Port congestion economics
Because economics is something of a second hobby for me, I've been reading everything I can lay my hands on related to this subject. There's a lot of finger pointing going on. Most likely it's a combination of the factors. I'm going to try and list the ones that I've seen mentioned:
- California Truck Regulations. California specified a few years back that as of this year trucks operating in the state had to be the newer diesels that use that DEF additive. Lots of older trucks got forced off the roads or out of state. This was one of those "seen it coming" things. Several major importers did see it coming and have rerouted their imports to other non-california ports over the past two years.
- California Port inefficiency. I saw an article blaming the longshoremen union. Blaming them for resisting every moderization and automation effort. Saying that US ports in general and california ports in particular are far less efficient than they could be, as demostrated by some very efficient ports in Asia, such as Singapore and Korea. The article had various statistics and measurements of time a container stays in the port area.
- California Port management. Apart from the above, the scheduling system for pickups and drop offs is terrible, with truckers having to wait hours in queue because the port doesn't give them an assured tight delivery window. A truck that simply runs between the port and a local warehouse, dropping off empties at the port and picking up a full container to take back to the warehouse, may spend all day and get only 2 round trips done, with 7 of the 8 hours spent waiting in queues at the port.
- Lack of chassis. The chassis is what they call the wheels part that the container is loaded onto. To me, this seems to be a knock-on problem, a secondary effect not a primary cause. There are apparently a lot of chassis loaded with containers parked in the neighborhoods around the ports. My assumption is that these are mostly empty containers because it would be a risk to leave a container with cargo unguarded. Truckers have all sorts of regulations governing the number of hours they can work, mandatory breaks, logs they have to keep to prove they haven't violated the rules, etc. I believe these apply to short-haul as well as interstate drivers. So my guess is that the reason a lot of these chasis+empties have been abandoned near the ports is because of the long queues to drop them off properly, and the truckers ran out of hours and so they just dumped them and drove the tractor home.
- Lack of truckers (#1). California passed that anti-Uber law that originally sought to force Uber and Lyft to treat all the drivers as employees. Then an exception got added that let Uber and Lyft off the hook. But it still applies to lots of other 'gig' workers, including independent truckers. So people saying that a lack of drivers is part of the problem are pointing to that saying that the law caused a lot of independent drivers to switch jobs or move out of state.
- Lack of truckers (#2). The Biden vaccine mandate for companies with 100 or more employees applies to truckers. That has been blamed for truckers quitting. I read that OSHA had added an exemption for truckers that drive solo (most of them) so this problem should be now corrected, except for the damage already done.
- Lack of truckers (#3). Even before California's anti-gig law and Biden's vaccine mandate, there was a lack of truckers. In particular, many of the independents who used to live at home and do short trips between the local warehouses and the ports had apparently given up because while a paid-per-hour employee of a larger company can get paid to wait in line, an independent owner/operator makes no money waiting in line and has fixed costs. There was also a lack of long-haul truckers, and wages for them had gone up substantially. So some of the drivers that used to do port runs (and especially those with older rigs that don't consume DEF) moved out of state to do trucking elsewhere.
- Lack of warehouse workers. The containers mostly are delivered to a warehouse where they get unloaded and their contents reloaded into a number of other containers bound for different directions. Thus a container full of nothing but one particular model of air conditioner might be split up into 20 or more containers each of which is bound for a different Home Depot, and another container full of shop vacs would get split up likewise until all the Home Depot containers are mostly full of mixed goods, then they go out each to their own destination. So the containers get unloaded and reloaded in transfer warehouses. Those may be near the port or a long way away, it doesn't matter, most containers need to get split up and reloaded somewhere. And the workers to do those jobs got laid off when trade cratered during covid and the warehouses have been having trouble replacing them.
- Lack of ships to pick up empties. Another part of the problem was said to be a huge surplus of empty containers in and around the ports. Some of the following explanation is guesswork on my part and may be incorrect. Normally a ship that comes in full should fill up with empties on the way back to Asia rather than sail home with an empty deck. The empties don't generate a lot of revenue, but they generate some and something is better than nothing. So for this to have become a problem a lot of ships must have sailed home with empty decks. My suspicion is this is really a symptom of the ports being backlogged. I believe that there are separate queues and cranes for loading and unloading, so a ship, like a container chassis truck, has to wait in one line to unload and then wait in a second line to load. If the line for loading empties is long enough, at some point the revenue from the empties is going to be less than the cost of the wait time and the ship will sail with an empty deck instead. So that might be how the imbalance of containers developed (too many empties on the west coast of the US, too few empties available in Asia).
- Lack of longshoremen. I think somebody was trying to deflect blame from the ports by saying they couldn't hire enough longshoremen. I don't really understand how this works with the longshoremen's union, I thought they supplied the workers. Maybe they're not recruiting enough new members?
- Other ports. Some people have pointed out that other ports (I think Savannah GA was mentioned) are also backed up. Yet on the other hand, I think the Florida governor was saying "send your stuff here, we've got port capacity available". Nobody said anything about the panama canal being more of a bottleneck than usual.
- Just in Time. Over the last 30 years, the people whose job it is to squeeze any and every inefficiency out of the supply chain have beavered away and the result was a very very efficient supply chain with very very little excess capacity at any point. The result was also a very fragile supply chain. Yet in spite of all the optimization to the rest of the supply chain, the ports have escaped modernization and improvement and were operating very inefficiently (at least compared to what they might be). Now that the system has broken down, with bulges and air pockets everywhere, it's going to take a long time to get the bulges ironed out into the air pockets. To some extent, this was all a disaster waiting to happen.
So there might be other things that have been blamed that I can't think of right now. I'll add more later if they come to me in another post or if someone else mentions them. At a high level, some were predictable (and it's said that Amazon and a couple other big retailers did predict them and adjusted their supply chains ahead of time) and some were not. Some were due to covid, and some were due to the government's response to covid.
While government is definitely not the full cause of the problem, it is part of the problem. And it seems to me that California and the federal government have not done much to reduce the issues they've created. Writing an exemption to the vax rule for truckers is helpful - but the vax mandate has already been put on indefinite hold by the 5th circuit court, anyway, and it's too late now to get the truckers who switched jobs to come back. California could push back its regulations that have taken trucks off the road. Just another 2 years would help a lot. Another 5 years of non-DEF trucks would not cause the oceans to rise. For the longer term, the longshoremen could and must agree to more automation. The port operators don't want to run the ports 24x7 because that forces them to pay longshoremen overtime (it's apparently possible to make 120k a year as a longshoreman if you have the seniority and play the game right). The ports don't, but should, operate like clockwork. A driver should have a delivery window that's short, not hours long. They shouldn't have to sit in line for hours, that's inefficient (and polluting - those trucks are idling, for hours).
There are apparently quite a few 'best practices' that we have not adopted in the US. It would be helpful for the people in charge to leave off finger pointing and work to fix the problems. There's plenty of blame to go around.