- February 3, 2015
Customs and compliance – It’s All About Logistics
Contributor: Eric Linxwiler, Vice President, Business Development Americas
We had the pleasure of sponsoring and attending the first ever “It’s All About Logistics” workshop put on by the AAFA and hosted by the Port of Long Beach on January 28, 2015. The vital learnings were countless and I walked away not only better informed about the challenges facing retailers and brands as they continue to deal with increasingly complex compliance regulations, highly elastic logistics scenarios and rising operating costs, but also the overwhelming issues facing ports of call from British Columbia to Los Angeles and Long Beach. Although the following post about LA and Long Beach terminal congestion is dated in October it could have been written yesterday as the issues are still exactly the same.
Email and Excel Can Prompt Problems in Port
I was moved by the comments from Spencer Melville, Manager of Logistics Planning at Gap/Old Navy. During a panel discussion, Spencer was asked how logistics operations could be improved. He explained in one comment, that trying to monitor disconnected email threads and incomplete spreadsheets once orders have been committed is too late. When sourcing is using emails and spread sheets to track all correspondence from the quote, to committed order and through WIP, it is nearly impossible for compliance and logistics to be able to find documentation that may be required by customs to get cargo out of the terminal.
Spencer went on the say that customs and compliance as well as logistics personnel must get involved in the product development process and direct sourcing activities much sooner in the product lifecycle. For example, sourcing may want to use a new supplier in a different geography that may ultimately want to ship from a port the retailer has never used before. If logistics finds out about these changes post production the delays for getting cargo loaded and on the water may be weeks. All good words to live by, thanks Spencer!
What I also came to learn, that I don’t think most people who are not closely tied to port operations and import logistics really understand, is that labor is just one of many factors contributing to port congestion up and down the Pacific Coast. In fact, Phil Connors, Executive Vice President of Flex-Van Leasing, Inc. stated boldly that the “the system is broken” and a settlement in the labor dispute will not go nearly far enough in solving the systemic legacy issues that have been masticating in the ports for years.
For example, just this week the PMA and ILWU reached a tentative agreement on the issue of maintenance and repair work of the chassis which has been a major sticking point in the labor negotiations. This alone does not solve the real problem whereby the chassis deployment system model is currently a mess. As carriers have divested from chassis ownership over the last couple years, the availability to truckers in close proximity of the cargo has been extremely limited. There is a possible solution which goes into full effect in March where by all the primary chassis leasing companies are creating a common “gray-pool” in order to cut down on the need to keep chassis separated by leasing companies owners however only time will tell if this concept will be a long term solution.
Another issue not often reported is the effect that larger ships with much higher container capacity are having on terminal operators. The Triple E class of ship for example can carry 8,000 TEU’s (20 foot equivalent containers) or more. This means it takes much longer to off load the ship, the cargo sits on the dock longer and in some cases the overhead cranes don’t have the boom length to reach the containers, presenting unique engineering and mechanical delays. Most carriers have many more ships of this size on order so the problem is only going to intensify which demands that fundamental systemic operation modifications must be implemented sooner than later.
2015 has been dubbed by many as the “Year of the Mega Alliance”. It has been reported that 16 of the world’s 20 largest container carriers are members of just four mega alliances: 2M, O3, G6 and CKYHE. The primary business driver for the mergers is cost reduction and better customer service. Great for the carriers but not so good for the ports and the cargo owners. Cargo gets consolidated or even split between multiple ships and the results are not communicated effectively to the terminals. This can result in containers being in port for extended periods while operators “hunt-and-peck” their way through hundreds of containers in search of all the cargo owners specific stock.