time in port. To achieve this, ‘even with modern, fuel-efficient engines, this is likely to mean extra spending on fuel’.

“The article added that ultimately savings will depend on vessels operating with capacity loads.”

[Even though we ignored the words of Mr. Eberhard and Mr. Hartung, it appears as though the overseas authorities were listening very closely.]

Fully Loaded
Vol. II, Art. 2

The last line of the previous commentary reads as follows:

“The article added that ultimately savings will depend on vessels operating with capacity loads.”

The article being reviewed stated that these words originated with “industry insiders”, and that observation, therefore, speaks volumes. It was revealed just a few days earlier that container ships have been operating at somewhere between 75% and 85% capacity, and lest this bit of information pass unnoticed, let’s look back a few weeks ago at what maritime authorities were trying to bring to our attention. That 75% - 85% capacity figure has a great deal of significance because, depending on the source, the break-even figure for container ships falls somewhere in that range. At Navis World 2004 when Neil Davidson of Drewry Shipping Consultants called attention to the operational and commercial limitations that reduce the effectiveness of mega-ships, he pointed out that carriers will have a more difficult time filling these large vessels, thereby cancelling out the economies of scale these ships are supposed to produce. Mr. Davidson had done his homework. It’s simple math so let’s look at a hypothetical situation.

• An 8,100 TEU mega-ship requires somewhere around 6,480 TEU (80% capacity) before it could even consider getting underway. This ship, of course, would absolutely not sail until additional cargo was taken aboard. It would be cheaper to put the vessel in mothballs.
• Two 3,240 TEU container ships, however, would be fully loaded (6,480 TEU) and en route in that same time frame, and would be 100% profitable for the ship owner.
• Or three smaller 2,160 TEU container ships could be fully loaded (6,480 TEU) and en route in that same time frame, and bringing 100% profit to the ship owner. Bear in mind that in these latter two cases product would be arriving at destinations much earlier.

Other important aspects will weigh heavily in this scenario .
• The smaller vessels are not restricted to just a handful of U.S. ports.
• No expensive dredging projects are necessary to accommodate them.
• No excessive freighting will be required in order to deliver goods to distant consumers.

There are other “industry insiders” who will also have a say in the matter. Shipping Agents have a lot at stake and will have good reasons to shy away from these restrictive and inflexible mega-ships.
• Time is always a major factor. Smaller ships, fully loaded and underway days in advance of mega-ship departures, assure quicker delivery of goods.
• Lost time will force competing agents to choose the quickest, least costly vessels.
• When mega-ships offload at “king-ports”, the cost of additional freighting to ultimate destinations will reduce an agent’s profits and increase costs to the consumer.
• Consumers will rely upon the agent using the quickest and least costly means of transit.

When money talks, people listen.

On The Same Wave Length
Vol. II, Art. 3

If you don’t have a copy of the January 3rd issue of The Journal of Commerce, by all means get one. The “Journal”, as most of you already know, is one of the world’s leading sources of port and shipping information, and is staffed by some of the finest analysts. Now let’s get back to the January 3rd issue.

Peter Leach put together an article entitled, “Uniting against a common enemy”, dealing with the comments by Maersk executives with respect to the concerns their customers have about intermodal congestion. This entire article is so accurate and so timely that it requires little paraphrasing, and most of what follows in this commentary, therefore, will be a verbatim use of Peter’s words. Using the “good news/bad news” scenario, Peter reminds us that the world’s port and intermodal infrastructure is straining to handle explosive growth in containerized trade. That’s the bad news, he says. The good news, according to Maersk Sealand executives, is that there’s a growing recognition of the problem among shippers. The problem is affecting the relationship between shippers and carriers and is forcing the two sides to unite against what’s seen as a common problem — congestion that is slowing shipments to a crawl.

J. Russell Bruner, president and chief executive of Maersk Inc., said that last year’s port and intermodal delays weren’t a one-time event and that he and other Maersk executives have noted the growing concern among their large customers that the world’s port and intermodal infrastructure won’t be able to handle the accelerating growth of world trade volume. “The issues of 2004 - 2005 will seem inconsequential by comparison with what’s coming down the road,” Mr. Bruner is quoted as saying. He expressed concern about how to get all of the various interests that depend on the nation’s port and intermodal infrastructure to understand the dangers they’re facing. “We have to change what the country is doing”, he said.

The astute Mr. Bruner pointed to port trucking, which he sees as the weakest link in the intermodal chain. “It all begins and ends with the trucker,” he said. “You have to use trucks to haul containers to the railroad — even the on-dock railroads.” He noted that congestion at terminals “is causing owner-operators to leave the trucking industry. We’ve seen 30 percent of all port truckers leave the industry in the last five years. The trucking fleet continues to deteriorate, and the number of trips a driver in a day can make has been cut.”

To reverse this decline, Mr. Bruner thinks the shipping industry should provide higher wages to drivers. “It’s simply a matter of dollars and cents,” he said. Because BTT, Maersk’s trucking subsidiary, overhauled its compensation plan last June, “We’re seeing an increase in the number of owner-operators who want to work for us,” he said. “Truckers have to be paid more, and the terminals have to operate more efficiently.”

We’re on the same wave length, and Mr. Bruner’s observations require further comment.

When Mr. Bruner shows concern “about how to get all of the various interests that depend on the nation’s port and intermodal infrastructure to understand the dangers they’re facing”, we were reminded of the AAPA’s S.H.A.R.E. initiative and Kurt Nagle’s presentation at “America’s Ports: Gateway to Global Trade”. This website covered Mr. Nagle and the AAPA’s S.H.A.R.E. initiative in our September 30th, and in our October 4th, 11th and 12th commentaries. Mr. Bruner’s and Mr. Nagle’s concern for this lack of understanding was shared by Mr. Philip V. Connors, Maersk’s executive vice president and chief commercial officer, who said, “All the stakeholders — carriers, ports, truckers, railroads and government at national and local levels — need to get involved”.

When Mr. Bruner correctly warned that, “We have to change what the country is doing”, we had to recall the words of Mr. Doug Tilden who so clearly stated, “We have to find a different way to operate, or else we are not going to be able to handle the trade”. This website stressed Mr. Tilden’s words in our October 27th and December 6th, 7th, 8th and 13th commentaries. Our “Quotable Quotes” commentary on November 8th was devoted exclusively to the admonitions of sixteen of the more recognizable maritime authorities. Every statement had to do with the stressful conditions imposed upon our terminals by the rapid rate of growth, and every statement was a call for remedial action. In fact, every statement was a plea for remedial action.

Because of his extensive background in trucking operations, Mr. Bruner is particularly concerned about the state of port trucking, which he sees as the “weakest link” in the intermodal chain, and he also suggested that in order to reverse the decline in driver ranks, the drivers should be paid better. This website recognized the plight of drivers in the September 30th; October 1st, 4th, 11th, 12th and 29th; November 12th, 15th, 16th, and 18th; and December 23rd commentaries.

In the Journal’s interview, Mr. Bruner cited the inaccuracies of the too-low trade growth forecasts and blames these forecasts for many of the current problems facing ports and the intermodal infrastructure. No maritime official contests this observation, and this website treated this subject in our October 6th, 18th, 26th and 27th commentaries. Because Maersk’s economic models were within a percentage point or two of actual growth in trade, he said ... “We couldn’t understand why the ports were making so little plans to cope with the volume we could see coming”. Alarmed at underinvestment in port and intermodal infrastructure, Mr. Bruner predicted that, “By 2010 there will not be enough capacity to handle the demand”. He noted that China is making plans for huge increases in port capacity to handle its continuing boom in export trade, but “ ... you wonder where all that cargo is going to go ... China has aggressive growth plans, but their numbers don’t match up with the growth numbers at the other end.”

Peter’s article is spotlighting the problems that have been stressed in this website:
• “We have to change what the country is doing.”
• “Truckers have to be paid more ...
• ...and the terminals have to operate more efficiently.”
• “All the stakeholders ... need to get involved.”

We’re all on the same wave length, alright, but most of us have our receivers turned off.

Braking Point
Vol. II, Art. 4

California’s Senate Committee on Labor & Industrial Relations and the Assembly Committee on Labor & Employment held a joint hearing last week to investigate the developing crisis in the “inland transportation leg of international container shipping”. Trucking, in other words.

“Public attention has been focused on the huge number of ships unable to gain access to Southern California port terminals,” said Chuck Mack, director of the Teamsters Port Division. “The real crisis affecting traffic congestion, deteriorating air quality, and highway safety are critical problems created by the shipping industries ability to thwart government oversight and regulation. Hopefully this hearing will mark the turning point.”

Port truckers addressed the causes of these crises, explaining how they spend several hours a day idling their trucks when they are waiting for containers, bringing about forced delays which have had a severe environmental impact on the port and surrounding communities. “The drivers are constantly waiting three to four to six hours,” said Miguel Lopez, the Teamsters representative in the port. “I’m looking at the testimony of one driver who spent 11 hours waiting in a terminal to get a load discharged. These guys are losing substantial amounts of time they aren’t getting paid for.”
In addressing the Senate and Assembly committees, members of the California Trucking Association presented their long-held grievances:
• Truckers are paid by the load, not by the hour, and their earnings are unjustly reduced when forced to wait in terminal lines for their designated containers.
• Companies that lease trucks to port drivers are taking a bigger hit through fees assessed by the terminals for picking up and returning containers late.
• These so-called “demurrage” and “detention” fees are about $ 60 a day and significantly cut into the profit margins of the trucking firms and the rates paid to their drivers.
• Traffic congestion caused by operations within the port makes the fees unfair.

“This is the fastest growing and possibly most profitable industry in the globalized economy,” stated Mr. Mack. “There is no reason the foreign-owned steamship lines and the giant retailers should not be held accountable for the hazards that the chaotic inland transportation system poses to the general public.”

“This is beyond a trucking-industry problem,” said Patty Senecal, vice president of Transport Express. “When the yield per truck is so significantly reduced because of the velocity the terminals are processing the trucks, it’s unfair to hit us with late fees,” she said. “Our concern and fear is a continued driver shortage. There’s a nationwide driver shortage, but you have to have trucks. We are a critical link, and we’re the weakest link.”

[Well, maybe so. Now let’s examine the sources of the stress being placed upon this “weakest” link. By pinpointing the causes of this crisis, we can zero in on a cure. A guaranteed cure this time.]

