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How Chassis and Driver Shortages Will Impact the Supply Chain

Posted on Wednesday November 26, 2014 by April U

Retailers in the midst of the peak holiday season, are already feeling the affects of chassis and driver shortages on the arrival of holiday merchandise. Shipping delays, higher freight transport costs, cargo port diversions and related issues seem to be the norm as the supply chain struggles to minimize delays in the movement of goods across the country.

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Source: www.airandsurface.com

The disruption in the intermodal freight industry resulting from major ocean freight companies divesting their fleets has created an evolving chassis landscape whose future is yet to be determined. The main components of this landscape are the need to create consistent logistics and freight delivery fulfillment while providing an equitable cost structure for chassis acquisition, use, and wear and tear. Chassis rental firms and drayage firms have developed a cost basis where they are charging freight haulers a daily rate for chassis use (rather than the steamship industry’s lump charge or their ability to roll these costs into their ocean-freight charges) and leasing companies that generally have a lower use rate, but charge for damage upon the return of the equipment. In addition, the cost of cargo, security inspections, pending trends, and an uncertain regulatory climate will likely contribute to further shipping delays.

In addition, issues such as the current driver shortage and legislative and regulatory initiatives such as MAP 21 and Hours of Service (HOS) requirements are prime drivers of the port congestion affecting all major U.S. ports. Consequently, the supply chain, which relies on predictable costs and delivery times, is experiencing a high degree of uncertainty about meeting delivery schedules that coincide with consumer demands. While delays are a common fear of the industry, so too are unknown costs, which will also have a negative impact on efficient and on-time cargo delivery as drivers and drayage carriers strive to consolidate loads and retain profitability.

From the Ports of Los Angeles and Long Beach to the Ports of New York, congestion problems and delays have become the new normal. A recent Reuters article reported on how the confluence of limited chassis availability, driver shortages and labor disruptions have led to nearly a three-week delay shipping containers at the Ports of LA and Long Beach. The concern of major retailers was further explored as the article pointed out how Wal-Mart recently diverted 300 containers from L.A./Long Beach to Oakland, CA in order to avoid congestion at the southern port.

While other major retailers were cited in the article as being affected by the problems mentioned above, “several retailers and importers are considering alternatives such as Houston or East Coast ports,” says Mark Hirzel, President of the Los Angeles Customs Brokers and Freight Forwarders Association in an interview with Reuters for the article. Hirzel made it clear that certainty trumps costs and longer lead times for retailers.

A recent PierPass informational report explained how marine terminal operators are working closely with chassis leasing companies to help ease congestion problems resulting from the lack of chassis availability such as at the Ports of LA & Long Beach. In its role as a not-for-profit company started by marine terminal operators, the PierPass information report is geared to cargo shippers and other supply chain interests that utilize the Ports. The report also addressed the challenges created by ocean carrier alliances dispersing cargo to other terminals.

Despite the uncertainty and likelihood of higher prices for cargo shippers throughout the supply chain, it appears that retailers and the freight transport industry are implementing solutions to meet shipment deadlines and stock the shelves this holiday season. With another winter pending and few long-term answers to the challenges facing transporters and ports, stable chassis rates and consistent availability for cargo shipments as well as on-going measures to recruit drivers are likely to be implemented over the next several years.

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