Faced with empty shelves and rising prices, consumers have become unwitting experts on shipping container shortages and pileups in the ports.
While prices continue to rise and markets face shortages in everything from cereal to computer chips, a stark reality has settled in: these challenges will likely get worse before they get better.
Since supply-chain issues began to emerge in the early stages of the pandemic, companies have tried to cope in various ways — from online merchants raising retail prices to cover increased cost of getting items to the door (like flying wares to the U.S. rather than shipping them), to major retailers stockpiling goods and even acquiring their own logistics firms. Many of these solutions from retailers are stopgap measures with limited scope because they aren’t sustainable for a business or its customers.
Instead, we must take a long-term view on key pain points, like the ports. While we’ve seen some measures from the government to increase hours of operation at major U.S. ports, scrutinizing the snarled processes — beyond hours of operations — and finding solutions, can uncover a more resilient path forward for the transportation and delivery of our goods.
A fragmented processes at the ports
The situation at U.S. ports — tens of thousands of containers stacked like Legos, countless products marooned — is a convergence of many complex issues: increased demand, changing shipping routes, labor shortages, strained supply chains. The list goes on: The pandemic set off the “perfect storm” of logistics and made the cracks in its foundation undeniably clear.
But if we zoom into the ports there’s one area that could provide some much needed relief to the strained system: drayage. Drayage is the small but critical piece of the process that gets containers out of the ports and to their next stop (usually a rail yard or warehouse).
Today, drayage is made up of a web of many independent contractors with different systems interacting with thousands of shippers to get those shipping containers out of port and to other storage areas. At the epicenter of this patchwork are individual dispatchers, who coordinate deliveries using their own manual processes. It’s a system full of disconnects and inefficiencies — and often results in truckers making multiple, unnecessary trips and severely delayed pickups and deliveries.
“The bottleneck and logjam we are seeing at the ports is due to trucks, port terminals and other stakeholders not coordinating well enough with each other,” says Steve Wen, co-founder and CEO, of port logistics company Dray Alliance.
On top of a lack of uniform communication between drivers and dispatchers, operators are also experiencing a severe shortage of chassis. Chassis are an essential piece of equipment used to move shipping containers from port terminals. Currently, there are not enough of them to handle the influx of imports; many that are available are sitting idle. Although chassis are the same and can be used with any container, a variety of factors keeps them stuck. In some cases, certain contracts restrict drivers from picking up and returning containers from certain port terminals. In others, the chassis are privately owned which further limits access to those sitting idle.
Still more chassis are sitting unused because they have empty containers on top of them, stuck in the Port of L.A. log-jam and unable to return to their original markets. Many of these containers are from China. Because the country recovered from COVID-19 sooner, it started shipping in large numbers, creating an imbalance before the U.S.’s recovery. And the financial incentives of shipping from the U.S. to China are compounding return delays, with carriers getting $0.66 per nautical mile from coming to the U.S., but only $0.10 on the trip back.
As a result, chassis end up unused while goods pile up nearby.
The simple magic of dual transactions, “one container in, one container out”
Streamlining the ports and reducing drayage-related delays needs better logistics — namely, fewer single trips and more “dual transactions.” The theory is simple: a driver drops off an empty container inside the terminal and picks up a container full of imported goods, all in one round trip. This reduces unnecessary traffic, and ensures that the chassis are used efficiently and not left for storage. It also frees up more valuable space in the ports, eases driver frustration, and increases their earning potential.
Wen’s company prioritizes dual transactions by connecting container shippers with a network of vetted trucks through its mobile app. He says that less than 20% of current pickups at Los Angeles and Long Beach, CA, ports are dual transactions. Wen estimates that increasing dual transactions to 70% would dissipate the logjams at the ports in as little as a few months.
1/ Dray Alliance is a venture-backed startup that is focused on building a container trucking platform to deliver shipping containers from ports to warehouses by connecting container shippers with a network of vetted truck drivers through a mobile app.— Steve Wen 🚛 (@stevehwen) November 2, 2021
Dual transactions aren’t a new concept — but the industry is so disjointed with things like chassis restrictions that the inherently inefficient situation at the ports persists, and results in far too many single trips. Wen says there are several ways to incentivize dual transactions right away: Allow truckers with dual transactions to enter the port without an appointment, create a separate entrance and lane for dual transactions, and allow all chassis to be used for dual transactions so they can be immediately reused.
Using tech tools to ease supply-chain bottlenecks end-to-end
Increasing the number of dual transactions would immediately alleviate port congestion, and Dray’s app would help even more. It gives dispatchers a common, unified technology platform to coordinate the delivery of shipping containers from ports to warehouses. The app leverages API integrations with the ports and data from the mobile app to allow container shippers to manage and track all container deliveries in a single webportal and make truckers more efficient.
The company has worked with some of the biggest consumer brands and retailers like Mattel and Wayfair to cut millions of dollars in fees and save drivers hundreds of hours of waiting time at the ports each month.
Taking a similar approach and applying logistics tech across the supply chain could ensure its resiliency for the future. The industry is already looking to AI/ML, IoT, and other technology solutions to revolutionize logistics by automating processes like maximizing every truckload and increasing overall efficiency and scalability.
Consumption of goods in the U.S. has yet to fall since February 2020, when it well outstripped spending on services. And experts warn that if we don’t send more containers back to Asia very soon, we’re facing an even more dire shortage of goods in early 2022. We need to address the very urgent and immediate supply chain problems, but also take advantage of this opportunity to reshape logistics with tech solutions to become better positioned and more resilient for the future.