A Clear Majority
Vol. II, Art. 5

Bill Mongelluzzo said it best in this week’s Journal of Commerce. In his article entitled, “No time to waste”, Bill begins with the warning that “The U.S. freight-transportation industry is on the brink of an infrastructure meltdown, but only a few port and shipping executives have been brave enough to state publicly how critical the situation is”. He ends his article on the same note: “As shipping executives have warned, that cargo will crush U.S. ports and the inland transportation network if infrastructure isn’t expanded quickly. It’s a warning that should be heeded”.

As Dave Barry would say, Bill isn’t making this stuff up. The “Journal” issued a supplement this week, and Joseph Bonney, in his editorial, tells us that when asked to discuss briefly what they see as the top industry issues for 2005, a clear majority of the 205 responding executives voted for port and intermodal capacity. These commentaries total approximately 65,000 words, and we agree with Mr. Bonney when he says that these thoughtful statements by people whose opinions count make fascinating reading. There’s just one problem, though. Many, many people just don’t have the time to read a 65,000 word treatise, and that’s a doggone shame because the folks at the Journal outdid themselves. It’s a tough act to follow.

For those not privileged to have access to this supplement, or the time to read it through, we’d like to provide excerpts from some of the thoughtful statements contained therein. Such a sampling might encourage a thorough reading of this supplement and might even lead to a unified effort by the freight community to search for the elusive solution to supply line congestion. Let’s begin.

“2004 demonstrated once again the fragility of the international transportation system. The combination of unexpectedly strong volumes out of China and issues with “right-sizing” the Southern California work force brought previously unimaginable delays to the movement of trans-Pacific cargo. Other ports around the world struggled with congestion, but none suffered the level of disruptions of Southern California ... We are seeing diversions to other West Coast ports and new all-water services starting up. We will definitely be faced with a much broader set of issues in 2005.”
— Douglas A. Tilden, President and chief executive, Marine Terminals Corp.

“The majority of our ports are bursting at the seams. Available shorelines are becoming increasingly scarcer in parts of the country. As this is becoming more the reality for the nation’s ports, we have to address the issue that compounds the problem of expansion – cargo opportunities are increasing. Increasing international cargo could potentially overload the inland transportation systems in delivering goods in a timely manner. Best practices, technology and innovative cargo handling can only take us so far. However, as an industry we need to collectively determine a long-term strategic plan. We have adapted, as an industry, in the past when new innovations came along and we will do so again, but it will take the concerted effort of all of us working together to meet the demands of the future.”
— James J. White, Executive director, Maryland Port Administration

“The U.S. transportation and logistics industry in 2004 faced pressures on all fronts, and became headline news for all the wrong reasons. On the West Coast, ships were delayed for days, sometimes weeks, in ports. New behemoth 8,000 - TEU vessels, heralded by the carriers as the solution for the lowest costs, were found to take seven days to offload, and no one on the carrier sales force wanted to tell the poor small consignee when his box finally reached the pier. The railroads experienced meltdown, with intermodal speeds across the country substantially less than those achieved by Lance Armstrong ... What are the important changes and news for 2005? I am an optimist. I believe that at least some members of the transportation and logistics industry will hear the cries of shippers for reliable service at a fair price, of something approaching service and cost guarantees in slow periods as well as the peak, and will step up a superior offering ... Who will history show to be have been equal to the challenge?”
— J. Douglass Coates, Principal, Manalytics International

“In forecasting the biggest changes for the industry this year, all one needs to do is reflect on the West Coast freight bottleneck of 2004. The problems on the West Coast were primarily due to unexpectedly high volumes. Vessels were not worked in a timely manner. Ships sat idle off the coast for days, costing the U.S. economy millions of dollars and putting the holiday shopping season at risk for retailers nationwide. Even if vessels had been worked quickly, the inland intermodal infrastructure, particularly the railroads, was not prepared to handle the volume of freight moving across the Pacific.”
— Rick A. Kessler, President and chief executive, Horizon Services Group

“Two of the most important challenges requiring more attention in 2005 are accurate forecasting and congested infrastructure ... Infrastructure expansion is expensive and requires a long lead time. As a result, some expansion plans are under way to address the doubling of container traffic in the next decade. In the interim, we must find ways to move more cargo through existing capacity. This will be accomplished only with effective planning, and that planning must begin with an accurate projection of the volume expected to move through these facilities.”
— Russ Bruner, President and chief executive, Maersk Inc.

“Congestion is the question; diversification of cargo routings will be the answer. While ocean carriers continue to enjoy the bounty of plentiful cargo, the U.S. ports and intermodal systems are becoming bottlenecks for the national and global economies. Too much cargo through too few ports, and diversifying the routings of import cargos will be the only way for our country to steer safely through these rocky shoals. Containerized cargo growth will continue, and perhaps accelerate, and we must make better use of our distribution infrastructure to move these boxes quickly and efficiently.”
— Jerry A. Bridges, Executive director, Port of Oakland

“This year may be our industry’s last best window of opportunity to help craft an effective and productive national response to today’s global trading and security challenges. We must work toward a coordinated and multidimensional response that balances national security with trade facilitation and economic security.”
— Hallock Northcott, President, American Association of Exporters and Importers


“Congestion on the West Coast will continue to alter shipping patterns for months, and perhaps years, to come. With all-water service from Asia to the East Coast now under 25 days, the impetus to use Los Angeles-Long Beach and rail has decreased. The imposition of congestion surcharges is pushing cargo to Houston and the Pacific Northwest at alarming rates and this is already overwhelming carriers’ ability to cope with the surge in freight.”
— Alan E. Baer, President, Ocean World Lines

“In 2005, concerns about capacity and security will have a profound effect on ports. These issues are not new, but they will manifest themselves in new ways – and they are likely to attract increased attention from the world beyond the maritime industry. Capacity concerns require an intensified focus on the landside transportation system. For years, ports have worked with ocean carriers and others to maximize the ocean side of the transportation system to accommodate larger vessels and cargo flows. With the recent growth in trade, we now face real and impending crises in managing the volumes of cargo that ports move to and from the land side of the transportation system. We face bottlenecks in the system, conflicts with other interests for the use of highway and rail capacity as well as for use of land , and the ever-present concern about the environmental impact of our business activities.”
— Richard M. Larrabee, Director, Port Commerce Department, Port Authority of NY and NJ

“The deterioration of ocean carrier, port, truck and rail capacity and service threatens the agricultural export and import supply chain and the U.S. economy.”
— Peter Friedman, Executive Director, Agricultural Ocean Transportation Coalition

“Many ports, especially on the West Coast, are facing congestion and labor problems resulting in costly delays for shippers and carriers. Ports continue to be squeezed by cities and metropolitan areas that have grown up around them, and there are never-ending battles with public and private interest groups that are not in favor of port expansion, regardless of the cost to international commerce and the economic benefit that accompanies port activity.”
— Rick Ferrin, Executive director, Jacksonville Port Authority

“Ocean carriers continued with the pursuit of rate stabilization for all trade lanes throughout 2004. But much to the chagrin of all parties involved, we were confronted with the challenges of the port environment in Southern California beginning early in July ... The Los Angeles-Long Beach port complex handles an astonishing volume of imports from Asia. This gateway is critical to the industry, and all entities must work together in a unified approach to properly service our clients in 2005 and beyond who elect to use these facilities.”
— Toshio Suzuki, President and chief executive, “K” Line America

“The driver shortage, consolidation of LTL carriers, rail service problems and West Coast port congestion, combined with a volatile fuel situation, are all likely to continue well into 2005. Combined, they create an environment where shippers will increasingly need to find methods by which to cut their costs, consolidate their shipments and enhance their shipment facilities.”
— Bill Clark, President, American Institute for Shippers’ Associations

“There is much evidence that driver pay has not increased as fast as some other blue-collar occupations over the past few years as trucking companies were hit particularly hard during the recession. This discrepancy makes it difficult to attract new men and women into the profession. The driver shortage problem will not be easy to solve, but if we are going to keep the world’s largest economy running smoothly, it is something the entire freight community will have to deal with.”
— Bill Graves, President and chief executive, American Trucking Associations, Inc.

“We started early last year to see warning signs of port congestion and infrastructure constraints. However, with full ships, few focused on these issues globally or realized how they would affect our industry and our customers’ supply chains ... Trade growth will make the constraints more acute in 2005 ... There is no doubt about the scale of the challenges in front of us, and the need to think differently about our business. But by working together in 2005 and beyond, we can positively influence the environment, and find solutions that minimize the impact on service reliability.”
— Ron Widdows, Chief executive, APL Ltd.

“The long-term picture projects world trade to double in volume by 2020 and in some markets such as Los Angeles and Long Beach, volume could easily triple. To handle this growth, we must lead changes in the national transportation infrastructure, the productivity level of waterfront labor and cargo-handling capabilities at our container terminals. New efficiencies, stronger teamwork and innovative approaches are needed industrywide ... Strong cargo volume will mean more jobs for waterfront labor, and the need for a higher level of productivity. Container terminals need higher productivity, achieved through the use of new technology, processes and equipment.”
— Tony Scioscia, President, APM Terminals North America

“We face two major issues over the next few years. First and foremost is the meltdown of ship-rail/truck connections in North America. You move the cargo rapidly over thousands of miles of ocean only to find you cannot unload it from the ship because there are four ships waiting to use the same berth. Then you can’t move the cargo onto a railcar because there are not enough railcars to accommodate everyone’s backlogged volume. In the middle of all this chaos is the heightened security vigilance that adds to the delays ... Unfortunately, the domestic transportation system cannot absorb all the cargo that mega-sized vessels are delivering to our shores. And if you look at the new ships on order, it’s going to get a lot worse over the next few years.”
— Andrew Abbott, Chief executive, Atlantic Container Line

[The seventeen officials just quoted say pretty much the same thing. We’re overburdened ... Greater volumes of cargo are coming this way in ever-increasing amounts, and we don’t know what to do about it ... We’ll soon be overwhelmed by congestion at every link in our supply chain, and then it’ll be too late for a response to the crisis ... No one denies a willingness to participate in a cooperative effort to contend with this dooms-day threat to our economy, but they see no further avenues to explore. There seems to be no way out. Well, there is a way out, as a matter of fact. Readers of this website fully understand that the storage, retrieval and delivery system promoted herein is the one sure way of avoiding the unthinkable, yet seemingly inevitable, transportation gridlock that looms on the horizon. As soon as one of the above officials stumbles upon this site, quick action will follow and our port and supply line problems will be solved. And when our “Problems & Solutions” segment and our October 14th commentary are assessed, we’ll be home free.]

