Port Congestion Article

Congestion at the Ports of
Los Angeles and Long Beach
Paul Davis | Moulton Fulfillment | November 11, 2014

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TABLE OF CONTENTS
Statement Of Purpose 2
What Is Happening And Why? 2
Who Is This Impacting? 4
What Is The Solution? 7
What Does This Mean For The Future? 10
Sources 11

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Statement of Purpose
Congestion at the ports of Los Angeles and Long Beach has been creating quite a buzz in
recent news. The impact reaches beyond the ports into all segments of the supply chain and
everyone is looking for someone to whom they can assign blame. Unfortunately, the cause of
the congestion cannot be attributed to any one entity or process, but rather a combination of
multiple flawed and poorly executed practices and business decisions (or lack thereof) that
could not have come at a worse time. So…
 What is happening at the ports and why?
 Who is this impacting?
 How can these obstacles be overcome?
 How long will it take for the issue to be resolved?
 Is this likely to happen again?
This whitepaper will attempt to explain the situation at the ports, its influence on the
entire supply chain and consumers, as well as potential solutions and contingencies to this
crisis. Inbound ocean freight bound for the West Coast is causing logistical problems at all
levels of business in many industries throughout the entire country.
Moulton Fulfillment’s bicoastal distribution centers in Van Nuys, CA and our new
location in Dayton, NJ provides our clients with peace of mind of having alternate distribution
points to ship inbound ocean freight to in the case of service delays or interruptions. Port
Elizabeth, located only 30 minutes from our New Jersey location, is the largest port on the east
coast and the first call for inbound ocean freight among all other East Coast terminals. For
more information please contact us at www.moultonfulfillment.com or toll free at (800) 808-
3304.
What is Happening and Why?
As two of the busiest ports in the country, Los Angeles and Long Beach are always
pushing their operational capacity to its limits, but in the past few months it would appear they
have overextended their capabilities. With fourteen massive inbound cargo ships anchored in
the San Pedro Bay (as of November 6th) awaiting berth at the twin ports for days on end and
with growing numbers of trucks sitting idle for hours in hopes of finding, accessing, and hooking
up to their respective chassis…it is no wonder so many are eager to understand and attempt to
plan for contingencies.

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More Ships, Bigger Ships
Looking first at the ships that are arriving at the ports, we notice that in recent months
they have grown, both in size as well as numbers. In anticipation of the 2014 holiday season,
Asian factories have increased production in order to satisfy consumer demand. This increased
output is then containerized and loaded onto an inflated fleet of “Super-Sized” Freightliners
and sent off to the ports. The challenge presented by these Super-Freighters is that they hold
many more containers (the largest can accommodate up to 18,000 twenty foot containers) so
that it takes significantly more time to unload them than the smaller cargo ships. For example,
APL Norway Shipping Company’s weekly container lift count increased from an average of
approximately 15,000 to more than 22,000 in September. In fact, according to the Journal of
Commerce’s data division, so far this year imports to the West Coast are up 6.2%. The sheer
size of these Super Freighters makes navigation into the port more difficult (think about the 405
Freeway during rush hour …with road work …and an accident or two …involving tractor
trailers). This means fewer ships can berth at once which leave more waiting in queue in the
bay, sometimes for days. In turn this creates another problem because the vessels, once
emptied, are then put behind schedule for their return voyage. As a result, many importing
companies have filed claims against the ports for the loss of business due to the delays.
Container Storage & Chassis Allocation
Once the containers have been offloaded from the ships they must then be stored in the
port until picked up by truck or (occasionally) rail. Containerized shipments are typically stored
on truck chassis in order to make the turn time for truckers as fast and easy as possible. When
a container is already on the chassis a truck can drive in, hook up, and drive off. But what about
when the container is not stored on a chassis?
Before we get into that, why wouldn’t a container be stored on a chassis? In the past,
chassis at the ports were typically owned by the importing company, meaning: their containers
would go on their containers and be stored in a dedicated and easily accessible area awaiting
pickup. Recently, however, many of those companies have divested themselves of their chassis
and sold them to third-party equipment leasing companies within the ports. This has created a
logistical nightmare for trucking companies. Since most of the importing companies no longer
own a stock of chassis, freshly unloaded containers are sent into a “storage limbo” of sorts. The
uncertainty begins with locating an available chassis…if there is one. There are a number
chassis pools located within the ports, but if a container is unloaded into an area of the terminal
that is depleted of its chassis stock, a chassis from another pool cannot (under current binding
agreements) be transferred to where it is needed. If this is the case, the container is then
stacked and stored on the ground. To get a good idea of what stacked storage means in the

