Summary List PlacementIf there’s one thing haunting the dreams of logistics leaders all over the US right now, it’s images of the line of ships waiting to dock in California’s San Pedro Bay.
America’s busiest port complex — the Ports of Los Angeles and Long Beach — has been gridlocked for months, with a line of vessels waiting to unload that at one point in mid-February stretched to more than 60 ships. In mid-March it’s more like 30. Those ships contain hundreds of Peloton bikes, countless clothing items quickly aging out of trend and season, and parts for cars waiting to be built.
“All of us are getting emails from customers in panic,”Jett McCandless, founder and CEO of freight visibility tech company Project44, told Insider.
The backlog is the result of massive imports sent to feed an economic comeback, reduced processing speed at the ports, and the sluggish rate of empty containers returning to the ports — all exacerbated by COVID-19’s chilling effect on the workers tasked with moving the stuff.
In normal circumstances, a few weeks’ delay might not have a palpable impact on US commerce — strikes and storms have created similar problems with somewhat less desperation. But after a year in which consumer demand was a mystery and supply chains had to bob and weave to keep products flowing amid factory closures and transportation disruptions, inventories are low. That means retailers are starving for the goods that are stuck on the water.
Plus, some of the products stuck at the port have already been sold through e-commerce — a phenomenon that also wasn’t an issue when the only way consumers could make purchases was by taking an item off of a shelf.
“The ocean container is the warehouse now,” said Charley Dehoney, CEO of digital freight marketplace FreightMango. Increasingly, consumers place online orders for merchandise that hasn’t yet landed in the US, raising the stakes for US ports to get product out quickly.
“If you just work some napkin math, it’s about $15 to $20 billion of goods that are just sitting out on the port,” McCandless said.
Congestion reaches beyond the port. When containers eventually make it out, they face a tight trucking market, which makes vehicles and drivers pricey and difficult to find. Air freight is much of the same. S&P Global’s Panjiva estimates $10 billion in extra freight spending for 2021 — just on goods coming into the US due to the price hikes these capacity crunches cause.
But where there is chaos, there is opportunity to cash in by wrangling it. Here are the players that stand to gain from the panic that a jammed port complex creates.
Alternative ports can offer smoother operations
Winners: Ports of Charleston, Jacksonville, Houston, Oakland, New York/New Jersey, Savannah, Virginia
Ports are businesses, too, and the more cargo they take in, the more money they make. Though the LA/Long Beach complex is and likely will continue to be North America’s busiest port, others will inevitably benefit from its present difficulties.
In February, ocean shipping lines had already started diverting ships away from their planned port of call and cargo owners found their goods sent to Oakland, Mexico, Tacoma, Washington, or even Canada — a rare practice until this year, according to Project44 Chief Product and Service Officer Vernon O’Donnell.
But even before the diversions, some shippers saw the signs that congestion was coming.
“As we saw the first sign, we moved,” said Cristian Chavez, senior vice president of supply chain for direct-to-consumer furniture company Article. Article began shipping to a wider variety of ports in Q3 of 2020 and now works with a portfolio including Charleston, Houston, Oakland and New Jersey.
“I’ve talked to multiple shippers now that are moving operations out of LA/LB to Savannah, taking the risk of going through the Panama Canal,” said Glenn Jones, vice president of product strategy at Blume Global.
Since the other West Coast ports are receiving more diverted vessels, they are facing unseasonable congestion too, so shippers looking for long-term solutions are more likely to make the more dramatic shift to the Gulf of Mexico or East Coast ports. Further evidence of this shift: MSC, the second-largest ocean carriers by freight volume, is launching a new weekly service running from China and Vietnam to Savannah, Charleston, and New York starting in May.
Visibility tech provides an ETA in a chaotic world
Winners: Blume Global, Fourkites, OpenTrack, PortCast, Project44, Terminal 49, Vizion API
Knowing where in the world a container is won’t help it move faster, but it will help decide where it should go next and how fast it needs to get there. Ocean, rail, and trucking freight companies have been slow to adopt the kind of technology that answers the simple question of where shipping containers are in real-time. Naturally, a cavalcade of startups and a few established players have moved in to fill the gap. The cost to business operations caused by port congestion is case in point for their products.
Trucking visibility tech provider Project44 acquired ocean visibility platform Ocean Insights earlier this month for this very reason. The reality is, McCandless said, that most cargo owners don’t know where their cargo is.
“We’re able to tell them that in seconds,” he said. “Then they can figure out what products they want to airship into [warehouses] or into stores.”
When freight is diverted to another port, shippers are often the last to know. Learning that information earlier can save days in customs and port authority paperwork processing once the vessel docks, and provide more time to get trucks in place to continue the journey beyond the port.
“I hate saying it’s good for us, but I would have to say it’s actually good for us,” said Blume’s Jones. Blume Global has a visibility technology available for shippers while also directing carriers to move containers out of ports via rail ramps and trucks — meaning it’s double dipping on the current pileup.
“We make money based on volume and right now, volumes are through the roof,” he said.
Airfreight operators and freight forwarders make up for the delay
Major players: Atlas Air, DB Schenker, DHL, Expeditors International of Washington, FedEx, Kuehne + Nagle, UPS
If air freight wasn’t already red hot in 2021, it would be drawing heat now as a result of the port congestion.
“I’m amazed by what I’m seeing in terms of the amount of ongoing demand for air freight … the types of products that are being flown on air freight would never normally be considered to move on air freight,” Bob Biesterfeld, CEO of CH Robinson told Insider.
Internationally, cargo owners looking to avoid the complications of port congestion may put products on a plane at the point of origin, passing over the ocean carriers entirely. This option is several times more expensive than booking a ship and is only an option for smaller items, but it saves weeks of waiting.
Domestically, logistics companies that work in the air have had multiple forces generating lift in 2021. The available cargo hold space on passenger flights is still way down since travellers continue to be hesitant as the vaccine rollout continues. Plus the growth in e-commerce amid promises of fast delivery have upped the need for domestic flights for packages too.
The result is billions in extra freight spending across industries. “One of the largest vehicle manufacturers in the world is a customer of ours … about $50 billion in revenue. And they have tens of millions of dollars of additional air freight costs in the last 30 days trying to get their parts to the vehicles,” McCandless said. Join the conversation about this story » NOW WATCH: How American Airlines flies 715,000 pounds of cargo every day