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  • Shippers, truckers hit chassis roadblock in Memphis

    Shippers, truckers hit chassis roadblock in Memphis

    A coalition including shippers attempting to solve chassis problems in Memphis, Tennessee, has encountered an obstacle in its effort to launch an interoperable grey pool.

    Two chassis providers — TRAC Intermodal and DirectChassis Link, Inc. (DCLI) — killed a proposed solution agreed upon by an association of ocean carriers and coalition of beneficial cargo owners (BCOs), truckers, and Class I railroads. TRAC and DCLI contend the interoperable pool isn’t the answer, at least not right now. Flexi-Van Leasing supported the initiative.

    An interoperable pool — also known as a grey pool — would have allowed truckers to pull any chassis instead of being restricted to a specific provider. Currently, the trucker is told which chassis to use on carrier haulage and some merchant haulage by being directed to a private pool.

    The objection given last week is a blow for the Supply Chain Innovation Team formed by the Federal Maritime Commission targeting equipment shortages causing hefty demurrage and detention bills.

    The most recent supply chain meltdown occurred in January when a surge of import cargo front-loaded into Southern California in December made its way into Chicago and Memphis. Union Pacific Railroad’s terminal in Marion, Arkansas, just outside of West Memphis, ran out of TRAC chassis. BCOs waited weeks to get their containers while racking up penalties. Although the situation was resolved, it brought up ghosts of chassis shortages in 2018 and the general lack of trucker choice.

    The coalition of BCOs, truckers, and railroads believed an interoperable pool would provide a backstop if any single provider ran out of chassis.

    “We just wanted to move back to the way it was done before. Eliminate the three separate pools and consolidate them into one pool with open choice,” said Michael Symonanis, director of North American logistics for Louis Dreyfus. “This is not an assignment of blame about who is at fault here. We just want an efficient supply chain.”

    Ron Joseph, DCLI’s chief operating officer (COO), told that an interoperable pool isn’t a panacea for the problems in Memphis, pointing out issues with the pool of pools in Southern California.

    “An interoperable pool doesn’t necessarily solve every problem. Take the pool which has 67,000 chassis in it. It’s a huge pool covering 12 terminals and completely interoperable, but we have issues because of the dislocation of chassis when empties are diverted to different terminals than where they started,” he said.

    Dislocation “is a problem”
    Symonanis agrees this dislocation is a major problem. “You’ve got all this unnatural movement in the system that drags down cargo velocity, which affects our ability as an exporter to compete with other countries,” he said.

    The answer is better forecasting, especially during cargo spikes, according to Joseph, who noted that DCLI didn’t run out of chassis in January. But it’s not only how much volume is coming or going, it’s also predicting how long a BCO will hold a chassis, called a street dwell.

    TRAC COO Val Noel added that an interoperable pool might eventually be a solution, but it’s premature now. Other ideas might do the job, he said.

    For example, Canadian National Railway recently decided to move from wheel-mounting containers to grounding them. This operational change might improve the situation.

    Like Joseph, Noel said better forecasting is the key.

    “The data shows we went from 1,000 chassis use days to almost 3,000 in January, and now we have 2,000 chassis idle in Memphis,” he said. “No one really knows how much cargo is coming, where it’s going [inland], when it’s coming, [or] how long it’s going to dwell. How do we bring all this information together to get all stakeholders on the same page?”

    Donna Lemm, executive vice president with IMC Companies, said forecasts are unreliable, particularly for exports.

    “There is simply no accurate way to forecast US exports today, and that is a problem,” she said.

    Ocean carriers on board
    Lemm said the coalition’s original proposal called for the elimination of private pools and formation of a single pool without box rules. The Ocean Carrier Equipment Management Association (OCEMA), a coalition of 11 ocean carriers, countered with a single pool in Memphis while maintaining box rules.

    “Honestly, it was moving the needle. We would have been able to live with that. Interoperability would have been a positive first step toward open choice,” Lemm said.

    Box rules refer to an operating practice in which the chassis provider invoicing and collecting the revenue on a haul depends on the container. If it’s a Maersk container, for example, DCLI would collect the revenue, even if a TRAC or Flexi-Van chassis was used. By eliminating box rules, whichever company is stenciled on a chassis would collect the revenue.

    Lemm said BNSF Railway, CSX Transportation, CN, and UP read statements supporting OCEMA’s compromise.

    But the objections of DCLI and TRAC effectively kill this compromise solution and send the group back to square one.

    Is accurate forecasting enough?
    The key question is why do chassis shortages happen? Is it the restrictive policies of ocean carriers binding truckers to a specific chassis in carrier haulage and some merchant haulage? Or is it poor forecasting?

    Knowing how many containers to anticipate during a surge doesn’t help if shippers don’t know where they end up within the US.

    “Is it going to Global IV in Chicago, is it going to BNSF [Logistics Park Chicago], or is it going to the Ohio Valley? We had a decent forecast but not accurate enough,” said Jon Poelma, Consolidated Chassis Management president, in January.

    But given what has happened in Memphis, are chassis forecasts as reliable as an economic forecast or a weather forecast?

    Perhaps the apt analogy is a supermarket stocking up on water, bread, and batteries during an approaching snowstorm or hurricane. Goods are transported from other markets. It would be unwise, however, to permanently store gallons of water and pallets of batteries for an event that occurs a few times per year.

    Going forward, the coalition will create a shipper’s board to figure out how to proceed. Symonanis will lead the group with the hope that talks can continue with chassis providers, ocean carriers, and the railroads to make incremental decisions to address the problem.

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    Posted: March 6, 2019