Pallets Move the World, but Seaports Keep Businesses Afloat - U.S. Seaports: Economic Lifeblood of International Trade
Ports and Pallets: American seaports remain vital part of international trade as the global supply chain faces an uncertain future. Discover how changes could impact your customers and pallet demand.
By Matthew Harrison
Date Posted: 12/1/2006
The U.S. ports system functions not only as a linkage between our nation and the rest of the world, but it also impacts domestic pallet demand and customer requirements.
Ninety nine percent of the U.S.’s international trade moves through domestic sea ports. Over 2.5 billion tons of cargo move across U.S. waterways each year. According to the American Association of Port Authorities (AAPA), that figure is expected to double within the next 15 years.
Volumes are expected to keep climbing while the aging U.S. transportation system struggles to keep up. John Vickerman of TranSystems recently told AAPA managers that at current productivity and growth levels by 2020 demand will exceed current capacity of many U.S. ports by as much as 200%.
The current infrastructure is able to handle present demand except for peak periods as retailers get ready for the Christmas season. But the future remains a giant question mark.
Describing the lack of systematic thinking, Vickerman said, “We do not have an ‘intermodal system’ as such. Rather we have an aggregation of multiple, private and public modes, each of which are ‘stove-piped’ within their own individual areas of interest with little or no true cross communication and collaboration.”
The AAPA and others in the supply chain are working to improve collaboration and synergy. But the task is daunting. Current demand and new security measures put so much pressure on the players involved that it is difficult to retool and work toward systematic improvements. The AAPA estimates that nearly 26 million cargo containers move through U.S. seaports each year. That’s a lot of cargo.
Seaports are not the only area where future growth promises to cause significant growing pains. Vickerman pointed out that the railroad industry has 35% less track, 27% fewer railcars and 60% fewer employees with well over 50% more freight than in the past.
Truck traffic is projected to double by 2025 while Interstate growth fails to keep pace. Driver shortages, higher fuel costs and new regulations may hamper the ability for trucks to pick up the slack.
These pressures are creating an environment where pallet customers will increasingly be asking for the impossible while expecting it yesterday. Approximately, 83% of general cargo goods is containerized. Much of this product comes in floor loaded, especially products coming from Asia and other areas where labor is cheap. There does not appear to be a significant increase in foreign palletization at this point.
Some incoming goods are heavily palletized. For the most part this all depends on the shipper.
The Army Corps of Engineers Waterborn Statistics Center calculated that in 2004, U.S. seaports were evenly divided between international and domestic trade at nearly 1.3 billion tons of cargo for each.
With staggering trade figures projected to continue their upward trend, pallet companies can also expect the cargo business to boom.
Examining the Global Supply Chain
Here’s how a shipment of tennis shoes gets from China to customers in Spokane, Wash. A shoe retailer places an order for 500 pairs of shoes. The tennis shoe company works with a Canadian freight forwarder to arrange transport from the Chinese factory for a container load of shoes.
A Chinese trucking company arrives at the factory, loads the order, along with orders from many other retailers, into a 40-foot container, which is bolted shut. In this example, the container will not be opened again until it arrives at a U.S. distribution warehouse, unless U.S. or foreign customs officials decide to open and inspect the load.
In some cases, a cargo consolidator combines small shipments at a port for ocean transport. The consolidator receives freight and handles bookings with local and ocean transportation providers.
The freight forwarder determines it is most economical to truck the container to the Port of Tianjin for trans-Pacific shipment to the United States. The freight forwarder has contracted with a shipping line, which must submit documentation about the shipment at least 24 hours before the ship leaves port. Once on board the cargo vessel, the trip takes 12 days.
When the ship arrives in Tacoma, longshore workers unload the cargo. This includes crane operators, lashers, clerks and cargo equipment operators.
U.S. Customs officials, armed with a careful evaluation of each container’s documentation, instruct terminal operators to pull specific containers for further inspection. Inspection may include a physical inspection of the contents (a 6-40 hour procedure) or inspection by a machine that uses gamma-ray technology to look inside and confirm the contents of the container without opening it. This process takes 3-5 minutes.
Once cleared by U.S. Customs, longshore workers load the container on a truck chassis. A trucker takes the container to an import distribution center in a nearby area. The container is opened and the orders by individual stores are separated and prepared for shipment. Floor loaded products may be palletized if pallets are part of the retailer’s distribution process. The next day, the Spokane athletic supply store receives 500 pairs of the season’s most popular athletic shoes.
A Closer Look at Port Operations
Ricardo Arias, Trade Development Manager for the port of Houston keeps his fingers on the pulse of international shipping. However, he admitted that “dockworkers rarely touch cargo.”
Containers are much like big, portable post office boxes, Arias said. Vendors rent them out to companies that sell a product, like Nike, for instance. Either the vendor or a contracted trucking company will drop off a container at Nike’s distribution center where the container is loaded full of shoes at their leisure. Then, the container gets sent back to the port terminal and sits on a pad until the vessel to which it is assigned arrives.
From there, a rubber-tire gantry (RTG) places the container on a yard chassis and moves it across the terminal to a wharf crane, which gently loads it onto the outbound ship. Arias makes an incredibly complicated system seem like nothing more than reciting the ABC’s, but the minute something goes wrong in the supply chain, the whole system collapses.
“The slow down isn’t going to be at the ports, the slowdown generally is going to be where those goods are loaded and unloaded,” said American Association of Port Authorities spokesperson Aaron Ellis. “It’s a supply chain issue.”