All? Or Nothing!
Vol. II, Art. 6

In our October 22nd commentary we dealt with the questionable inspection methods of imported containers and the conflicting positions held by Senator Kerry and Mr. Bonner, the U.S. Customs and Border Commissioner. Diplomatic double-talk led to a standoff, but we made our feelings known with the following parenthetical statement:

(For any policymaker to give knowingly a false sense of security to the people in this country would be nothing short of criminal.)

Without a doubt, these words brought nods of agreement from our readers, and without a doubt, the thought was quickly dismissed. There was no need to worry after all because the word we heard from those in the know assured us that all necessary steps have been taken to provide the security promised. Baloney. Read the following article appearing in the “Long Beach Press Telegram”.

“By Associated Press

“Sunday, January 16, 2005 – LOS ANGELES — Thirty-two Chinese immigrants were found inside two cargo containers aboard a ship arriving from Hong Kong, authorities said.

“They were discovered Saturday night when a crane operator at the Port of Los Angeles saw three men climbing out of a container, said Lt. Titus Smith of the Los Angeles Port Police.

“The suspected illegal immigrants, including 28 men and four male teenagers, were being questioned by federal authorities, said Virginia Kice, spokeswoman for U.S. Immigration and Customs Enforcement. All appeared to be in good health after the 10-day journey.

“The 40-foot containers had little more than food, water, sleeping bags and battery-powered fans and arrived aboard the Panamanian-flagged NYK Athena. Authorities don’t believe the ship’s crew knew about the stowaways.”

Now go back to our October 22nd commentary, if you will, and read the assurances we were given about the sure-fire inspection operations that were supposedly put in place overseas. It’s simply a fantasy. There’s no such system in place. Well, if satisfactory security cannot be made available in foreign ports, ( and there are a few dozen reasons why security measures on our behalf will never be reliable), and if space and time constraints allow U.S. terminals to inspect only 4%, or so, of all incoming containers ... then isn’t it fair to say that a policymaker at one level or another has decided to “give knowingly a false sense of security to the people in this country”? And when you nodded your head in agreement three months ago, didn’t you also agree that such duplicity would be “nothing short of criminal”?

Somebody owes us an explanation. An honest one.


Here are some questions that must be considered:

What if the crane operator had been looking the other way and didn’t see the three men?
What if those three men had decided to lay low a little while longer?
How many other 40-footers pass “under the radar” in our hit-and-miss random inspection system?
If unsophisticated “illegals” are getting through the inspection system, as this group did, how much easier is it for sophisticated “terrorists” to circumvent our half-baked inspection systems?
Do you suppose these terrorist-types would limit their carry-on luggage to “food, water, sleeping bags and battery-operated fans”?

And the $ 64,000 question is, “Will we sit on our hands until another 9-11 awakens us?”

If you haven’t yet read Dr. Stephen Flynn’s book, “America The Vulnerable”, do yourself a favor. Read the book. Dr. Flynn makes it clear that:
• Foreign-based inspectors are not being adequately trained by Customs personnel.
• Foreign-based inspectors can inspect “only the tiniest of percentages of containers”.
• The government is fighting terrorism overseas while refusing to provide adequate protection to the vulnerable superstructure at home.
• Instead of providing a general report of our vulnerabilities, the government refuses to be candid with its citizens.
• The many millions of containers that arrive in U.S. ports each year pose the greatest vulnerability, but not enough is being done to respond to the terrorist threats in this sector.

Mr. Jay B. Grant backs up Dr. Flynn as follows:
• He called homeland 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 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.”

On at least a dozen occasions in this website we’ve described the scanning/inspection aspects of our patented storage, retrieval and delivery system. Time and space constraints in conventionally-structured terminals place unacceptable limitations on scanning/inspection equipment and allow no more than an estimated 4% of incoming containers to be examined. Our patented facility guarantees that 100% of all containers will be scanned/inspected prior to being stored in designated and preprogrammed slots.

Under no circumstances could “illegals”, or “terrorists”, or contraband escape detection when our system is in place. It couldn’t happen. And because we cannot rely on foreign nationals in overseas ports for our security because of their laxity, or unconcern, or even preconceived notions toward us, we must assume for our own safety that the measure of success at those detection points is something in the 0% range. The Los Angeles stowaways justify that assumption. In contrast to that, the measure of success in our patented facility will always be 100%.

A Consensus
Vol. II, Art. 7

The seventeen maritime and transportation officials quoted earlier were just a sampling of the many comments submitted to the Journal. The fact that so many took the time to provide answers to the Journal’s questionnaire is an indication of the severity of the conditions in the intermodal chain and the sincere interest each has in the industry’s search for a panacea. Here are more excerpts.

“Despite the growth of the European Union, the U.S. remains the world’s largest consumer market, and the U.S. West Coast is its major gateway. The fact that the ports there have become bottlenecks, rather than funnels, should be a significant concern and a priority issue to solve in the immediate future.”
— Capt. S.Y. Kuo, Vice group chairman, Evergreen Group

“While radio-frequency identification will continue to dominate the headlines, most logisticians will face more immediate and critical challenges, such as finding ways to secure trucking capacity and overcome port delays.”
— Adrian Gonzalez, Director, Logistics Executive Council, ARC Advisory Group

“In 2004, strong American demand for Asian-made products increased trade by more than 10% at the ports of Long Beach and Los Angeles. The prospect of still more cargo growth in the years ahead, and trade’s impact on highway traffic and on air quality have many people in Southern California wavering in their support for further trade growth.”
— Richard D. Steinke, Executive Director, Port of Long Beach

“It’s the time for creative, consensus solutions. Southern California’s advantages as a distribution hub are threatened by its own success and from an ever-growing consumer population. We must take a realistic look at short- and long-term solutions, even those discounted earlier ... Solutions are the product of new alliances and strong leadership.”
— Bruce E. Seaton, Interim executive director, Port of Los Angeles

“Shipowners, liner operators and port operators can hardly cope with the volumes. Ships from Asia are full. Congested terminals, especially in Europe and the U.S., have delayed ships and disrupted the tight schedules of usually well-oiled weekly loops. This is a challenge for 2005.”
— Capt. Yann Le Gouard, Consultant, BRS - Alphaliner

“The days of keeping stockpiles of empty containers and fields of chassis are over. Planning for labor requirements to load and unload ships, operate equipment and provide necessary clerical services must move in step with terminal capacity planning, as must the road, feeder and rail facilities for moving cargo to and from the terminals. Close partnership between carriers, major shippers and ports will ensure that terminals have the labor, equipment, terminal space, and rail, feeder and road infrastructure in place in an orderly fashion.”
— Michael A. Leone, Port director, Port of Boston


“The marine intermodal drayage industry faces two important issues: the shrinking pool of available owner-operators, and congestion at ports, railyards and customer facilities. Solving the congestion problem would have a positive effect on driver capacity, but there are a number of other contributing factors that affect the industry’s ability to recruit and retain independent owner-operators. We estimate that more than 50,000 drivers – roughly one-third of the total – have left the profession since 2002. Inadequate income is the top cause. A competitive environment has kept the base pay rates low since the 1980s. When, with our customers’ support, we were able to raise drivers’ base rates in many lanes, we immediately saw a corresponding increase in the number of new owner-operators contracting with us, and in the retention of contracts with existing owner-operators.”
— Clark E. Brown, President, Bridge Terminal Transport Inc.

“The emphasis on international trade will affect the entire intermodal supply chain, including steamship lines, port terminal operators, trucking companies and railroads. The key to fluidity will be attaining full use of the available capacity of each link in the chain. That will mean doing business differently; at some ports, for example, moving to 24-7 operations and achieving higher production standards.”
— Matt Rose, Chairman, president and chief executive, Burlington Northern Santa Fe Corp.

“The volume increases that we are experiencing are taxing the infrastructure in place to accommodate it. This growth has presented challenges in terminal design, labor availability and intermodal capabilities amid heightened environmental concerns ... Our industry in 2005 is experiencing a call to arms. The challenges are enormous, the solutions not simple. Valid arguments on all sides of an issue mandate that compromise be a necessary part of every solution. Compromise with all due deliberate speed will allow us to achieve solutions well before we gridlock the system.”
— Thomas J. Simmers, President and chief executive, Ceres Terminals Inc.

“ Two million TEUs of containers entered the intermodal stream this year. Assuming similar growth in 2005, congestion will reach epic proportions. Factor in additional security requirements atop this growth, and we could be headed for port gridlock. Can we accept delays of a week or more to unload container ships? Manufacturers, distributors and retailers increasingly view the marine-intermodal supply chain – particularly with larger vessels – as their warehouses for just-in-time products. But limited port and docking space, not to mention handling facilities, will place an enormous burden on our ports. Are we ready, willing and able to confront this reality before it is too late? Perhaps it’s too late already!”
— Henry F. White, President, Institute of International Container Lessors

“West Coast ports, particularly the Los Angeles-Long Beach basin, are in need of operational plans for the future. Growth is a key to prosperity and plans need to be laid for that growth. Proper coordination between the various parties involved, including management and labor, is needed to secure this region’s future. Issues such as productivity and investment are high on everyone’s agenda. Other West Coast ports also need to plan for future expansion and development that reflects increased vessel size and container volume.”
— Zhang Bing, President, China Shipping North America


“Sometimes I think we are stuck in the 20th century – making today’s decisions on the basis of our understanding of the world then. We find ourselves falling behind and moving in directions that will not serve us well in this century. Why? Because we – transportation providers, operators, users and government – don’t always speak plainly, understand or listen to one another, or respond to the reality before us. We have not paid enough attention to funding and improving the assets that are needed to deliver goods. Active national policies to encourage global trade are out of balance with our passive transportation supply policies.”
— Lillian C. Borrone, Chairman, Eno Transportation Foundation

“As sophisticated as we are in world commerce today, transacting nearly $ 10 billion of commerce each second, there is still plenty of money on the table. Much of the world’s liner shipping continues to be done haphazardly and with little planning by service suppliers. The supply chain is not well-linked – it is generally a series of actions taken by parties, often in response to the previous person’s actions ... Generally in container transportation today, no one in the supply chain is alerted to his role until it is his turn to act.”
— Charles G. Raymond, Chairman, chief executive and president, Horizon Lines

“The backlog of import boxes stranded on the U.S. West Coast and in European terminals, plus the parking lot lookalike 8,000 TEU vessels awaiting berths in Los Angeles-Long Beach and Seattle, are a clear sign that our facilities are overtaxed. Our inland infrastructure is NOT capable of handling the influx of containers. And our ports, too, look frail. We do not have enough truckers or skilled laborers on the waterfront.”
— Jim Poon, Chairman, Hong Kong Liner Shipping

“Carriers introduced the 8,200-TEU mega-vessels to assist in delivering improved service reliability and economies of scale, but any benefit gained was quickly negated by land and terminal infrastructures that could not support the increased volumes. These bottlenecks caused disruptions and added costs to the customers’ supply chain pipeline-distribution channels as well as to container carriers due to berthing delays, terminal congestion, diversion costs and decreased productivity.”
— Frank J. Baragona, President, CMA CGM (America) Inc.

