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Unleashing Pool Power

March 19, 2015

 

The San Pedro Bay ports are on track to move cargo faster by making a chassis supply problem a thing of the past.

The nation’s busiest harbor complex now has a “gray chassis fleet” – a new model for managing the equipment that drayage trucks use to haul containers – to ensure chassis are available when and where they are needed.

The gray fleet serving the ports of Long Beach and Los Angeles – which move nearly 40 percent of the nation’s containerized imports – is the first of its scope and size to tackle a problem experienced by all major U.S. ports in recent years. The program is already helping to relieve the region’s current congestion, and it is expected to help to prevent chassis shortages in the future.

“We are solving a systemic problem that has played a major role in cargo piling up on our docks,” said Port of Long Beach Chief Executive Jon Slangerup. “When you’re using a truck to move a container, both pieces of equipment – the tractor and the chassis – should always be available at the same time.”

The ‘Pool of Pools’

Effective March 1, three companies – Direct ChassisLink Inc. (DCLI), Flexi-Van Leasing Inc. and TRAC Intermodal – that own more than 80 percent of the fleet serving the San Pedro Bay ports began operating under a new agreement that allows their chassis to be used interchangeably. The landmark pact creates a “pool of pools” of more than 81,500 chassis.

All but one of the container terminals in the harbor complex, as well as off-dock rail yards, are participating. The remaining marine container terminal uses its own chassis fleet, but could opt to participate in the future.

“The concept is chassis interoperability,” said DCLI Senior Vice President and Chief Operating Officer Ron Joseph. “Terminal operators can load any chassis with any container and a motor carrier can return a chassis to any one of 12 terminals. This improves efficiencies by reducing chassis dislocation and empty miles.

“We also believe the gray fleet will improve turn times since the driver avoids returning the chassis to an originating terminal,” Joseph said. “Other real benefits include clean air gains. Fewer truck trips, lower emissions.”

A team of representatives from each of the three pool operators oversees and coordinates the day-to-day logistics and repositioning of the combined fleet. The pools remain commercially independent, with each chassis provider competing for business and setting its own leasing terms and rates. A separate third-party service provider manages the accounting of the usage between the pools and other proprietary customer information.

Origins

Congestion problems that snowballed at West Coast ports in recent months highlighted the growing need to improve chassis availability and utilization across the supply chain. Previously, ocean carriers owned and provided the chassis, considered standard operating equipment, at no cost to cargo owners or trucking companies.

Over the past decade, shipping lines have been abandoning that model, which was unique to the United States. Accelerated by the recession, the trend led to a patchwork of new ownership and leasing models of non-interchangeable pools. It did not alter the fact that the vast majority of drayage trucks serving U.S. ports are not equipped with their own chassis.

Seeking a better model for the San Pedro Bay ports, the Port of Long Beach formed the Chassis Operation Group in 2012. Representatives of ocean carriers, terminal operators, beneficial cargo owners, trucking companies, the railroads, labor and the Port of Los Angeles came together to explore solutions.

“The group identified a gray chassis fleet as the best solution for our gateway,” said the Port’s Managing Director of Commercial Operations and Chief Commercial Officer, Dr. Noel Hacegaba. “That collaboration set the stage for the ‘pool of pools.’ ”

DCLI, Flexi-Van and TRAC began meeting in fall 2013 to develop the new model. In addition to working with the two ports, the companies collaborated with the Harbor Trucking Association, beneficial cargo owners and other industry stakeholders.

The process also involved submitting the gray fleet proposal to the Antitrust Division of the U.S. Department of Justice, which found, “The increased flexibility created by the interchangeability will enhance customer service, improve chassis productivity and respond to the desire of the Long Beach and Los Angeles ports authorities to achieve better overall utilization of the region’s chassis fleets.”

At the recent Journal of Commerce Trans-Pacific Maritime Conference in Long Beach, executives of DCLI, TRAC and Flexi described the gray chassis pool as an emerging model they expect will evolve. DCLI CEO Bill Shea, TRAC President and CEO Keith Lovetro, and Flexi-Van Executive Vice President Phil Connors said their companies continue to work closely with other links in the chain to further harmonize operations and improve chassis utilization and supply.

More Solutions Ahead

In recent months, lack of available chassis compounded delays created by a combination of factors: cargo growth, changing dynamics in the shipping industry, a shortage of rail cars due to demands in other markets and protracted contract negotiations between the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU). On Feb. 20, the PMA and the ILWU announced a tentative agreement on a new five-year contract covering nearly 20,000 workers at 29 West Coast ports.

To augment the chassis supply when demand is greatest, the Port of Long Beach is pursuing its own peak season pool. The Port expects to issue a formal request for proposals in the coming weeks for an operator.

Also this month, the Port extended a lease with Pasha Stevedoring & Terminals L.P. to continue operating a temporary container storage depot on Pier S through Sept. 30. The Port also expanded use of the 30-acre site to include staging chassis and wheeled loaded containers.  

The ports of Long Beach and Los Angeles are also now free to jointly pursue regional solutions to avoid future delays and logjams. In late February, the Federal Maritime Commission (FMC) granted the ports’ request to collaborate with their industry partners on projects and programs aimed at eliminating supply chain inefficiencies of vessel, marine terminal, trucking, chassis and railroad operations. Representatives of the two ports plan to hold their first meeting March 23 to map out how they will move forward together.

 

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