Ellis noted that it’s difficult to pinpoint the origin of a freight backup. “It doesn’t end or begin at any particular point, because the freight is moving,” he said. “If at any point in the supply chain there are inefficiencies that slows down the movement of freight, it’s kind of like dominoes, everything starts to fall behind it.”
Ellis cited a famous scene from the popular sitcom I Love Lucy to illustrate his point. “[Lucy] starts eating candies that she’s supposed to be pulling off the line. Pretty soon, things start getting all backed up because she can’t keep up and that’s what happens with freight, it just starts to pile up.”
Warehousing Innovation & Freight Forwarding
On the warehousing side of shipping, companies are constantly looking for novel approaches to unit load management. One such company, Twinlode, focuses on increasing the turnaround of goods at ports, by increasing the efficiency of warehouses.
“We have found a real niche in sea ports, particularly those that are handling fruits and vegetables that come in and move out on a weekly basis,” said Twinlode president Ray Chase, “so the rotation is a very big concern.”
“Basically, our system allows a warehouse to handle multiple pallets at a time,” Chase added. The Twinlode system comes in two varieties: the Pushback system and the Pallet Flow system.
Twinlode’s Pushback system allows distribution centers and warehouses to move and store two pallets at a time at a variety of heights. It does this by means of a proprietary drive through design that allows fork trucks to move and retrieve palletized goods from deep within the rack structure. As opposed to simply picking unit loads off the edges, this method gives warehouses greater flexibility in storage configurations.
With the Pallet Flow system, fork trucks can retrieve a unit load from one end of the rack system; the next unit load will slide in place to fill the empty space because of a gentle slope built into the rack design. Thus, warehouse managers spend less time and money on internal logistics and order preparation.
Chase emphasized that Twinlode rack systems improves warehouse density and productivity “because you’re using more of your warehouse space as storage and moving two pallets at a time. That’s half the fork trucks, half the operators, and that’s a real savings to people.”
Freight-forwarders usually pick up where distribution centers leave off in the supply chain. They take care of everything from basics like domestic trucking and crating to the finite details of importing and exporting. It handles functions like maritime insurance, customs clearance and vessel procurement.
Trends in Cargo Distribution
Here is a list of trends to look out for as pallet users react to changes in the seaport industry:
• Port security costs escalate causing price increases.
• To keep pace with demand, ports have begun instituting peak hour fees while increasing hours of operations.
• Cargo stacking density will increase terminal capacity. This requires equipment to stack higher and improve yard optimization.
• Marine terminals are using off dock empty depots and are removing chassis from terminals in order to increase throughput capacity.
• Marine terminals are charging export demurrage and reducing free time so that customers do not use the terminals as storage facilities.
• Flexibility will be key for quite sometime into the future.
• New supply trends will continue to evolve, in order to deal with trade growth.
• According to Anthony Chiarello of AMB Property Corp., it is estimated that 30% of cargo transported to the Midwest is then shipped back to the West Coast for delivery. This may provide business opportunities for companies that can provide warehousing and other services to these shipments.
• RFID and tracking technology will play an important role in security and inventory control. Logistical backlogs may become a major driver for RFID as just-in-time delivery becomes harder due to strained resources.
• More automation to speed up processing time at ports.
• Expansion of intermodal interchange capacity. This means additional on dock, near dock rail access.
Lobbying from Sea to Shining Sea
“If you can’t move freight efficiently, you’re dead in the water,” quipped Ellis. “The whole competitive edge of our international trade goes down the drain.”
The AAPA’s political agenda primarily involves maintaining commerce at home and abroad. Ellis added that the Bush administration’s Freight Policy Framework (FPF) is helping to secure funding for the entire transportation network.
“Our stance is that there needs to be swift, efficient movement of freight throughout the whole transportation system, [which] depends on investment on highways and other integral infrastructure. The AAPA supports Bush’s FPF, but Ellis suggested that it still needs some fine tuning. “It’s long on coordination and public/private partnership, but it’s short on funding,” he said. “We’re going to push for a framework that develops policy solutions.”
Ellis also remarked that the shipping industry is interested in the Department of Transportation’s National Strategy to Reduce Congestion on America’ Transportation Network.
“The Department of Transportation is calling congestion the single largest threat to the U.S. economy,” he continued.
Since most supply chain mishaps happen on land, as opposed to at a port, seaports are devising strategies to reduce the amount of traffic on the roads. The AAPA is working closely with the Maritime Administration to develop urban partnership agreements with communities that are willing to demonstrate congestion relief strategies.
Ellis also explained that the AAPA is encouraging states to pass legislation to invest in transportation, “primarily with new toll roads, and new technologies that are helping to end these traffic tie-ups, such as Intelligent Transportation Systems (like the big reader boards on interstates that advise motorists).”
Additionally, the AAPA advocates creating new interstate corridors of the future. These corridors would have specific lanes designated for trucking separate from regular commuter traffic.
U.S. seaports want to relieve some of the roadway burden by utilizing more short sea shipping. “Short sea shipping would actually move a lot of cargo onto rivers and inter-coastal waterways,” said Ellis. Currently, harbor maintenance taxes collected on short-sea shipping make it more affordable for companies to ship goods via truck or rail.
Seaports are also working on topics important to pallet manufacturers like invasive species control, and phytosanitary procedures. Keep posted to see how implementation of the new ISPM-15 guidelines affects supply chains and the shipping industry in a future issue of Pallet Enterprise.
Do you want reprints or a copyright license for this article? Click here
Research and connect with suppliers mentioned in this article using our FREE ZIP Online service.