“I believe the most important issue facing us is how to deal with the record trans-Pacific volumes while facing serious congestion at West Coast ports and on railroads. Many carriers have addressed the ballooning volume by building larger vessels ... Even with the extra tonnage being deployed, volume has overwhelmed ports and railroads, in one of the longest peak seasons we have ever seen. Ocean carriers are always pleased to see an increase of volume, but if your vessels can’t get into port and your containers are backed up at the terminal, the supply chain is seriously affected.”
— Zhang Liyong, President, Cosco Americas Inc.

“A negative consequence of growth has been severe congestion at the ports. However, the growth has not been and will not be the only cause for the congestion. Labor shortages, a crowded intermodal rail network and an influx of mega-ships are all contributing factors. Unfortunately, port congestion will persist as a nagging problem into 2005.”
— J.Y. Park, Chairman, Hyundai Merchant Marine


“The shipping industry faced unprecedented challenges last year with the severe port congestion in Southern California, coupled with historically high vessel-operating costs. These two areas will have a major impact on shippers and carriers in 2005. We will undoubtedly continue to experience major infrastructure problems at the ports of Los Angeles and Long Beach, which have led to recurring congestion and long delays for shippers ... These slowdowns are plaguing global supply chains, forcing shippers to change the way they manage the transportation process for the time-sensitive delivery of global goods.”
— Sergey Kozlov, Vice president container lines, Fesco

“The infrastructure development is not keeping pace with the increase in world trade, creating numerous bottlenecks at ports, terminals and railroads, mostly in the U.S., but also now developing in some European locations, and approaching in Asia. We must work to develop port and rail capacity to cope with the rising volume requirements. Terminal capacity, already stretched to the limits, needs to be expanded. Where this is not possible through horizontal growth, different “vertical” solutions must be found, and procedures allowing for improved efficiencies must be developed to deal with volume increases.”
— Rudy Mack, President, Hapag-Lloyd (America) Inc.

“As international trade continues to grow, the ability of customs brokers to expedite the delivery of shipments will be challenging. Problems with lack of infrastructure reached elevated levels during 2004, and prospects for 2005 are not much brighter. Larger container vessels, scarcity of acreage for terminal expansion, insufficient labor supply and shortage of truck drivers at insufficient wage levels will continue to put a strain on supply-chain reliability.”
— Peter H. Powell, Sr., Chairman, National Customs Brokers & Forwarders Association

“Historically, terminal operators have proved to be very flexible in rising to the occasion and finding ways to deal with challenges. However, the experiences in 2005 will most likely underscore a fact that has become increasingly apparent: The congestion problem cannot be solved with fixes that occur solely within terminals. In particular, inbound cargo can be moved off the terminals only at the rate that the supporting road and rail infrastructure will permit, and the capacity of that network is nearing its limit in many areas. Think of a backyard pool; it will empty only as fast as its drainpipe allows.”
— Michael J.S. Seymour, President, Americas, P&O Ports

“As international trade continues to grow at an ever-increasing pace, one of the most pressing problems facing the transportation industry is congestion – port congestion, rail congestion and highway (truck) congestion.”
— Paul F. Richardson, President, Paul F. Richardson Associates

[The spokeswoman and the 21 spokesmen above echo the plaints and admonitions of the 17 we quoted in our Article 5 commentary. A quick assessment of this website and the contents of the “Trends & Developments” segment will convince these concerned officials that our container yard systems will assure the transportation industry of a trouble-free future.]

More Guesswork?
Vol. II, Art. 8

Guesswork and stopgap measures have been the order of the day during the developing years of the intermodal industry. Not very long ago containers were dropped directly on chassis in order to locate these boxes and avoid delivery delays. We were given assurances that this “wheeled” system of doing things would be the way terminal operations would provide orderly tracking and delivery of containerized cargo, but it wasn’t to be. Terminal operators were forced to abandon this method when it became apparent that this simple luxury required more acreage than what was available in order to handle the increasing and unanticipated volumes that have been generated by U.S. consumer demands and Asian capacity for production. So that operations could be condensed, therefore, “stacking” was then determined to be the solution to terminal crowding, but it soon became obvious that this measure made it extremely difficult to locate and retrieve containers. A variety of tracking methods were introduced in order to make it possible just to locate a targeted box after that box itself had been shuffled out of the way during previous searches for boxes, and ... well, you know the story.

The entire development of the industry has experienced unending growing pains, which have been promoted and perpetuated by guesswork and by introducing one stopgap measure after another. Given the information available, though, would any of us have acted differently if we had been positioned as a port official or terminal operator? Not a chance. No one can see into the future, nor was a cure-all available for the problems that have cropped up because of unexpected growth. Even now, uninformed port authorities are backed into a corner on the West Coast and are desperately looking for ways to stem the threatening flood tide that they hoped would show signs of receding after the recent seasonal peak. No relief is in sight, however, and further problems are assured.

Fearful of an impending gridlock, West Coast authorities are now recommending the establishment of an inland container depot and a rail shuttle line connecting the harbor and that offsite depot. But officials also know that this will be just another stopgap measure because an elevated expressway on Route 47 is also in the works down the line. What the last two sentences don’t say, but do imply, is that someone will be asked to shell out several billions of dollars for these projects. (And can you guess who that will be, Mr. and Mrs. Taxpayer?) Admitting that no one yet knows of a better way to postpone this chaos, what else can possibly be done in this crisis?

If you’ve gotten to this point in these commentaries and have yet to familiarize yourself with our patented storage, retrieval and delivery system, please click on to this website’s opening pages. You’ll see that we can conduct all operations on one-tenth the acreage now being used at the LA-Long Beach complex and still have room to spare. You’ll see that our delivery system would be a programmed distribution of cargo utilizing existing rail services in conjunction with generously paid truck driver employees, and you’ll see that our system would relieve the community of its present environmental concerns. We’d like to add that the amounts of income generated to the port authorities, the state, the county and the city governments would greatly exceed amounts now being realized, and NO funds would be required from beleaguered taxpayers because currently proposed demolition and reconstruction would be unnecessary. [Money talks, but is anyone listening yet?]

Force Majeure!
Vol. II, Art. 9

This formal declaration signals that trouble in one form or another has encumbered some person or agency. The implications are that adverse circumstances brought about by outside forces require the aggrieved party to plead for understanding, assistance and exemption from responsibility or legal liability. Terminal Systems, Inc., the operators of Deltaport in Vancouver have just been forced to declare “Force Majeure” because of a backlog of more than 5,000 containers. Phrases such as, “greater than average ship discharges” and “a higher than average amount of containers” are wordy ways of admitting that the terminal’s primitive methods of operation have spawned congestion. And that’s what it is ... purely and simply ... congestion. But this mess will take months and months to clear up, and by that time the effects of the projected increase in volume for 2005 will be felt.

This website, and our frequent commentaries, have stressed the many warnings issued by maritime authorities with respect to the impending gridlock in our intermodal transportation system. Each of these officials have deliberately appealed to every participant in every link of the supply chain to take heed and to come together in a joint effort to avert this expected disaster. Yes. Disaster. Maybe “catastrophe” would be more accurate. The folks in Vancouver could describe it exactly, no doubt. Vancouver saw an 8% increase in containers in 2004, reaching the 600,000 TEU mark, and with a projected tripling of throughput by the year 2020, 2005 will see at least an 8% increase over 2004's unmanageable growth. What’s worse than “catastrophe”? Armageddon, maybe?

TSI will be forced to “divert”, intentionally, that 2005 increase because Vancouver will never find a way to accommodate the burden. If it isn’t obvious to everyone by now, it soon will be. Where will the diverted vessels go? To LA-Long Beach, maybe? Forget it. According to the latest admission, 115 ships were diverted from that complex during the year end peak season. And speaking of the turmoil in LA-Long Beach, how are the authorities in that overwhelmed basin proposing to handle the 10 to12% increase projected for their terminals in 2005?

“Force Majeure”, that’s it! ... and let the devil take the hindmost, as the oldtimers used to say. No, that won’t happen. The heady maritime authorities often quoted in these commentaries will eventually be directed to this website and will do what’s right. Either that, or the U.S. Department of Transportation will see the need for an intermodal supply chain commissioner of some sort ... and that wouldn’t be right. There are several hundred associations looking to the well-being and profitability of their members, but there is no all-embracing intermodal supply chain association as yet. This website would like to go on record as suggesting the formation of just such an association. Consisting of experienced and capable authorities, such an alliance would quickly promote the means that would best serve the interests of all, and especially the interests of the most neglected segment ... the very last link in the chain ... the American consumer. Would sacrifices be required of anyone along the line? None whatever. The patented system promoted by this website would come to the attention of this brainstorming group, and in order to avoid a domino-like intermodal collapse, with Vancouver as the starting point, our recommendations would be adopted. More profit would be generated all along the chain, as a matter of fact. Take it to the bank.

A Win-Win Situation
Vol. II, Art. 10

Much is being said about “technology”nowadays, but there are good kinds of technology and there are bad kinds of technology. The term “high-tech” almost immediately brings to mind the dot-com disaster that cost U.S. investors billions of dollars three or four years ago. Now that’s an example of bad technology. And of course, that bombshell hit right after the Y2K fiasco, which should have taught us that there are Information Technology swindlers on the loose, and that maybe we should do some homework instead of being intimidated in this age of so-called rocket science. Homework doesn’t seem to be our strong suit, however.