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port, think of the popular family game, Jenga™, where each block of wood is a container.
Where the port situation differs from the game is that, unfortunately, you cannot gain access to
the bottom container just by sliding it out. In this case, you have to locate available container
cranes and move each container from the stack until the one you need is accessible. As you can
imagine, this can be quite time consuming, and even once this is done, trucks may still be
required to wait until a chassis is available. Additionally, the shortage of chassis is made worse
when containers that do get stored on chassis sit idly in off-site storage lots and worse still
when a growing number of chassis are out of service as they require maintenance and/or repair
which requires additional labor.
Labor Conflicts
Labor conflicts among the ports is nothing new, but is it reaching a new low point? In
May, the International Longshore and Warehouse Union (ILWU), representing workers in all of
the nation’s ports, began negotiations with the Pacific Maritime Association (PMA) for a new
contract. An agreement was supposed to be reached by the old contract’s maturity date of July
1st, but obviously that has not been the case. Over the more than six month negotiation
process one of the hottest topics seems to be truck chassis maintenance and repair. The labor
required to keep adequate numbers of chassis serviced and available for offloaded containers
(especially during peak season) is crucial to the ports’ operational efficiency, and the recent
failure to satisfy that demand has been cited as the number one cause of the congestion.
To make things worse, the ILWU and PMA have both engaged in smear campaigns
against one another via hostile press statements. A statement released on November 3rd by the
PMA accuses the ILWU of instigating a slowdown in the West Coast ports by refusing to
dispatch qualified, experienced workers. Without those workers an estimated 50% of the
cranes used to unload and move containers could sit idle. The PMA goes on to say that this
violates an agreement between the two parties that “normal operations at West Coast ports
would continue until an agreement could be reached.” A spokesperson from the ILWU
answered back saying that this is a “bold face lie” and that “No such agreement was ever made,
nor could it be made given the parties’ historic disagreement regarding the definition of
‘normal operations’.” The ILWU is in turn accusing the PMA of using the media attack to shift a
greater portion of the blame for the congestion onto the union.
At this point, the validity of either statement has not been confirmed, but one thing is
certain: this behavior sends the message that neither party is being proactive in resolving their
contract issues, which will consequently only make the port complications worse for everyone.
The threat of a worker strike by the ILWU or a lockout at the ports by the PMA is anything but
productive and could not come at a worse time. This childish conduct is looking more and more

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like a similar conflict between the ILWU and PMA in 2002, which eventually led to a ten day
lockout at the ports which was estimated to have cost the U.S. economy billions of dollars. The
conflict was only resolved after President George W. Bush invoked the Taft-Hartley Act which
forced the ports back into operation and negotiators back to the table. Let’s hope this is not a
situation in which history will repeat itself.
Who is This Impacting?
The easier question to answer would be, “Who isn’t this impacting?” The reach of the
congestion at the Southern California ports seems to extend with every passing day. Every
segment of the supply chain could potentially feel (if not already) the delays of inbound
shipments impacting their business.
Ocean Freight Companies
Anchoring in the bay for up to two weeks causes a huge increase in ocean freight round
trip times, meaning that shipping companies are making fewer deliveries per month.
Consequently, the unpredictability of the trip duration is forcing those shippers to fill each
vessel to maximum capacity for every voyage, making the unloading process at ports even
longer! A survey conducted by the Journal of Commerce indicates that 97% of shippers
surveyed feel that the congestion at the ports of Los Angeles and Long Beach have hurt their
business in some way and many believe the problem will continue to get worse.
Port Employees
In addition to their contract struggles, employees of the ports are feeling additional
pressure from the crisis. Until the announcement by the ILWU to withhold workers beginning
November 3rd, union employees had been working overtime, double-overtime, and odd shift
changes for the past few months. However, this labor push comes at a cost, overtime wages
and additional hiring of non-union workers becomes very expensive very quickly. Now many
union workers are concerned about the security of their jobs and the potential for a lockout.
This drop in morale potentially comes with an equally devastating drop in worker productivity.
Inbound Ground Transport Companies
The next group hit are those involved in inbound ground transportation of containers
leaving the ports: trucking and rail companies. As discussed earlier, trucks are backed up at the
ports just as badly as the ships are in the bay. As of November 13th, two of the major trucking
companies that service the ports have resumed striking that was thought to have been resolved

