Extending ports’ operating hours won’t be enough to fix supply chain disruptions

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FREDERIC J. BROWN/AFP via Getty Images
The US National flag waves near shipping containers stacked high at the Port of Los Angeles, California on April 19, 2021, where records continue to be set for incoming cargo at the nation’s 1 container port which had its busiest March in 114 years.

The colossal shipping jam at Southern California’s ports is delivering one thing in abundance: surprise anxiety for American families, many worried whether Santa will pull through in time — and without breaking the bank.

But for experts in supply-chain management, what’s happening is no surprise. Instead, it’s the unmasking of a long-hidden problem, thanks to disruptions wrought by the pandemic.

Addressing the fundamental causes will require much more than extending hours at the ports, a development heralded last month by the White House. To keep these shipping slowdowns from recurring, worsening and menacing economic growth, the U.S. needs comprehensive strategies to update overall port infrastructure, encourage automation and strengthen communication.

First, the nation must reckon with the port system’s severe capacity issues. The country’s two largest ports — the ports of Los Angeles and Long Beach, which handle 40 percent of imports and 30 percent of exports — rank only as the ninth-largest port operation in the world when counted as a combined entity. This is a glaring mismatch with the United States’s standing as the largest economy, the largest importer and the second-largest exporter.

Notably, seven of the 10 biggest ports are in China. The No. 1-ranked Port of Shanghai handles about three times the volume that moves through Los Angeles and Long Beach.

U.S. ports aren’t especially economical, either. In the World Bank’s new Container Port Performance Index, no U.S. port cracks the top 50 for efficiency. The Los Angeles and Long Beach ports land at 328 and 333, respectively, in the ranking of 351 container ports worldwide. Even the Port of Lome in Togo, one of the poorest countries, does better.

To understand how those rankings translate into time lost, consider this: It takes an average of 46 seconds to move a container on large vessel calls at the ports of Rotterdam, Antwerp and Hamburg. At the Port of Singapore and the Chinese ports of Yantian, Ningbo and Shanghai, the average is just 27 seconds. But at Los Angeles and Long Beach? A full 76 seconds. None of these figures includes the time to send cargo through customs or to collect it for shipping inland.

This isn’t to condemn the entire U.S. supply system. For years, domestic supply chains have negotiated our port system with amazing efficiency. Logistics costs have been around 8 percent of GDP. The number in China is around 14 percent; in Japan, 5 percent; and in Germany, 7 percent. In the U.S., a combination of thoughtful planning, supply-chain coordination, new technologies and routing and scheduling optimization make possible the standout performance.

Thanks to hardworking and highly efficient supply-chain managers, American holiday shopping carts always have been packed, even with the current bottleneck at port operations. This year again, retailers prepared and planned ahead, as early as the summer. Chartered vessels have been hired; ports on the East and Gulf coasts are added to shipping routes; and, of course, air transportation volume has increased. To counter rising prices, retailers such as Walmart have compromised with suppliers to manage costs. So far, consumers have had a favorable holiday shopping season.

However, there is a limit to how much our private sector can cope with outdated infrastructure in handling increased demand and unprecedented disruptions. We cannot delay the expansion and construction of our ports anymore. Specifically, they need railway connections, greater channel width, bigger cranes and higher bridges, both to accommodate large vessels and to encourage competition with one another.

The infrastructure shortfalls reach from coast to coast. In Seattle, the port’s crane is low and can’t off-load large vessels. Shipping channels in the New Jersey-New York area are narrow and limited by overhead bridges. Some ports lack railway connections. Ports such as Miami’s have benefited from smooth port-to-rail links, which should be expanded everywhere.

While all U.S. ports need better capacity, West Coast ports should be a priority because they’re the fastest conduit from East Asia. Cargo from Asian ports takes about three weeks in over-water time to arrive there, a full week or two faster than the travel time to the East Coast. And some giant ships just cannot pass through the Panama Canal to reach the East Coast.

Automation needs attention as well, but bigger budgets alone won’t do the trick. Collective-bargaining agreements slow automation in order to guarantee jobs. Conflicts between the ports and unions must be worked out, and politicians must work harder to reestablish trust and build partnerships with organized labor.

Finally, the ports’ intersections with the rest of the supply chain need better coordination. For example, the volume of inbound and outbound containers should be balanced constantly; railways and trucking companies should share loads efficiently to maximize the flow rate; and communications between shippers and carriers should be enhanced. In particular, shippers need better technology to track cargo containers. Stronger investment in artificial intelligence, the internet of things and blockchain technologies is key to this progress.

Who should pay up? Given the huge scope of the need, government at the federal and local levels should lead and coordinate large-scale investments. It should encourage experimentation, too — perhaps a brand-new port built without union constraints on automation. The U.S. could take a cue from the new Shanghai port, constructed on a manmade island replete with new technology and extreme efficiency.

A profound problem needs profound solutions. When we nail them down, we’ll safeguard not just holiday shopping but also our country’s economic vitality, keeping our ports from turning into a permanent battleground.

Yu Amy Xia is an associate professor of business analytics at the Raymond A. Mason School of Business and a faculty affiliate of William & Mary’s Global Research Institute. Her research interests include contract design, risk management and new technology in supply-chain management.

Tags Cargo Cargo Shipping COVID-19 supply chain Port of Los Angeles

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