“Labor-saving” technology is the worst kind of bad technology, but that depends upon whose ox is being gored. A tenuous contract between the International Longshore and Warehouse Union and the Pacific Maritime Association is a six-year arm-wrestling engagement concerned mainly with the advancement, or encroachment, of information technology in West Coast terminals. The ILWU, of course, wants to preserve as many jobs as possible, and to be perfectly frank about it, the PMA wants to eliminate as many jobs as possible. That’s what the term “labor-saving” means, doesn’t it?

This website has described our patented system as being efficient. Our October 14th commentary lists more than two dozen cost-saving advantages that are not, and could never be, offered by conventionally structured and operated container yards. These benefits are achieved by using, of all things, technology. But this is good technology because the goal in our system is not “labor-saving” but “job-creating”. Even the PMA boasts that even though their aim is to eliminate clerks at gates, a resulting increase in volume will more than offset the loss in clerk jobs. This was borne out when TraPac (Trans Pacific Container Service Corp.) introduced automation in its gate operations. About 19 clerks were eliminated by this move but the subsequent increase in cargo volume required the addition of dozens of equipment operators and yard workers. A win-win situation.

“As volume goes up, work opportunities for the ILWU will increase,” said Doug Tilden of Marine Terminal Corp., and though he agreed that technology will help he also pointed out that technology alone won’t solve the problem. Terminal operators are already aware of the inevitable saturation point in today’s space-starved terminals. Art Merrick, president of Long Beach Container Terminal, said, “We need more space. Without enough space, you spend more time shifting containers than moving them.” And so go the quandaries besetting labor and management in container terminals.

Retrofitting our systems in those terminals would solve everything. Space would be no problem. In the limited amount we’d require, the system would handle as much cargo as the community and the transportation modes would allow. The increased cargo volume and added distribution centers would create, not dozens, but thousands of new jobs. Acres and acres of valuable land would be returned to the community for other more practical and more profitable uses. The efficiencies in this new system of ours, made possible by good technology, would bring significantly higher incomes to all employees, increased revenues to port authorities and terminal operators, and greatly reduced operating expenses for carriers. [Now that’s what you’d call a real win-win situation.]

On The Same Page
Vol. II, Art. 11

A few days ago, in Article 9, we commented on the many national associations that have been set up to promote the interests of concerned members, but we noted the absence of an umbrella-like intermodal supply chain association that would serve to link the links, so to speak. The growing need for such an alliance becomes more and more obvious as the transportation industry muddles through one crisis after another, each one more severe than the one preceding. What is also quite obvious is the subliminal emphasis that has been placed upon this need time after time by so many transportation officials these past few years. It might be worthwhile at this point to review recent statements made by some of the industry’s foremost spokesmen citing the need for coordinated efforts and a sharing of information with respect to forecasting and developing trends. Here are just a few quotations that bear repeating, and we can begin with the AAPA’s S.H.A.R.E initiative.

• Kurt Nagle said that this initiative, “... 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”.
• Chuck Raymond, at MARAD’s Short Sea Shipping Conference, said, “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.”
• John Bescec, VP of Canadian Association of Importers and Exporters, said, “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.”
• Dr. Andrew Traill, the Freight Transport Association’s Head of Maritime Cargo Policy in the UK, stated, “This is something that cannot be solved 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.”
• Hallock Northcott, President of the American Association of Exporters and Importers, says, “This may be our industry’s last best window of opportunity to help craft an effective and productive national response to today’s global trading and security challenges. We must work toward a coordinated and multidimensional response that balances national security with trade facilitation and economic security.”
• Steven R. Blust, Chairman, Federal Maritime Commission, says, “One of the greatest challenges facing the industry is to ensure that our transportation system is capable of safely, securely and efficiently accommodating the requirements of ever-expanding trade and global supply chains ... The creation of forums for communication and discussion among the industry segments should be promoted and facilitated. Active collaboration among cargo interests, carriers, ports, intermediaries and government entities will be a key element in reaching effective solutions.”
• Ron Widdows, Chief Executive of APL Ltd., says, “There is no doubt about the scale of challenges in front of us, and the need to think differently about our business. But by working together in 2005 and beyond, we can positively influence the environment, and find solutions that minimize the impact on service reliability.”
• Tony Scioscia, President, APM Terminals North America, says, “To handle this growth, we must lead changes in the national transportation infrastructure, the productivity of waterfront labor and cargo-handling capabilities at our container terminals. New efficiencies, stronger teamwork and innovative approaches are needed industrywide.”
• Adrian Gonzalez, Director, Logistics Executive Council, of the ARC Advisory Group, says, “Although the need for better collaboration among shippers and carriers is a recurring theme, maintaining the status quo will be impossible in light of physical constraints and more demanding service requirements. Although this prediction has been made in the past, you will see better collaboration and more “outside-the-box” thinking between shippers and carriers in 2005.”
• Zhang Bing, President of China Shipping North America, says, “All responsible maritime carriers wish to assist in the evolutionary process of providing smooth and effective surface transportation to the shipping public.”
• Henry F. White, President, Institute of International Container Lessors, says, “There is no single answer, but if no solutions are sought through organizations or governments in 2005, we can foresee the usual political rhetoric forcing governments to act and undesirable solutions imposed on the maritime industry.”
• Edward J. Kelly, Executive Director, Maritime Association of the Port of New York and New Jersey, says, “As transportation congestion creates a negative impact on the general populace, our transportation industry will become a target on every politician’s radar screen. The industry must collectively and creatively create internally formulated solutions, or an irate public will initiate their own solutions.”
• James J. White, Executive Director, Maryland Port Administration, says, “Increasing international cargo could potentially overload the inland transportation systems in delivering goods in a timely manner. Best practices, technology and innovative cargo handling can only take us so far. However, as an industry we need to collectively determine a long-term strategic plan.”
• John B. Ficker, President, National Industrial Transportation League, says, “There is still value to be gained in transportation and logistics, but it will require even more effort and collaboration. That collaboration must be on many fronts: Between shipper and carrier; Between the departments within carriers and shippers; Between the public and private sectors; Between the modes of transportation; Between labor and management ... That will be the challenge of 2005.”
• Sandy Kennedy, President, Retail Industry Leaders Association, says, “Stakeholders (carriers, terminal operators, truckers, unions, etc.) need to work together to develop an industry-wide solution that works for everyone instead of relying on governments on how the ports should operate. For the longer term, industry, transportation providers, unions, ports operators, importers-exporters and other players in the supply chain need to work together to solve the more critical issues facing port congestion ...”

Let’s nominate these 15 officials to be board members of the industry’s “umbrella association”.

Umbrella Policy
Vol. II, Art. 12

John Vickerman of TransSystems Corp. always makes good copy. At last week’s AAPA Seminar in Long Beach he threw his weight behind two issues we’ve had occasion to discuss in these pages, one of which has contributed to U.S. supply line congestion, and the other almost a sure bet to bring relief all along the chain. The first issue is one we dealt with in our commentaries dated the 13th and 18th of October, and on the 2nd of November. Mr. Vickerman hits the nail right on the head when he criticizes the reckless building programs of foreign shipyards and shipping lines in their efforts to upstage one another. Because the onslaught of megaships brought considerable grief to U.S. providers and consumers in 2004, the brakes should have been applied and radical logistical planning should have been initiated. A pause of some kind at that point would have done much less damage than a catastrophic stoppage would do in the coming months. This lack of planning was his second point. Didn’t it occur to anyone that if “... trying to fit a 16-inch pipe into a 4-inch opening” doesn’t work, (Thank you, Jean Godwin.) why the heck would anyone try to jam in an even larger one? With no thought to the consequences of an almost certain breakdown in the U.S. transportation system, shipping lines have rushed headlong into newbuild programs that will soon glut our “driftboxes” with more than 150 of these behemoths. To make matters even worse, just last week Hyundai Heavy Industries announced that COSCO had ordered four new vessels with capacities of 10,000 TEU, and that designs for 12,000 TEU vessels have already been completed.

The shipping lines were quick to criticize the ineptness of terminal operators in the LA-Long Beach complex as well as the inaccurate growth projections in all areas of the U.S. supply chain, but these same lines openly boasted that they correctly forecasted 2004's growth in volume and accordingly introduced the appropriate amount of capacity to accommodate this growth. But does that give them bragging rights? Those unexpected vessels, caught in a predicament of their own making, wasted anywhere from one to two weeks waiting to be serviced, and at an operational cost of $ 50,000 per day, who do you suppose ends up with the tab? Take a guess. And wouldn’t you think that the “correctly forecasted” growth figures would have been shared with the rest of the transportation supply chain? This was the theme of our previous commentary which relied upon the statements of 15 well-known maritime officials, and prompted our call for an umbrella-type organization akin to the “national intermodal freight policy” called for by Mr. Vickerman at last week’s seminar.

We referred above to our November 2nd commentary, and it might be wise to take particular note of paragraphs numbered 5 and 6. Mr. Nolan Gimpel of Axiom Consulting warned us several months ago that mega-ships strain the capacity of inland infrastructure, terminal operators and rail and truck carriers, and that the least costly way to expand these separate but linked operations is to establish smaller container ports closer to end users. Mr. Neil Davidson of Drewry Shipping Consultants called attention to the operational and commercial limitations that reduce the effectiveness of mega-ships and also emphasized the need for smaller container handling ports in closer proximity to end users. These are assessments that an “umbrella association’s” brain trust would surely consider.

[Mr. Vickerman, Mr. Gimpel and Mr. Davidson would fit comfortably under that new umbrella.]

"The more things change, the more they remain the same."
Vol. II, Art. 13

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.

[This is a reprint of The Future Is Now, dated October 28th, 2004 ... because “the more things change, the more they remain the same”.]

The "National Crisis"
Vol. II, Art. 14

Back in February of 2000, at a seminar sponsored by the Transportation Research Board, Michael Belzer of the University of Michigan’s Institute of Labor Relations stated, “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”.

There have been limited responses, of course, but because of the inability to coordinate the stovepiping operations that make up the intermodal supply chain, an effective and decisive response has been an impossibility up till now. There is no lack of concern or determination, however. At the AAPA seminar in Long Beach the other day, Philip V. Connors, Maersk’s Executive VP, stated that although the capacity limitations at the ports are bad, the infrastructure limitations are even worse in the rail and trucking industries. “The real problem is infrastructure”, he said. “When we talk about infrastructure, you better be worried.” Mr. Connors then echoed Mr. Belzer’s earlier warning by saying, “It is, in my opinion, a national crisis”. This seemingly hopeless situation is exacerbated by a shortage of port drivers. Because of low wages and costly unpaid delays, the national fleet of owner-operators serving container ports has declined from 160,000 five years ago to approximately 110,000 today, says Mr. Connors. This decline has been verified by Mr. Clark Brown, the President of Bridge Terminal Transport Inc., who states, “We estimate that more than 50,000 drivers — roughly one-third of the total — have left the profession since 2000. Inadequate income is the top cause”.

