Overcoming the obstacles at U.S. ports

The World Bank’s newly launched Container Port Performance Index rankings show that the U.S. is largely at-fault for the worldwide container shipping industry’s lack of balance. American West Coast ports have longer ship turnaround times, which is the time elapsed between the arrival of a ship and its departure. The inefficiency of the L.A. and Long Beach ports have been exposed with the recent surge of cargo volume.

Poor port infrastructure is at the root of the long ship-discharge time problem, as bridge or depth limitations restrict many U.S. ports from receiving large, post-Panamax vessels. Channel depth limitations for accessing many East Coast ports exist because the St. Lawrence Seaway limits access to the Atlantic Ocean. Major East Coast ports such as Philadelphia and Charleston can only handle container ships up to 6,000 TEU, and Boston and Wilmington are even more limited. Most container traffic on large vessels is flowing through only the select few U.S. ports that have the onshore and offshore capacity to handle them, which includes the Los Angeles and Long Beach ports and the Seattle and Tacoma ports. Indeed, these West Coast ports are the only U.S. ports able to handle Post-Panamax III vessels.

Undeniably, U.S. ports are lagging far behind overseas ports automation-wise. Chinese port terminals operate 24/7 with many automated tasks. The Port of Rotterdam, which ranks top 10 globally in efficiency and capacity, is the most automated port in the world. Moreover, the world’s busiest port, Singapore, has invested $10 billion and counting in port automation projects. Clearly, the U.S. needs to undergo systematic changes to match the performance of foreign ports. Automating ports would provide truck drivers with more consistent loading schedules, improving the ongoing trucking industry issues.

There is a shortage of longshore workers, who are responsible for securing and then unloading/loading the ships arriving at ports. Longshore workers are responsible for getting 90% of U.S. consumer goods into the country. Longshore workers are known for their very powerful unions and tough negotiation tactics including purposeful slowdowns.

Indeed, in 2015, when a labor impasse threatened to shut down the entire port system on the U.S. West Coast, it was reported that the average dockworker’s annual salary was $147,000. Pensions paid $80,000 a year and dockworkers also pulled in $35,000 a year in employer-paid health care benefits.

Notwithstanding the good pay, there is still an extreme shortage of longshore workers because there are not enough skilled equipment operators. Unless the number of longshore workers increases, slow operations speed will continue. An increase in workers will likely be met with resistance from strong unions if it coincides with lower pay, so this is a complex logistical problem that needs to be dealt with.

Hauling over 70% of domestic cargo shipments, the trucking industry’s significance to the global supply chain cannot be overstated. Lately, U.S. has seen a shortage of truckers. The industry has lost many drivers at the beginning of the pandemic; the surge in customer demand afterwards has left many truck fleets unable to hire enough drivers.

Intensified freight backup, pay, long hours, and retention are all plaguing the trucking industry. At the ports, the surge of freight has left port truckers who make short runs tired and burned out. Some port truckers have switched to become long-haul drivers or turned to local delivery work. Others have just left the industry altogether, opting for jobs with more predictable hours.

The crackdown on drug and alcohol program violations is worsening the shortage, as 72,000 U.S. truck drivers have been barred from work since the establishment of the Federal Drug & Alcohol Clearinghouse in January 2020.

The marijuana crackdowns on truck drivers especially make it difficult to recruit additional drivers in California, where there is an immediate need for drivers to unload and load cargo at the bottlenecked San Pedro Bay Port Complex. The challenge for dealing with marijuana-related failed drug tests is that marijuana can stay in one’s system for 30 days or longer, long after the intoxicating effects have worn off. A driver may test positive for marijuana and actually be perfectly safe to drive.

Now that marijuana is legal throughout so much of the country. This raises the question of whether the method of determining a driver’s impairment needs to be updated to alleviate the driver shortage problem. In the long term, the possibility of utilizing automated trucks as well as increasing reliance on railway could provide alternative options to sole reliance on truck drivers.

Finally, warehouses are in demand. The warehouse vacancy rate recently dropped to an all-time low of 3.6% and first-year rental rates have jumped nearly 10% in 2021. If this trend continues, securing increased warehouse space near ports will be more difficult than ever. With the surge in consumer demand and spending, there are more goods needing to be stored. Linking this with a lack of warehouse space is a disaster in the making for U.S. ports. A shortage of truckers and longshore workers combined with a lack of warehouse space is causing even greater disruption in the global supply chain. There needs to be a higher priority in the communities surrounding ports to invest in warehousing facilities.

Changes on the way, but with caveats

As part of the U.S. $17 billion infrastructure legislation to improve port infrastructure, $2.6 billion is targeted for equipment upgrades, but not for port automation. It is possible that port automation is not included in the budget because unions have been known to protest through work slowdowns. During the 2015 labor dispute between 14,000 West Coast longshore workers and the major shipping companies, the International Longshore and Warehouse Union staged work slowdowns that were estimated to cost the economy $2 billion per day. Especially considering the current labor shortages and cargo delays, angering longshore worker unions is a risk. Therefore, more productive negotiations and practical policies are needed to achieve cooperation from the unions that help move things forward.

Clearly, the U.S. needs to undergo systematic changes to match the performance of foreign ports, and a focus on port automation is necessary. Equipment upgrades at port terminals are needed, but even more importantly, there needs to be a focus on port automation. Automating ports would also provide truck drivers with more consistent loading schedules, which would help improve the ongoing issues in the trucking industry.

In this approach, new technology such as auto-driving in the trucking industry as well as operations that adopt blockchain technology and collaboratively improve ocean transportation efficiency, should be further explored. In addition, the option of constructing a new technology-advanced port shouldn’t be ignored.

The congestion in U.S. ports is caused by collective results of disarray and lack of sufficient automation, outdated infrastructure, shortage of truck drivers, longshore workers, and warehouse space. Also, politics continue to get in the way of making practical decisions. The U.S. must be willing to adapt on the maritime front if it seeks to remain a world leader in trade, which is at the center of economic development and prosperity.

Alexander Singer, 2022 MBA Graduate – College of William & Mary, can be reached at [email protected]. Yu Amy Xia, Professor of Business, College of William & Mary, can be reached at [email protected].

SC
MR