For this Congestion, You Need More than Chicken Soup

Shippers Seek New Solutions to Ease Port Crowding

By Mike Zachary
Senior Vice President, Global Supply Chain Services

International trade has grown at an amazing rate over the past decade, leading to greater congestion at North American ports. In 2006, North American port container traffic totaled more than 44 million twenty-foot equivalent units (TEUs). And by 2020, the total volume of cargo shipped by water is expected to double that of 2001.

At the same time, the capacity and investments in infrastructure at ports and the supporting distribution network have failed to keep pace with the growing demand.

This imbalance has led to port congestion, time delays, a rise in transportation costs, and the need for added security.

To help resolve these issues, significant changes are taking place in North American port operations today. A recent Supply Chain Consortium survey found that many ports and shippers are turning to the solutions below to help ease congestion, maximize operations, and increase security.

Using Alternative Ports

Growing congestion and container capacity issues, including inland transportation aspects, at U.S. ports have prompted companies to consider using alternative ports and increasing inventories to meet customer demands. Shippers are now looking to reach customers in the Midwest and on the East Coast by delivering products to the less congested East Coast and Gulf Coast ports.

They are doing this instead of shipping to the West Coast and then transporting the products across the nation using a rail or road network. However, this strategy does not come without costs as many Eastern and Gulf Coast regions and ports do not have the infrastructure capability to handle the inland component efficiently.

Implementing Productivity Improvements

In addition to physical expansion, terminal operators are focusing on productivity improvements to increase capacity. These include:

• Utilizing terminals during off-peak hours.
• Implementing process changes dictated by changing security and regional transportation impacts.
• Densification of yard storage due to the lack of physical expansion capabilities.
• Automation of yard and gate processes, including advance notification and appointment systems.
• Application of optical character recognition (OCR) and radio frequency identification (RFID) to increase traffic flow, and more importantly, maintain accurate and reliable container yard inventory informational control.

Consolidating: Mergers & Alliances

Consolidation of ocean carriers through mergers and alliances has resulted in a shifting of lane capacity, terminals and equipment. These alliances have also helped reduce overall transit times due to fewer port calls being made by each ship, which in turn has increased the reliance on a stronger inland transportation system. At the same time, these alliances have put carriers in a stronger position to negotiate higher rates.

Optimizing Supply Chain Alignment

According to the Consortium’s North American Port Operations Focus Report, a majority of respondents believe that their supply chain network is not in sync with the ports used for their ocean freight. Significant opportunities exist when all aspects of the supply chain are aligned.

By optimizing the location of the ports in relation to their current network, supply chains can improve the flow of materials and reduce logistics costs, thereby optimizing costs and customer service. This is especially significant to locations where the beneficial cargo owners are choosing to relocate or significantly alter their material and component sourcing activities.

A recent study by Global Insight Inc. (GII) showed that, while China will continue to increase its exporting volumes, India and Brazil will become new members of the “Top 5” exporting (sourcing) nations.

Prioritizing Port Security

Port security continues to be a top priority and requires that ports expand without compromising safety. The use of advanced container security devices (CSDs) to check containers for radiation has increased, and enhancement of container security using electronic seals and RFID continues to grow and supplement homeland security initiatives such as the container security initiative (CSI) and customs trade partnership against terrorism (C-TPAT).

Also, contrary to the opinion of law enforcement agencies investigating cargo theft, more than half of the respondents report experiencing rare or no losses at ports, including port terminals. A recent Consortium “Hot Topic” on security did point out that most of the losses within the supply chain occurred at the warehousing or distribution centers before or immediately after a marine terminal operation.

It is obvious that ports will continue to play a large role in North American economies as global trade continues to grow into the next decade. Stakeholders need to look at strategic distribution and sourcing, tactical transportation components, and contingency and supply chain redundancy risk management planning. An organized, continuous effort from all stakeholders within the supply chain will be required to ease port congestion, ensure the best security, meet delivery dates, and control costs.

For more information on findings published in the North American Port Operations Focus Report, contact Bruce Tompkins at 919-855-5527.