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in July. Total Transportation Services Inc. and Pacific 9 transportation have cited wage theft,
multiple violations of labor laws, and employer retaliation as justification for the strike.
Another, less top-of-mind, problem that trucking companies are experiencing has to do
with recent business models changing as a result of the purchase of new, Clean-Air Trucks.
These more eco-friendly trucks not only come at a premium purchase price, but are also much
more expensive to operate, maintain, and repair. In order for the purchase of these trucks to
be justified, they require an increase in daily revenues, which means more trips per truck per
time period. With trucks sitting at the port for upwards of 10 hours awaiting an available
chassis, these trucking companies are seeing their smart, environmentally responsible
investments negatively impact them at no fault of their own. Rail companies are experiencing
similar difficulties with their railcars as truckers are with their chassis.
Warehousing, Fulfillment, 3PL, and Outbound Distribution Companies
The delays at the ports trickle further down the supply chain to those segments
responsible for warehouse and inventory management, order processing and fulfillment, and
product distribution to retail stores and direct to consumers. With the unpredictable delivery
schedules of inbound product it becomes increasingly difficult to manage inventory. Those
responsible for ensuring proper warehousing and inventory levels have little to no ability to
plan as transit times are unreliable at best. Product scheduled for delivery on one day may not
arrive only to come another day, with other back-deliveries, as well as those that are on time.
Needless to say, this has the potential to create congestion at the distribution centers.
Furthermore, order fulfillment companies may be receiving orders from retail,
e-commerce, and direct to consumer customers for product that is delayed in transit. This
upsets those placing the orders as the companies selling the products run the risk of stock-outs
and backorders…neither of which is good for business, particularly during the holiday season.
Outbound distribution and delivery companies also have a reason to be concerned. Just
as with the warehouse inventories, their shipment scheduling is difficult to predict and could
prove to be unreliable. They may find that when the product is delayed to the warehouse they
are unable to fill their trucks. If they cannot fill their trucks they are essentially paying drivers
to deliver empty space. On the other hand, if the fulfillment companies are trying play catchup,
they may find that the volume demanded exceeds the capacity of their trucks. This leads to a
logistical problem that will require last minute changes to fleet allocation and routing. As with
everything else, when things are rushed or changed at the last minute the potential for
mistakes increases significantly…and no one wants to be responsible for a child not having a
present under the tree on Christmas morning.

