Squeezing perishable exporters; The “Amazon Effect” and Operation New Hope
Squeezing perishable exporters
One of the methods marine terminals and port authorities have used to curb congestion arising from the new reality of mega-size containerships is to reduce the amount of time export containers can be stored on the dock without charge, known in the industry as “free time.”
Free time varies by port and terminal, but can be several days or more.
Shippers are also unhappy with less free time for imports, complaining that they usually can’t pick up cargo as soon as it’s available because of lack of visibility into container readiness, excessive wait times for truckers, chassis availability, closed areas of the yard, appointment availability, Customs holds, and shortages of available draymen.
The situation is most prevalent on the West Coast and is especially troublesome for shippers of perishable, temperature-controlled products.
At the South Carolina International Trade Conference outside of Charleston in mid-September, Perry Bourne, director of international transportation and supply chain management at Tyson Foods, explained why meat producers face a double dose of issues because of tight delivery windows.
Tyson food plants used to load containers full of meat products and send them to ports by truck or rail almost every day of the week. Drayage drivers would pick up loaded import and empty boxes at terminals and bring them to Tyson cross-docks for quick reloading of export commodities.
But under the new restrictions, Tyson is incurring extra shipping costs because it can’t pre-deliver loads for vessels scheduled to arrive the following week.
The pork and poultry producer, which ships about 20,000 40-foot equivalent units (FEUs) a year, is now paying to store wheeled containers at container freight stations, as well as plug-in chargers for electricity to run the refrigerated units, and additional rental fees for special tri-axle chassis designed for heavy loads.
“Perishable shippers are not that pleased with big ships,” said Bourne. “We don’t slaughter everything on one day. We’re moving product every day and the sooner we can get it on a ship, the faster we can get it to our customers, the better they like it.”
Marine terminals also charge detention fees for late return of the container, adding insult to injury. A shipper like Tyson can get hit with demurrage charges on the front end, storage fees in the middle and detention charges on the back end, all of which can put a pretty big dent in their margins.
According to Bourne, shippers should be able to deliver loads early and carriers should load them on whatever vessel is available at that moment, rather than holding them for the vessel on which space was booked.
“There has to be sensitivity to the perishable nature of the products that are being moved,” he said.
Bourne is a proponent of expanding night gates at West Coast ports, as well as having special gates for reefer traffic, so perishable goods don’t have to wait in line and risk missing the vessel.
“If we don’t get it on the ship, we end up air-freighting the cargo,” he said. “We’re in the mix with somebody who is delivering waste paper, and perishable meat is worth a hell of a lot more than a load of waste paper. There’s not a lot of differentiation to try to customize services to products, and I think that’s something all ports should look into.”
He praised stevedore SSA Marine at the Port of Oakland for operating special gates and extending gate hours for truckers.
“Oakland seems to have taken the lead providing more consistency for night gates and especially for reefer,” Bourne said.
The logistics chief also identified another challenge with big ships, which carriers tend to schedule less frequently than smaller vessel classes because they can carry more cargo in a single journey.
Foreign customers, he said, increasingly want smaller shipments because the market has evolved to more of a retail model than a wholesale one. Overseas grocery chains, restaurants and other food establishments, for example, are buying more product directly from Tyson, but want it in smaller, more frequent loads to ensure freshness and minimize the liability of holding too much inventory at once.
The “Amazon Effect” and Operation New Hope
American Shipper Research Director and IT Editor Eric Johnson gave a presentation at the Council of Supply Chain Management Professionals (CSCMP) Roundtable in Jacksonville, Fla. in early October on what people are calling “The Amazon Effect.”
The presentation focused on the way that Amazon is impacting perceptions and attitudes about the global supply chain. The e-commerce giant has slowly, and somewhat secretively, been building its own logistics network, which has led to speculation—some of which has appeared in the pages of this magazine—the company’s offerings could one day rival the likes of traditional providers like DHL, FedEx and UPS. The company has remained tight-lipped about such plans, however, saying that it only plans to use its own network to supplement capacity provided by other parcel delivery firms during peak shipping times.
More important to the CSCMP Roundtable discussion, Amazon also has plans for a major distribution center in Jacksonville and it is expected to tighten an already very tight labor market for qualified warehouse workers here in the city.
At the meeting, I sat at a table with John Warren, business development manager of Operation New Hope; and Kevin O’Meara, senior vice president, operations with Interline Brands in Jacksonville.
With Operation New Hope, John works on placing individuals who have had difficulties in their lives in new jobs once they’ve gone through the non-profit’s program to train them on reentering the workforce. Operation New Hope has had a great deal of success in training and placing workers in warehousing positions, where a real shortage of labor is forcing companies to think outside the proverbial box to fulfill their workforce needs.
Kevin was very interested in the program because he has to deal with a shortage of trained warehouse workers on a weekly basis, along with dealing with a labor market where most applicants for warehouse positions often are not properly trained trained and, therefore, not prepared to take any position.
Operation New Hope not only trains the men and women in its program for work, but also teaches them the life skills necessary to present themselves as applicants and in interviews, as well as to successfully hold a job. The organization carefully vets participants in the program before working with employers to place them in jobs, and John said the training and placement of workers for warehouse positions has by and large been very successful.
When you go to a CSCMP Roundtable meeting, you can never be certain what you will learn, but to me, it was very heartening to see an employer with a problem and a ministry with a solution come together for their mutual benefit.
And by the way, Eric Johnson did a great job on his presentation and initiated a lot of discussion on the direction that the supply chain is moving with companies like Amazon introducing a new paradigm in setting consumer and business expectations toward fulfillment.