IANA Chair Hacegaba juggles supply-chain challenges
9/27/2021
By Julie Sneider, Senior Associate Editor
When Noel Hacegaba talks about what happened to the North American supply chain in 2020, he likes to describe it this way: “We went from doom and gloom to fast and furious at the turn of a dime.”
He speaks from two perspectives: as deputy executive director of administration and operations for the Port of Long Beach (POLB) in California, and as chairman of the Intermodal Association of North America (IANA), which last week held its Intermodal Expo in Long Beach. At this year’s conference, the pandemic’s monumental disruption of the supply chain was top of mind.
“What I heard at the conference is very much in alignment with what I’m hearing across the supply chain: Whether it’s international or domestic, the supply chain is overwhelmed,” Hacegaba says.
He uses the ports of Los Angeles and Long Beach — the first and second largest U.S. ports, respectively — to illustrate his point. For calendar year 2021, the San Pedro Bay ports are on track to process 20 million container units, which would shatter the record set last year. In 2020, the two ports combined processed over 17 million container units. The L.A. and Long Beach ports move about 40% of all containerized cargo entering the United States annually and about 30% of all containerized exports.
The rush of imports leading to record volumes and subsequent congestion has rippled around the world, from Asia across the Pacific to the United States. Disruptions in global shipping and rapid shifts in demand have led the cost of shipping containers between China and the West Coast to grow more than 90% compared to 2019, according to the White House.
“The magnitude of the cargo surge and its impact on transportation is being felt across the supply chain, and intermodal is not exempt,” says Hacegaba. “You see it play out in our cargo volumes in 2020, where we had steep decline in the first quarter, a single-digit decline in the second quarter and then, starting in July, we saw the beginnings of a cargo surge that frankly has not subsided.”
The surge has replaced the traditional peaks and valleys that typically characterize cargo flows. And it’s unique to North America, where a number of factors produced a perfect storm: the pandemic’s arrival on North American shores in February 2020, the health orders that prompted businesses to shut down for a period and the subsequent ramping up of e-commerce activity.
Prior to the pandemic, Hacegaba saw projections that e-commerce activity wasn’t expected to double for another five years.
“Well, guess what? It’s already more than doubled and that was a year-and-a-half ago,” he says.
As North American consumers switched to buying more products online, retailers replenished inventories more quickly. In response, vessels packed with goods produced in Asia continue to sail for North American ports. A backup of hulking container ships waiting for days to enter those ports has grown in recent months, despite the ports’ efforts to speed up the offloading of ships. Exacerbating the situation is a worker shortage and labor market that has yet to recover from last year’s economic shutdown.
All those forces have combined to interrupt the fluidity of the supply chain, Hacegaba says.
The Port of Long Beach has taken several steps toward streamlining the movement of cargo at its facilities. Port of Long BeachThe freight transportation sector’s longstanding forecasting challenges haven’t helped. When cargo flows went from “gloom and doom to fast and furious, it caught the supply chain off guard,” he added.
“Better forecasting will be achieved when there’s better communication, better coordination when discreet systems talk to each other about what is happening in the supply chain,” he says. “Technology is prevalent across the supply chain, but what is not prevalent is coordination across these technology platforms.”
POLB has taken several steps toward streamlining movement of cargo through the port. In December 2020, the port used 65 vacant acres to open what it calls the “STOR” — a short-term overflow resource to enable terminal operators to move containers off their yards and onto the site temporarily to make room for more incoming vessels.
Also last year, the POLB launched an online dashboard called the Weekly Advance Volume Estimate (WAVE) report to help promote more accurate forecasting. The report provides information on vessel services, container volumes and other data the supply chain needs to know to better plan and deploy equipment and labor, Hacegaba says.
In August, POLB officials marked the completion of the third and final phase of the Middle Harbor Terminal Redevelopment Project, which expanded one of the world’s most advanced and greenest container terminals. The modern 304-acre terminal represents a $1.49 billion investment in port infrastructure. The final phase effectively adds 1 million in 20-foot-equivalent units in annualized capacity to the supply chain, Hacegaba says.
And last week, the POLB launched its 24/7 pilot program in partnership with Total Terminals International container terminal on Pier T. The pilot aims to make it easier for trucks to access the facility during the overnight hours to widen access and speed deliveries amid the ongoing cargo surge.
The pilot started with gates open 24 hours — up from 16 hours — Mondays through Thursdays. Eventually, the program will expand to gates being open 24 hours seven days a week.
The pilot program at the POLB’s largest terminal focuses on the effort to reduce dwell, or the amount of time cargo spends waiting for pickup on the dock. The terminal is taking two steps to increase cargo pickup in the late night, early morning hours, when there is less traffic on the region’s freeways and surface streets.
“I believe our new pilot program will be the first step toward a 24/7 supply chain,” Hacegaba says. “The cargo surge is an indication the U.S. supply chain has to take a closer look at what it will take to transition to a 24/7 supply chain.”
Hacegaba believes the railroads “have stepped up” to meet the current supply chain challenges. He cites the reduction in rail dwell time in Southern California as proof. The average days an intermodal box sits at the terminal is currently at 8.2 days.
“That’s still not where we’d like to see it, but it’s a marked improvement because just a month before [rail dwell] was 11.3 days,” Hacegaba says.
Class I executives have told him their companies are “basically improving nuts-and-bolts coordination” to put the railroads in a position to apply the equipment where and when it’s needed.
“I would also say that some of the actions the railroads have taken to manage this surge is by better coordinating with the shippers,” he says. “I think this illustrates the value of better coordination going forward.”
As for when the supply chain will return to any kind of normal, Hacegaba believes that won’t happen until second- or third-quarter 2022.
“Based on everything I’m hearing, my expectation is that this surge will continue through first-quarter 2022,” he says. “At that point, it will ease a bit, but it will continue through next summer.”