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Brick-and-Mortar and e-Commerce Retailers
Unable to access sufficient inventory from warehouses, retailers are facing a tough
holiday shopping season. The vast majority (nearly 80%) of products sold during the biggest
retail season of the year come from Asia and enter the country via the West Coast ports. With
“Black Friday”, the retail industry’s single largest volume day of the year only a few days away
the pressure is rising. The frenzied “shopping holiday” relies on products being in stock and on
shelves. Having worked in retail for years when I was younger, I remember preparing for Black
Friday by moving everything from the stock room out onto the sales floor…forget about
merchandising, just make piles and put a big bright “SALE” sign visible to customers. Within
minutes of the doors opening, the pile was gone! Without any inventory, there can be no sale
piles, and that only results in less revenue and unhappy customers.
Though e-Commerce obviously cannot have physical piles of product on a non-existent
sales floor, web sales have seen exponential growth in holiday season sales in the recent years.
In fact, online holiday sales have increased so much in the past few years that another shopping
holiday was created specifically for e-Commerce retail…you have likely heard of “Cyber
Monday”. Since online sales do not require inventory to be “on-site” at the time of purchase,
they have a little more wiggle room than traditional retail when it comes to inventory levels,
but they still have to be confident that those orders can be filled and shipped on time. If they
are not able to get adequate inventory fast enough, they may have to eliminate the ability to
offer expedited shipping, taking yet another major hit to their revenues and possibly pushing
consumers to other shopping sites.
Retailers, both brick-and-mortar as well as e-Commerce have said that they are already
feeling the strain on their inventories as a result of the ports congestion and in some cases are
having to modify their holiday promotions.
Consumers
Finally we come to the group on which this crisis has the biggest impact: the consumers.
Without the consumer-generated demand for imported products and the consumer dollars
spent to buy them, the entire supply chain for consumer goods is pretty much pointless. No
matter where you lie in the supply chain, your business ultimately relies on the revenue
generated from consumer purchases. Consumers’ inability to buy the desired goods will likely
result in increased customer dissatisfaction, loss of customer brand loyalty, and, if nothing else,
a significant drop in sales for this year.

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What is the Solution?
As there is no one cause of the port congestion problem, there is no one solution. There
have been a number of recommendations addressing each of the causes, but as of yet only a
few have been implemented, some are still being discussed, while others have been deemed
ineffective.
Shipping Vessels and Berthing Times
The monstrous Super-Freighters are something that we can expect to stay. The ability
to ship more product in fewer trips has quite obvious economic efficiencies. The solution to
their lengthy “at anchor” times lies in the preparation for their arrival to the ports and the
processes related to unloading the increased cargo volumes. Many Asian ocean freight
terminals have become extremely efficient working with these vessels and have been able to
maintain port efficiency and consistent turn times. The struggling terminals on the West Coast
of the U.S. should use these ports as models from which to learn and emulate their best
practices. As this would require an investment in time and money to train workers and
implement new procedures, a more immediate solution would be to reroute ocean shipments
to other ports. Some ocean freight companies are trying to get a head-start and are already
sending many vessels, which would normally be destined for the West Coast, to ports on the
East Coast. There are a few concerns that may cause companies to hesitate to do the same:
1. Change in transit times for ocean freight bound for the eastern ports.
With vessels sitting at anchor for upwards of two weeks awaiting berth at the ports of
Los Angeles and Long Beach, the decision to reroute to eastern ports, such as New York/New
Jersey, could actually decrease transit times. Average transit times from China to the Port
Elizabeth Marine Terminal in New Jersey are between 26 and 32 days (depending on carrier).
Average transit times from China to the ports of Los Angeles and Long Beach are approximately
17 to 22 days, but adding an additional 10 – 14 days for time awaiting berth, the East Coast
could easily become the more time and cost effective destination.
2. Ground transit times within the country to warehouses and domestic distribution
centers.
The time savings realized by routing cargo to the East Coast may prove beneficial for
ocean freight, but what about after the containers are unloaded from the ships and ready for
ground transport to their warehouse destination? At that point the geographic location of the
warehouse and distribution facilities would become a factor in the equation. Those
organizations in the supply chain that specialize in storage of inventory, order fulfillment, and