Nor is this the first time Mr. Connors has sent cautionary words to the intermodal industry. In an earlier interview, when alluding to the widespread logjams in the supply chain, he said, “All the stakeholders — carriers, ports, truckers, railroads and government at national and local levels — need to get involved”. The logistical problems throughout the supply chain have been anticipated, however, for the most part anyway, and they’ve been addressed as they’ve developed, but now the gravity of the crisis is being freely acknowledged by those who will ultimately be held accountable. We’ll be hearing more about this “national crisis” as conditions grow worse.

Mr. Tommy Stramer, President of Zim American Integrated Shipping Services Co., looks at this crisis in the U.S. transportation system and lays it right on the line when he states:

“I hope there will be changes during 2005, namely in the infrastructure of the U.S. ports and the railways. If changes can be made in such a way as to allow a higher turnover of containers in the ports — coupled with the ability to transport these boxes to inland destinations — then our industry will survive. Otherwise, we are going to see ports, more so on the West Coast of the U.S., but also on the East Coast, approach the point where cargo will not be able to go through them, ships will wait outside, schedules will no longer be maintained, and the new ships of 8,000-TEUs-plus will be just another white elephant in the industry.

“So what are the changes that need to be made? We must find a way to build more terminals on the West Coast. We must find a solution for the environmental problem and deal with it. There will be more all-water strings to the U.S., which will mean heavier pressure on East Coast ports. A way must also be found to build more terminals there.

“To build new railways is a project for more than a year or two. Every year the U.S. is importing more containers, with exports on the rise as well. Therefore, without significant changes in the infrastructure, the American people will have to adjust their buying habits by reducing their standard of living or by purchasing more domestic products — products that will reflect the increased cost.

“If I sound a bit pessimistic, it is because I am. We must achieve improvements in port and transport infrastructure.” So there you have it, from an observer with a more objective point of view.

Mr. Stamer should be our company’s PR man. He places heavy emphasis on the need for a higher turnover of containers in the ports — a distinct advantage provided by our patented automated system. He cites the needed capability to transport these boxes to inland destinations — another distinct advantage provided by our innovative delivery system. He says we must find a way to build more terminals on the West Coast and on the East Coast — a simple matter in our case because no additional space would be required when retrofitting our space-creating systems within existing sites.

Space-creating — a perfect lead-in. As Mr. Richard Steinke, Executive Director of the Port of Long Beach, so eloquently put it a few months ago, “I’m here to tell you, the land will run out”. It appears now as though the land has indeed run out. Mr. Connors addresses this lack of acreage and informs us that shipping lines that do not operate their own terminals will in all likelihood be shut out as third-party tenants in West Coast ports. “As an industry, we’re in bad shape. Some of these lines will not have a home”, said Mr. Connors at the AAPA seminar. Terminal operators that customarily cater to third-party tenants will soon be able to service only vessels of their parent companies because of ever-increasing volumes. Ed DeNike, Chief Operating Operator of SSA, one of the few operators willing to take on third-party business, stated that in order to do so SSA will be required to double its effective throughput to 8,000 TEU per acre. But there’s a catch, or two — or three. To double the density to the degree Mr. DeNike feels will be necessary, SSA will have to “expand its use of technology, look to off-dock sites for the storage of containers and invest in modern equipment that can stack containers higher”. It won’t be as simple as it sounds, however, because when and where that technology, those off-dock sites and the modern stacking equipment can be made available is anyone’s guess. And the theoretical and considerable cost of these speculative acquisitions is an even wilder guess. [And why would anyone want to “stack containers higher”? Aren’t the additional retrieval costs and delivery delays bad enough as things are now?]

Just think, though, what could be accomplished by retrofitting our inexpensive storage, retrieval and delivery systems. Each terminal would be condensed to one-tenth its current size ... that would take care of the space problem. Slotting instead of stacking would allow a one-day turnaround ... that would eliminate costly repositioning, delays and stacking vehicles. Our in-house delivery system would eliminate gates, traffic jams, and piecework pay for drivers. Drivers would become full-time employees. The systems efficiencies will permit unimpeded growth in container volume and create thousands of additional jobs. And we’d see an end to the “national crisis”.

The Party's Over
Vol. II, Art. 15

It’s early yet ...There’s still time to get ready for tonight’s company after we rest up a bit ... And besides, we’re still cleaning up the mess left over from last night’s party ...They won’t be here for awhile anyway ...We’ll handle them when they get here. This seems to be the prevailing attitude on this side of the pond, but we’re in for a rude awakening. Here’s what’s happening on the other side.

1. One day last week COSCO contracted with Hyundai Heavy Industries to build four new 10,000 TEU container ships. We can gather from this move that COSCO has an ambitious shipping program in the works for the coming years. But COSCO’s enthusiasm doesn’t end there. Along with this aggressive shipping strategy, the company is taking even greater leaps with its shipbuilding program. Today’s February 3rd Singapore Times just revealed that where COSCO’s shipping arm has been accounting for 40% of the company’s annual profits, the rapid transformation of its COSCO Shipyard Group will account for 80% of company profits “within two years”.

2. It was also revealed in today’s Times that Hyundai, Daiwoo, and the other South Korean yards expect to increase their combined 2005 output by 24% because of rising demands. The article also stated that this year’s world-wide ship production will more than double the rate of growth in 2004.

3. From India yesterday we heard that The Shipping Corporation of India (SCI) has initiated moves to acquire an additional 18 vessels as part of a substantial fleet expansion plan. According to a senior official, the company’s requirement for these was “yesterday”.

Almost every day newspapers and maritime journals are announcing the giant strides taken by non-U.S. participants in the intermodal supply chain. Being closer to the Asian sources of production, and therefore being privy to consumer demand, these shippers, carriers and even shipbuilders are exercising good business judgement and reacting in timely fashion, and even as early as “yesterday”. At the same time, a disinterested or neutral observer would be inclined to think that, in spite of the nightmares that surfaced on this end of the chain in 2004, and the anticipated gridlock in 2005, U.S. strategists appear to be sitting on their hands. It would be difficult to come up with any kind of an effective argument against that perception. To be sure, except for strong and expensive attempts to counter real and imagined threats of terrorism, little if anything is being done to prepare for the tidal wave of containers coming this way. If the status quo were to be maintained in 2005 and there would actually be a zero rate of growth in container imports, serious breakdowns would still take place throughout the supply chain because adequate damage control measures have not been taken. Repeated warning signals have been given, projections in the way of outright guarantees have been published, and alerts such as those seen in the above announcements have all provided certain indications that, regardless of the lack of preparation in the U.S. delivery system, massive amounts of incoming containers will hit our ports even earlier than usual this year, and the crippling gridlock, or breakdown, or shutdown of the intermodal supply chain will become a reality.

No Timeouts Remaining
Vol. II, Art. 16

Here’s how U.S. planners are addressing today’s chaotic supply line congestion. A report in the LA Times tells us that the MTA (Metropolitan Transportation Authority) has just approved a plan to expand the 710 Freeway in an effort to ease traffic congestion from the ports of LA and Long Beach. This expansion project would create four elevated truck-only lanes which would boost the capacity of the highway to 10 traffic lanes at an estimated cost of $ 4.5 billion (that’s in today’s dollars). The article went on to say that port officials and the business community stressed the fact that there is an URGENT need to find a solution to ease the traffic gridlock, which they’ve acknowledged to be so heavy that trucks are seen crawling along, nose-to-tail, down the same lane.

But there are some flies in this ointment. (“Hurdles” is the term used in the Times article). The major stumbling block is funding. This has been common knowledge, however, because early in December even the Long Beach Telegram mentioned the fiscal shortfall. Mr. Zev Yaroslavsky, an MTA director and LA County Supervisor, has stated, “I don’t have a clue where the $ 4 billion is going to come from”. The MTA’s budget deficit is reported to be close to $ 50 million, and the state government is reported to have frozen funding for new expressway construction. Work to expand the highway is unlikely to commence anytime soon, therefore, regardless of whether the federal or state governments foot the bill, or the funds are raised through other channels, including the levying of highway tolls and container charges. To make matters worse, according to the report, environmental reviews and engineering and design plans are expected to keep the project on hold for the next decade. No wonder the MTA directors so magnanimously approved of this impossible expansion program.

Recalling the discomforting events in the U.S. transportation system in 2004, and being advised of the logistical developments taking place in Asia at this very moment, isn’t anyone in a position to step forward and take charge? MTA directors, port officials and the business community all recognize the urgent need for a solution to the problem, but no one knows how to approach the quagmire. That’s unfortunate because we have no more timeouts left. In our preceding commentary, we wrote about aggressive shipping and shipbuilding programs being undertaken in Asia, and today’s Lloyd’s List revealed that Hyundai Merchant Marine intends to have its affiliate, Hyundai Heavy Industries, build another eight 9,000 TEU ships. As if the problem isn’t bad enough already, this additional vessel capacity, announced in the past few days and not foreseen by prognosticators, has only added to our woes. So what steps are being taken in the LA-Long Beach complex to handle this year’s assured increases in volume? An official decision has been made to expand a highway — about ten years from now. So there. That oughtta do it.

The astute observer can see the problem. No one wants to step forward, simply because no one has the expertise to do so. This is the very first time a crisis of this magnitude has been encountered, and because no one individual can be held responsible for the tragic failings at every link in the supply chain, and because it seems so convenient to point an accusing finger at an adjoining link, the prevailing attitude is, “Let George do it”. But as we’ve just indicated, “George” is incapable.

"Easy come, easy go"
Vol. II, Art. 17

In a city audit, issued on December 3rd, the Port of Los Angeles was declared to be “adrift” and “suffering from lack of vision”. The report said the port clearly needs more strategic planning in order to improve its efficiency. Linda Chick, the controller who authorized the audit at the direction of Mayor Hahn and the city council, said, “Now, it is easier to understand many of the issues plaguing the port”. The audit was conducted for the city by Northside Consulting Group and recommended the development of a formal master plan and strategic plan for future operations, clear management guidelines and clear priorities for community advisory councils. It also called for limiting the role of the Harbor Commission in the day-to-day management of the department.

