2021 was the year that long-existing supply chain problems were exacerbated and made mainstream. If anything, it became clear that one quick fix at the ports, such as longer operating hours, wouldn’t penetrate the root of the issue.
In a conversation with FreightWaves, founder of Port X Logistics Brian Kempisty said that the supply chain’s biggest problem is that no one is taking ownership of the problem, as the system and responsibilities are siloed.
“When there is unreliability on vessel schedules, terminal congestion, lack of chassis, empty return issues, who is ultimately responsible? Right now it seems as if everyone is saying, ‘Not my problem.’ The steamship line simply wants to discharge containers as quickly as possible so they can make another profitable voyage,” Kempisty said.
Transactional relationships run amok in this industry, oftentimes alongside aspirational messaging of collaboration and “coopetition.” While Kempisty believes that collaboration is truly what needs to happen to fix the problem at the ports, it might require a collective stepping back to see how responsibilities are currently shared.
Splitting the work of international shipping
After the beneficial cargo owner (BCO) or freight forwarder books a shipment with a steamship line, the steamship line is then responsible for moving the cargo overseas to a designated port or terminal, which is hired by the steamship line to process full containers as they move from the ship to the drayage driver or rail. The terminals hired by the steamship lines are often responsible for maintaining the chassis pool.
“The chassis pools and shortage were one of the major downfalls of 2021 supply chains,” said Kempisty. “There simply were not enough roadworthy chassis available for the volume. The terminals are doing their best, but they still have issues with labor, automation and real estate.”
The BCO or freight forwarder then hires a drayage carrier to pick up and deliver the container, but considering the recent shortage of trucking capacity, a delay in finding a truck can lead to detention costs and contribute to the global container shortage, which affects pricing across the world.
Once the drayage provider secures the port appointment and dispatches a truck and driver, the driver waits for entry to find a roadworthy chassis and drive to the container’s location, where the terminal will mount the container. The work isn’t over for the driver once he or she exits the terminal and heads toward the consignee or transload warehouse. The drayage provider must monitor for the ability to return the empty container and secure another port appointment for the trucker to reenter the terminal and make those returns.
“Trucking companies and drayage drivers are doing their best to please customers while continuing to be profitable in this challenging market,” said Kempisty. “The group that gets hurt the most is the end user — either the BCO or consumer. They end up paying for congestion fees, port detention fees, per diem fees on containers that cannot be returned and additional chassis fees because of the lack of ability to return. Right now it seems the ball is rolling down the hill with ‘it’s not my job.’ I’m not 100% blaming the steamship lines, but they are at the top of the chain and making billions.”
Indeed, while BCOs feel the most financial pain from supply chain congestion, the ocean carriers are experiencing explosive profits. Early earnings reports from Q4 show the profits of Ocean Network Express (ONE) jumping 418%, while Evergreen’s operating revenues more than tripled.
Kempisty believes that collaboration among all stakeholders in the supply chain has the potential to help everyone — including the steamship line/NVOCC, drayage provider and BCO — eliminate delays, as well as appropriately allocate drivers, yard space, warehouse space and chassis. In the current fragmented system, the responsibility is handed from one party to the next with limited upfront planning.
“We should be planning the entire life cycle of a shipment upfront,” Kempisty said. “Right now it seems like everyone is flying blind, then playing hot potato by giving it to the next party. All that we want at Port X is for all parties of the supply chain to come together, collaborate and look for a better way. There is likely no silver bullet, but everyone must do better to come together and work to provide a better supply chain outcome for our country and the consumer.”