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outbound distribution to retail and end-consumers know that having multiple facilities is a huge
advantage over those with only one location. Moulton Fulfillment proudly boasts bicoastal
distribution with facilities strategically located in Los Angeles, Toronto, and a new location in
Dayton, New Jersey. The convenience of being near the three largest ports in the country
allows our clients to ship inventory to whichever coast is more convenient for them and their
clients. From the ports the inventory can then easily be delivered to a nearby Moulton 3PL,
distribution, and order fulfillment facility. A distribution company with the capability of
shipping from both coasts means shorter transit times and lower shipping costs to retailers,
marketers, and consumers.
Overtime and Additional Labor
In an attempt to combat the larger volume coming into the port, labor was increased
significantly. Longshoreman overtime and the addition of short-term, non-union workers
allowed the ports to unload the large vessels around the clock. However, even with this
increase in labor, little progress was made…in fact, the number of ships waiting to unload
containers only seemed to grow. This was only made worse on November 3rd, when the ILWU
announced that it would not dispatch qualified container crane workers. The argument has
been made that the increased labor was not improving the congestion situation enough to
justify the huge increase in labor expenses. Even if this had been an effective solution, it is not
sustainable in the long term.
Infrastructure and Equipment
Investing in additional container-handling equipment such as cranes has also been one
proposed solution. This could be extremely effective in preventing port congestion in the
future, but unfortunately the time required for new equipment to be purchased and put into
service would be far too long to provide any relief for the existing predicament. Expanding the
truck routes around the ports has also been suggested, but this suggestion also fails to provide
immediate relief and will be very costly.
Truck Chassis and Drivers
The recent divestment in truck chassis by many importing companies is widely
acknowledged as one of the biggest current issues at the ports. However, there is light at the
end of the tunnel. Four of the largest third-party chassis leasing companies in the ports of Los
Angeles and Long Beach have devised a new business model for inter-terminal chassis leasing
that will hopefully resolve the misallocation issues. The new model will unite the chassis fleets
of the four parties involved and make those chassis available to any truck in any terminal even

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if the owner of a particular chassis does not have operations in that terminal. These “gray
chassis” will drastically reduce truck turn times and are a much more sustainable solution for
port congestion. This plan will become effective as of February 1st. Some say this may be too
late to save the holiday season, but will set a precedent for ports all over the country. This
progressive, cooperative step by the equipment leasing companies is a great example of doing
what is best for the port and for business as a whole.
Another suggestion regarding chassis is for the ports to purchase a fleet of their own,
only to be used in times of need such as this. Though the proposal is designed in such a way as
to prevent damage to the private chassis leasing companies there is still likely to be some
resistance.
Los Angeles Mayor Eric Garcetti has stepped in to help settle the labor disputes between
truck drivers and trucking companies. On the evening of November 13th, he announced that a
truce had been declared by one of the trucking companies. This is not a solution to the
problem, but rather an agreement to continue working while the labor claims are being looked
into by officials. The Mayor has scheduled meetings with other trucking companies throughout
the week to discuss similar measures in hopes of returning operational efficiency to the port.
Container Move Hours and Storage
Currently, trucks are allowed to pick up containers without incurring fees as long as they
do so outside of the ports’ peak operating hours. The peak daytime hours were initiated in
2005 to help relieve truck traffic on the freeways during common daytime commute times.
According to the Journal of Commerce, only 45% of trucks pick up containers between 8am and
5pm. There have been talks with PierPass Inc., the organization responsible for setting these
guidelines, about temporarily forgoing those peak daytime fees in order to more evenly spread
out the truck traffic throughout the day and night, thus increasing the operating flow efficiency
within the ports. PierPass has since decided against the proposal citing a potential to increase
freeway truck traffic during times when most people are commuting to and from work.
Storage of containers and parking lots for trucks awaiting container pickup could
potentially be expanded into currently vacant lots within the main operating areas of the ports.
When available chassis are available it is preferable to load the containers directly on them
when unloaded from the ships. The ability for truckers to come and quickly hook up to their
chassis greatly reduces turn times and truck congestion within the terminals. However, since
containers stored on chassis cannot be stacked they take up a lot more area. The few empty
lots could act as overflow storage for chassis awaiting pickup and/or an area for truckers to