That report was issued more than two months ago and there is still no evidence of strategic planning, improved efficiency, formal master plans, clear management or stated priorities. The operations of PierPass, Inc. are the kinds of actions that have been taken in response to the city’s recommendations, but this is exactly the type of inefficiency that prompted the Mayor to call for the audit in the first place. We cited what should have been seen as inherent shortcomings in the “peak box fee” concept in our November 12th, 16th and 22nd commentaries, and sadly, the attempts to set this operation in motion have only served to justify the criticisms issued by the auditors and the city officials. Being “adrift” with a “lack of vision” is the worst kind of a pickle for a mariner to be in and one to be avoided at all costs, and the use of this terminology leaves no doubt that this blunt assessment by the auditors and the city was meant to be taken seriously.

Once again, though, this unpopular and impractical fee program has been postponed. That’s the good news. The bad news is that a top-notch IT firm has been engaged to develop the information software that should eventually get the program operational. How’s that for being fiscally responsible? Is the ability to waste time and money the only qualification for employment in the LA-Long Beach complex? Hasn’t it occurred to port officials that the inefficient use of time and money in operations in and around the port are the very reasons the Mayor called in the auditors? As questionable as this concept was at its introduction during the chaotic months of 2004, do the authorities really expect this program to be beneficial in the predicted 2005 crunch? How does this program create the space so urgently needed? After all, the lack of space is the cause of all the woes in the complex. What if owner-operators decide that late hour operations have no appeal, and en masse, they shun the industry rather than absorb the fees (fines?)? Or, alternatively, what if every port trucker decides to avoid the penalty fees and make use of the after hours gate accommodations? Still more gates would be required, and with no offsetting fees, this would guarantee a lose-lose situation for the port complex. We did the math back on November 12th, remember? The avoidance of fees, which are supposed to pay for the additional gates, would impose added costs to port operations, and now, with the engagement of one of the most capable IT firms in the world, can’t you just imagine how the Mayor and the city council will react at these misdirected expenditures?

“Easy come, easy go”, is one way to look at it. The Mayor and the city council won’t see it that way, though.

"Truck Driver's Blues"
Vol. II, Art. 18

Councilwoman Janice Hahn, in her January 28th statement at the Public Meeting on Goods Movement & Ports, stated that she was speaking, “ ... in 2 capacities. First, as Councilwoman, I represent the Port of Los Angeles and the communities of Wilmington and San Pedro — communities that have suffered from the effects of port operations. I am also Chair of the Alameda Corridor Transportation Authority”. Ms. Hahn, therefore, knows what she’s talking about, and she manages to get right to the point. [Unfortunately, because of unsatisfactory conditions in the port communities, Ms. Hahn’s candor requires her to use the word “suffered”, rather than the word “benefitted”.] Here are some more of her accurate observations:

On congestion: “Today, about 12 million containers are passing through our port complex every year. And, that number is expected to triple in the next 20 years. The international trade industry is booming, and we must do something to prepare for this growth. Highways in Southern California are already gridlocked and congestion will continue to worsen, unless we do something now ... It is my belief that congestion at our port complex, and on our roads and highways, is the one thing that will drive business out of California.”

On independent truckers: “While addressing you this morning, I wanted to bring another important issue regarding goods movement to your attention. And that is the plight of the independent trucker. These truckers are a vital link in the goods movement supply chain for this entire country. 40% of all our nation’s goods come through our port complex, and without these truckers, our entire economy would be crippled. Independent truckers are currently working unbelievable hours and barely making enough money to feed their families.

“I stand before you today to send a message that if we, as leaders, do not do something to improve the working conditions for our independent truckers, we could face a meltdown in goods movement statewide.”

Allen Clifford, Senior VP of Mediterranean Shipping Co., voiced the same concerns at this week’s meeting of the Raritan Traffic Club. “Things will get worse before they get better,” he said, and he compared port congestion with the futile attempt to park three cars into a two-car garage, closely paraphrasing an earlier description offered by Jean Godwin. In citing the rapid departure of drivers from the industry because of low pay and lengthy delays, Mr. Clifford said, “If it means paying truckers more money, so be it ... We have to change the way we do business, not only in America, but in the world.”

In still another address, this one given at the Los Angeles Transportation Club, Stephen Russell, chief executive of the Celadon Group stated that the driver turnover rate averages about 125% annually, and has brought about a 20% reduction in the nation’s truckload capacity.

[Sounds like we’re playing a broken record.]

The Magic Bullet
Vol. II, Art. 19

The following is excerpted from the Congressional Record, and the words are those of Virginia’s Senator Robert Byrd. One of the most knowledgeable and most respected of this nation’s legislators, he was urging his fellow senators to vote against the proposed Homeland Security Bill.

“This is one of the most far-reaching pieces of legislation I have seen in my 50 years. I will have been in Congress 50 years come January 3rd. Never have I seen such a monstrous piece of legislation sent to this body. Our poor staffs were up most of the night studying it. They know some of the things that are in there, but they don’t know all of them. It is a sham and it is a shame ...To tell the American people they are going to be safer when we pass this is a hoax. We ought to tell the people the truth. They are not going to be any safer. I was one of the first in the Senate to say we need a new Department of Homeland Security. I meant that. But I didn’t mean this particular hoax that this administration is trying to pander off to the American people, telling them this is Homeland Security.”

To be sure, this amalgamation of 22 government agencies and 170,000 employees is the most confusing blend of bureaucracy any administration has ever attempted to “pander off to the American people”. Many of the declarations, restrictions, and regulations issuing from this massive body are contradictory and irrational, and this administrative inefficiency must have been what Senator Byrd had foreseen in his harsh criticism in the Senate hearings. Let’s examine some of what has transpired in recent months.

1. Not too long ago, when a campaigning Senator Kerry accused the Bush administration of settling for a security policy that screened only 5% of the cargo coming to U.S. ports, he was taken to task by Customs and Border Protection Commissioner Robert Bonner. Mr. Bonner stated; “It’s terribly misleading to say you’re not inspecting 95% 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% 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”. [See our October 22nd commentary.]

Daniel Wagner, however, publicly disputed Mr. Bonner’s words. Mr. Wagner is a financing specialist at the Asian Development Bank and revealed that only 5% of what comes to U.S. ports is inspected, and he made it perfectly clear that because an act of terrorism would adversely affect Asian manufacturers, Asians are quite serious at their end and are not playing games with security issues. But a perfect example of the ineffectiveness of the CTI, as well as the Asian watchdogs, was seen when 32 Chinese immigrants were detected on January 15th by an alert crane operator at the Port of Los Angeles. They had arrived in a container, undetected, on a ship arriving from Hong Kong. The ship’s crew claimed, as one would expect, that they were unaware of the stowaways. [See our Vol. II, Art. 6 commentary.]


Check out Mr. Bonner’s resume, if you have the time. You’ll see that he’s eminently qualified and certainly not a dummy, but he seems to be the fall guy in what Senator Byrd feels is a hoax. 22 agencies and 170,000 government employees? No one, not even Mr. Bonner, could ride that bronc.

2. It gets worse, but to Mr. Bonner’s credit, he confessed the Department’s shortcomings when he was required to submit a new set of cargo security requirements for members of a public-private trade security partnership. “The goal of C-TPAT (Customs-Trade Partnership Against Terrorism)”, he said, “is to decrease the prospect of a terrorist weapon being concealed in a container headed for the United States”. Then he contradicted his earlier statement to Senator Kerry and admitted that, “We, as the U.S. government, can’t regulate back to the point of origin of a product.” To ensure a safer and more efficient delivery of cargo-carrying containers, Mr. Bonner announced that C-TPAT members would be required to equip containers with a proposed “smart-box” technology when it becomes available, probably later this year. At this point he said, “A seal alone only adds a marginal amount of security.” Another disconcerting admission.

First, we were assured of the reliability of inspections by vigilant overseas agents in the supply chain, then we were given assurances of tamper-proof seals. As it turned out, neither of these setups could be described even as a stopgap measure because nothing in the way of security was actually provided. Let’s take an objective look at the next magic bullet, the proposed “smart-box”. Still in the development stages, the technology in this specially equipped container is intended to detect tampering in transit, and importers using (and paying for) this technology will be assured of expedited inspections, or no inspections at all, in some cases. Expediting means speeding up and saving time, so that’s an advantage. But it’s the only advantage being offered so far. On currently held test runs, the so-called false-positive detection rate is about 5%. When the false-positive rate can be brought to below 1%, says Mr. Bonner, the product will hit the market. But since when does any kind of a system with “false-positives” provide a sense of security? How many times will false alerts disrupt security operations? And won’t security personnel soon tend to ignore these alarms? Like the boy who cried “Wolf! Wolf!” once too often ... well, you remember that story.

That’s a minor drawback, though. If, indeed, the terrorist threat is real, and if, indeed, a bomb-laden container would strike a crippling blow to the U.S. economy, how long do you suppose it would take for someone with hostile intentions to find out exactly which C-TPAT members are getting kid glove treatment by Customs inspectors in U.S. ports? The “smart-box” system and its public announcement are an open invitation to these terrorists. Look in a mirror, if you will. You see an upstanding American citizen. Believe it or not, most of the people in the world don’t see you that way. They see you as “the ugly American”. It’s time to be honest with ourselves. “Smart-boxes” may turn out to be the real hoax. There are thousands upon thousands in foreign lands who, for the right price, would look the other way when these containers are being prepared for shipment to our ports. Isn’t that how the 32 Chinese managed to reach the Port of Los Angeles? The old smuggler’s rhyme is recited in every language and in every port in the world, “There’s an extra week’s pay, if you look the other way.” We’ve allocated billions of dollars in futile attempts to provide security to this country and now we’re giving a green light and a road map to those who are trying to destroy us. Well, maybe we’re not really ugly, but we certainly are stupid.

We at Automated Storage & Retrieval Systems, Ltd. have an axe to grind and we’re not at all embarrassed to present our case. The first few pages of this website provide simple schematics and a concise description of our patented storage, retrieval and delivery systems. The advantages of our systems as opposed to the disadvantages of conventionally-structured container yards are clearly spelled out, and they can be quickly reviewed if there’s a need to do so. Security is what we’re dealing with in this commentary, however, and because no sure barrier has been erected by Homeland Security, and because so much is at stake, we have an obligation to make this sales pitch.

