White House seeks to alleviate supply chain and port congestion

As the global supply chain continues to struggle on various fronts, due to issues such as port congestion, equipment shortages, and labor availability, among a whole host of others, on Oct. 13 the White House met with U.S.-based business leaders, port leaders, and union leaders to focus on the challenges U.S.-based ports are facing, in addition to what each stakeholder group can do address various supply chain issues.

This meeting, according to a White House briefing sheet, focused on myriad private and public initiatives geared towards increasing supply chain throughput and moving goods more quickly, and also to augment supply chain resiliency. A key cornerstone of this, it said, is shifting to 24/7 operations at the Ports of Los Angeles (POLA) and POLB), whom collectively account for roughly 40% of U.S.-bound import containers and are on track to set new annual highs in 2021.

While POLB transitioned to 24/7 operations in mid-September, POLA is now doing the same, bringing on off-peak night time shifts and weekend hours, which the White House said is expected to double the number of hours cargo can move off of POLA docks and onto the roads to reach final destinations. What’s more, it added that the International Longshore and Warehouse Union (ILWU) has stated its membership are committed to working extra shifts, which will provide the needed capacity in order to clear existing backlogs.

The White House explained that “Unlike leading ports around the world, U.S. ports have failed to realize the full possibility offered by operation on nights and weekends. Moving goods during off-peak hours can help move goods out of ports faster.”

And it outlined efforts being undertaken by some of the largest retailers to leverage 24/7 U.S. port operations, which are cumulatively expected to move 3,500 more containers per week, at night, through the end of 2021, including:

• Walmart committing to increase usage of night-time hours significantly, with the expectation is can boost throughput by 50% in the coming weeks;
• UPS committing to increased use of 24/7 operations and enhanced data sharing with ports that could enable it to move 20% more containers from ports;
• FedEx is committing to work to combine an increase in night time hours with changes to trucking and rail use to increase the volume of containers it will move from the ports, which could double the volume of cargo they can move out of the ports at night;
• Samsung is committing to move nearly 60% more containers out of these ports by operating 24/7 through the next 90 days. 72% of U.S. homes have at least one Samsung product, from appliances to consumer electronics.
• The Home Depot is committing to move up to 10% additional containers per week during the newly available off-peak port hours at the Ports of L.A. and Long Beach; and
• Target, which is currently moving about 50% of its containers at night, has committed to increasing that amount by 10% during the next 90 days to help ease congestion at the ports.

On a media briefing call on October 12, senior White House officials observed that, due to the pandemic, there has been what it called an enormous demand for goods through the supply chain transportation system, with e-commerce activity seeing major gains, and subsequently impacting warehousing and importing and straining logistics and supply chain networks.

White House officials also noted that the aggregate numbers of the commitments made by the aforementioned shippers are enough to drive the transition to 24/7 port operations.

“In terms of the carrots that are out there, one example would be in kind of the middle mile of the distribution system, where the freight railroads have the ability to—through their marketing programs—to offer off-peak incentives to incentivize night use of ramp capacity,” they said. “The same is true of the terminal operators at the ports who are the ones that are actually operating the port on these public lands and they have the ability to financially incentivize night use as well.”
Various industry stakeholders offered up their respective takes on the White House’s approach to mitigating these myriad issues.

National Retail Federation President and CEO Matthew Shay said It is critically important for business, labor and government to come together to address the current issue regarding port congestion, and the long-term need to create a more reliable supply chain globally and within the United States. T

“The retail industry greatly appreciates President Biden’s personal commitment to marshal the power of the federal government behind efforts to reduce the disruptions our members are currently facing, and retailers remain committed to working with all stakeholders to ensure consumers have access to the products and services they want and expect,” he said. “NRF has been urging more focus and resources to address supply chain failures for many years, and we look forward to continued efforts that result in sustainable solutions for this growing problem.”

And U.S. Chamber of Commerce President and CEO Suzanne Clark said that American companies are stepping up to combat the bottlenecks and delays and this will make a crucial difference as they seek to tackle this problem head-on.

“This supply chain crisis is hurting businesses and consumers alike, leading to inflation and shortages of key supplies,” she said. “Coupled with massive labor shortages, this is a major threat to our fragile economic recovery and long-term competitiveness. We applaud the administration’s engagement in helping to solve this crisis. We will also continue to work with them and other stakeholders to advance commonsense solutions for the long term—including addressing the labor shortages, modernizing our ports, and passing the infrastructure bill.”

Chris Rogers, Principal Supply Chain Economist, for Flexport, observed that it is encouraging to see POLA follow POLB in moving to 24-7 operations during the Peak Season.

“The challenge however isn’t the willingness of the port operators, the longshoremen or the cargo owners to be involved, it’s whether sufficient truck drivers can be found to run the additional shifts,” he said. “There’s a risk, of course, that those drivers get drawn off of other vital transportation routes either elsewhere in California or from other parts of the supply chain. For context the 3,500 containers per week mentioned as being overnight handling is equivalent to 6% of LA’s handling of inbound containers (assuming 1 container = 2 TEUs and using the 0.5 million TEUs imported in October 2020).”

Brian Whitlock, Sr. Director, Analyst for the Gartner Supply Chain practice, explained that: The collaboration between the administration and private enterprise is a positive step in what must be much more work to improve port efficiency and throughput in the U.S. Investments in technology, equipment, infrastructure and labor need to be made to bring U.S. ports up to competitive levels with other ports around the world and the administration’s support of these broader initiatives would go a long way in making more meaningful long-term improvements.”

And he added that based on first half 2021 port throughput figures from Alphaliner, 3,500 additional containers per week represents a 1%-2% increase in port throughput.

“And while any improvement is welcome, it will do little to change the landscape of port congestion in LA/Long Beach this year,” he said.