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park, turn off their engines, and wait without having to burn through unnecessary
fuel…essentially acting similarly to a waiting room in a doctor’s office.
Typically, containers awaiting truck or rail pickup are allowed to sit at the ports for four
days without incurring additional fees. Given the current situation, the port of Long Beach has
extended the free period to seven days in hopes of reducing the truck lines throughout the
port. Critics say that this could make the situation worse as trucking companies may see this as
an opportunity to procrastinate: leaving containers that could be picked up in four days to sit
for the full seven. With cargo continuing to come in around the clock, chassis cannot afford to
sit idly with containers on them for an additional three days.
Union Contract Negotiations
The once cooperative negotiations between the ILWU and the PMA seem to be rapidly
deteriorating in the last few weeks. Many fear that if tensions get any worse a walkout by
ILWU workers or even a PMA lockout could be the final straw and kill any hope for supply chain
efficiency throughout the remainder of the holiday season. Earlier this week, in Oakland, union
dockworkers walked off the job.
On November 13th, the PMA presented the ILWU with an offer to extend their previous
contract (which expired on July 1st) in hopes of returning productivity and sensible business
operations to the port. The ILWU has yet to accept or officially decline the proposal. If
accepted, the contract would provide operation guidelines under which each party was legally
bound. This would restore definitive labor processes and responsibilities for both the ILWU and
the PMA. Any uncooperative or counterproductive actions would also follow protocol outlined
in the contract.
Some of the larger importers, particularly in the footwear and textile industries, have
been encouraged to put pressure on the ILWU and PMA to come to an agreement and sign a
new contract as quickly as possible so that decisions can be made more quickly and
intelligently. In addition, the National Retail Federation (the world’s largest retail trade
association) has been trying to get help from the federal government. They have sought help
from President Obama, asking that he intervene in the negotiations before there is a complete
shutdown in the ports. The use of a federal mediator was required in the 2002 ILWU contract
negotiations after a 10 day shutdown proved very detrimental to the economy. As of
November 6th, the President had not officially responded to the request.

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What Does This Mean For The Future?
At this point the primary focus of all those affected by the congestion at the ports is to
resolve the current matters and do our best to minimize the damage done to all stakeholders
throughout the supply chain. Once this has been accomplished then is the time to look further
down the road. There is no question that decision-making processes and all inbound cargo
practices need to be carefully analyzed.
Many would argue that the biggest factor contributing to the congestion is the
misallocation/shortage of truck chassis available for offloaded containers. While this seems to
hold true from a tactical standpoint, the bigger obstacle is clearly the stability of business
operations involving the port. The abrasive relationship between the International Longshore
and Warehouse Union and the Pacific Maritime Association stands to be a much more delicate
and enduring situation that requires considerable review and, potentially, a complete overhaul
of the labor contract negotiation process, worker rights, stakeholder consideration, and
distribution of power.
The implementation of a “gray chassis” equipment leasing system across all terminals
seems like a sound solution that should serve as a sufficient long term solution. There will
undoubtedly be some wrinkles that will need ironing out during the program’s implementation,
but at least this is a step in the right direction that should be beneficial to all. Though the
contract negotiations may get worse before they get better and may indeed create a
challenging holiday season this year, it is necessary that the two parties settle their disputes in
appropriate and productive ways.
Congestion in the ports is not a new or unheard of problem, but this year’s mess
definitely seems to put past years to shame. As operations at the port change so does the need
to adapt, plan, and take a proactive approach to overcoming new obstacles. If the holiday
shopping season, this year as well as for years to come, is to be prosperous, the focus needs to
remain on finding sustainable solutions to this crisis rather than on assigning blame. Those
organizations further down the supply chain will have to dig deep to find new and innovative
ways to make up for lost time and money. The challenge falls upon them to overcome the
setbacks caused by the congestion at the ports and ensure that this holiday shopping season is
as profitable and satisfying for everyone involved.

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To learn more about the port congestion and stay up-to-
date on the latest developments visit Moulton’s
West Coast Port Congestion News
http://www.moultonfulfillment.com/west-coast-port-congestion-news
Visit MoultonFulfillment.com or call us toll
free at (800) 808-3304 to discover how Moulton’s advanced
3PL, inventory management, and order fulfillment supply
chain services can help your business overcome the burden
caused by port congestion.

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