• Our container yard system: The space and time created by this system allows the operation to make use of existing scanning/inspection technology with the result that every container is inspected as it is being offloaded, and prior to its being positioned in a preassigned slot. Because constraints in today’s U.S. port operations permit only random scanning/inspections, weapons, contraband, illegal immigrants, and terrorists as well, have been smuggled into places like the Port of Los Angeles. If it were not for a stroke of luck, those 32 Chinese immigrants would have landed safely last month. An unwitting crane operator, and not any security measures, stymied their efforts. When only 4% of all containers are being scanned, we must ask ourselves how many other immigrants have gained entry in uninspected containers. How many of them are terrorists? How much in the way of contraband has been introduced into our markets? How many weapons have arrived?

With our system installed in U.S. ports, every container will be inspected/scanned. No weapons, no contraband, no immigrants and no terrorists could possibly get through. No longer would we be required to rely on overseas personnel for our safety and security, especially when so many beyond our shores have shown a lack of interest. The “magic bullet” mentioned above is proven, patented and readily available. It will be installed in one-tenth of the time, in one-tenth of the space and in one-tenth (or less) of the cost of a conventionally-structured terminal. Along with guaranteed security for all, port authorities will realize higher incomes, more job opportunities will be created, and taxpayers and consumers will be relieved of financial burdens.

• Our shipboard systems: Although this website is dedicated to terminal operations, if ultimate security is ever required, it can be obtained by means of our shipboard storage and retrieval system. Our “Chronology” page makes reference to U.S. Patent Number 5,860,783, Granted on Jan.19,1999, and Entitled: CARGO CONTAINER STORAGE AND RETRIEVAL SYSTEM AND METHOD INCLUDING ON DECK CARRIAGE ASSEMBLY. This shipboard system makes it possible to retrieve, or store, any single container, regardless of its location aboard the vessel, without handling any other container. As an added advantage, the system allows for the scanning/inspection of every container while the vessel is en route to our shores. The procedure can be completed in one week’s time, and prior to arrival at our ports, every safe container will be granted clearance, and any suspect containers may very well be jettisoned. The threat to “deepsix” offenders will be enough to discourage terrorists and any others who would wish to gain illegal access into our country. [Checkmate!!]

By adopting one or both of these systems, security at our ports will be guaranteed, unambiguous, and acquired at a cost far below the amounts now being spent and allocated in state and federal budgets. We ... all of us ... deserve a good night’s sleep for a change.

Short and Sweet?
Vol. II, Art. 20

This is supposed to be the IT age, the age of “Information Technology”. The problem is that the information being spewed out for public consumption is either inaccurate, incomplete or insincere. In a lengthy analysis of the economic conditions on the West Coast, the Regional Economic Briefing published by the Federal Reserve Bank of San Francisco included 31 graphs, a generous amount of charts and some authoritative comments on past and future developments. In all, the presentation required 12 full pages and had the appearance of a white paper rather than a “briefing”. But .... only 7 lines were devoted to the West Coast’s most important economic issue, the congestion that’s strangling port operations and the transportation infrastructure. The report, however, states that the situation has been “resolved”. Here’s what appears at the bottom of page 4 of the briefing:

“Transportation

• The backlog of inbound ships in Southern California generally has been resolved.

• Contacts at the Los Angeles port indicated that the bottlenecks were in part resolved by hiring new workers to handle the high volume of traffic.

• Shipping lines had responded to the bottlenecks by increasing their prices for ground and sea transport.

• According to our contacts, transport lines have not lowered their prices as the backlogs have been resolved.”

So there you have it. Short and sweet. The backlogs have been resolved, according to “contacts”. Those contacts, of course, weren’t identified in the report, but just a few days ago at the Long Beach AAPA seminar, Mr. Philip Connors, Maersk’s Executive VP, saw things differently. After citing the port’s adverse capacity, he stated that the infrastructure limitations in the rail and trucking industries are even worse. “The real problem is infrastructure ... It is, in my opinion, a national crisis”. How did the “contact” miss out on this assessment? Mr. Connors was one of the featured speakers at the AAPA seminal.

In nearby Oakland’s Marine Terminals is an acknowledged authority on West Coast congestion, Douglas Tilden, and he’s the one the Fed’s should have consulted. This is what he said:

“2004 demonstrated once again the fragility of the international transportation system. The combinations of unexpectedly strong volumes out of China and issues with “right-sizing” the Southern California work force brought previously unimaginable delays to the movement of transPacific cargo ... Other ports around the world struggled with congestion, but none suffered the level of disruptions of Southern California ...We will definitely be faced with much broader issues in 2005". [Makes you wonder on what other matters the Fed may have been led astray.]

"You ain't seen nuthin' yet!"
Vol. II, Art. 21

Peter Keller of NYK North America had some interesting comments to make about the state of affairs in the U.S. supply chain. Here are some of the concerns he touched upon in a recent interview.

• “Everybody’s mesmerized by this ‘just-in-time’ thing. What people really want is predictability. We have to deliver the predictability in the supply chain. That’s as true for the hay cubes as for the fur coats.”
• With respect to the West Coast terminal work stoppages late in 2002, Mr. Keller pointed out that this event “brought home the fact that we probably had too many eggs in one basket. Long-term, we need to spread our risk ... we need to look for other places to accommodate growth.”
• In criticizing the low rate of productivity at LA/Long Beach, he stated that even an improved rate would contribute little to the solutions so desperately needed. “Even if you increase productivity, all you’re doing is buying time until 2009 or 2010", he said.
• His advice to the industry was to address the approaching crisis in two ways. In noting that steps had to be taken in order to cope with the growing congestion at the LA/Long Beach complex, he stated first of all that existing resources must be utilized more efficiently, but in acknowledging the severity of the challenge ahead, he recommended the construction of new facilities and the acquisition of new equipment.

Mr. Keller has been involved with transportation for the better part of 40 years, and has witnessed the phenomenal growth that has taken place in this industry during those years. In the past half-dozen years or so this phenomenal growth has turned into explosive growth. Think it was bad in 2004? As Al Jolson would say, “You ain’t seen nuthin’ yet!” The respite after the Christmas season was supposed to bring relief to bedraggled port personnel. It was catch up time. It was time to make preparations for the coming year. And, according to the script, the shutdowns during celebrations of the Chinese Year of the Rooster would also provide the terminals with some breathing room. But it isn’t shaping up that way. To the surprise of exactly everyone, January shipments at the Port of Long Beach were 35% higher than they were last January, and this record rate of increase is projected to continue through the rest of 2005. Look at Vancouver. The port is so badly jammed up that force majeure was declared a couple of weeks ago. The outlook is so bleak that carriers are forced to reduce incoming volumes and to divert to other ports. This is one of the ports that is supposed to accommodate diverted vessels from Southern California, remember?

Now about those new facilities and equipment Mr. Keller recommended. Our patented and programmed systems are the answer to his concerns with respect to “just-in-time” efficiencies and predictability. Our November 1st commentary endorses his suggestion to spread the risk, and our system’s space-creating and time saving features produce undreamed of rates of productivity.

We agree wholeheartedly with Mr. Keller’s analysis and hope to be of assistance in the days ahead.

Enough Is Enough
Vol. II, Art. 22

1. As Peter Keller just advised us, we have “... too many eggs in one basket ... we need to spread the risk ... we need to look for other places to accommodate growth”.

2. Jean Godwin was one of the first to speak out about cramming and jamming within container terminals when she said, “It’s like trying to fit a 16-inch pipe into a 4-inch opening”.

3. Allen Clifford of Mediterranean Shipping said the same thing earlier this month when he compared port congestion with the futile attempt to park three cars into a two-car garage.

4. Nolan Gimpel of Axiom Consulting warned us several months ago that mega-ships are straining the capacity of inland infrastructure, terminal operators, and rail and truck carriers, and that the least costly way to expand these separate but linked operations is to establish smaller container ports closer to end users.

5. Neil Davidson of Drewry Shipping Consultants also emphasizes the need for smaller container handling ports closer to the end user.

6. Jerry Bridges at the Port of Oakland says, “ Too much cargo through too few ports, and diversifying the routings of import cargos will be the only way for our country to steer safely through these rocky shoals”.

7. “We must find a way to build more terminals on the West Coast”, said Tommy Stramer of Zim American Shipping. “There will be more all-water strings to the U.S., which will mean more pressure on East Coast ports. A way must also be found to build more terminals there.”

The maritime authorities cited above are now worrying about the unavailability of acreage for port expansion. Until recently this shortage of land seemed to be a remote possibility, but almost overnight port directors, terminal operators and transportation managers along the entire supply chain have come to feel the crushing impact of this scarcity. Those cited above say it in different ways, but the meaning in each case is quite clear. Enough is enough, and Secretary Norman Mineta made no bones about a few months ago when he reminded us that only 60 of the more than 360 ports in the U.S. handle containers at the present time, but that another 200 of these U.S. ports will be required to handle containers in the foreseeable future. From afar, he saw the developing logistic problems in the nation’s transportation infrastructure, and because the solution is so obvious and so simple, he put it on the table in an obvious and simple way. On October 13th, this website reminded the readers of Secretary Mineta’s advisory. Retrofitting other U.S. ports to handle containers would be like killing a half-dozen or more birds with one stone, and the sooner this tack is taken the sooner our entire transportation system will be streamlined. Some folks don’t quite get it, however. Even though a measure of relief was realized at LA/Long Beach when more than one hundred ships were diverted to other ports last fall, the full meaning of Secretary Mineta’s strategy has yet to register.

Acknowledging that transportation gridlock is imminent, West Coast authorities are now considering an inland container depot and a rail shuttle connecting the LA/Long Beach complex with that offsite depot. Think about that for a minute. It’s no secret that there are 29 ports on the West Coast. The media made that fact known to the whole country during the stoppage in 2002. Less than half these 29 ports are handling containers but they would dearly love to get in on the act. Peter Keller says, ... “we need to spread the risk” ... and spreading the risk by retrofitting these ports for container handling, and at so little cost, would greatly ease the congestion at the LA/Long Beach complex and would be highly advantageous to the West Coast economy.

But to consider building an inland container depot and a rail shuttle between the port and this offsite depot for the purpose of easing congestion? What are they thinking? It would take years just to get the project off the ground, and time is one of the commodities that is in short supply. It would also cost billions of dollars, and Mr. Zev Yaroslavsky, an LA County Supervisor, has already admitted that money is another commodity in short supply. While we’re on the subject of money, has anyone calculated what it will cost for the extra moves required in order to transport an o