As we send out this Two Minute Warning there are a record number of ships at anchor in the LA Basin waiting to unload at either the Ports of LA or Long Beach. That is why I was delighted to be invited to a virtual conference hosted by the the Toy Association, and the Port of Los Angeles, the nation’s number one container port with a whopping 43 miles of waterfront property.
It was interesting to hear Gene Seroka, the Executive Director at the Port of LA, highlight the extraordinary measures the Port is taking to handle the record volumes. In particular, he pointed out that even with the ships at anchor in the LA Basin, there are more ships on the way.
And for those shippers who are wondering "why don't we just add more ships and capacity," one of the things I learned at this week's Annual CSCMP Edge conference is that the United States does not have the infrastructure to be able to handle the volume of containers currently being sent to this country. I think that may be why Gene stated that the capacity crunch we are seeing now isn’t likely to end anytime soon and could continue for at least another 6-9 months, if not all of 2022.
On the parcel side, things aren't much better. We recently spoke to our friend and industry expert Jerry Hempstead and learned that the networks at FedEx and UPS are already "flush with freight" as we once again head into peak season. So the biggest challenge for parcel shippers will be to protect the capacity that they have had in the past from either UPS or FedEx.
Another tidbit that I picked up at CSCMP's annual conference came from a high level executive at one of the “Big Two” parcel carriers. He stated that heading into November and December, there may be as much as 10% of the daily packages in their network (or around 4,000,000 packages per day) that will likely not get delivered when shippers expect it to be delivered. That is a sobering message!
Heading into 2022, it is very likely that FedEx and UPS will use assessorial charges to send a signal about the kinds of freight they do or don’t want to handle.
I wish I could tell you that things are much better on the capacity front in the LTL or Truckload sectors - but they aren't. As it turns out the carriers in these modes aren't just having a tough time finding drivers. They are also having a very difficult time finding enough equipment to serve their customers. Shippers are taking longer to clear their trailers and containers and the trailer and truck manufacturers can't produce enough equipment to meet existing orders.
Add it all up and virtually every carrier executive is sending the same message: Shippers should expect higher rates in 2022! That's the bad news.
The good news is that shippers can still lower their freight costs if they are willing to improve their internal processes and practices that impact how their company consumes, or incurs freight. As we have shared with the companies that have asked, there are three things that most companies could start doing tomorrow that could yield significant savings.
If you would like to learn more about these three things and other proven savings opportunities, we encourage you to take advantage of our many resources or get in touch to schedule a Rapid Assessment. During this process we evaluate your current state and held identify any changes that could boost performance and produce bottom line savings.
BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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