How Did the Port of Long Beach Rebound?
The year that recently ended saw a big rebound for the port of Long Beach. Its biggest year since 2007 took the port back to pre-recession volume levels.
The port handled about 7.2 million TEUs in 2015, only the third time in its 105-year history that it exceeded seven million TEUs. Year-over-year volume growth was 5.4 percent, nearly double that of the U.S. economy in 2015. During July and August, Long Beach achieved record cargo volumes resulting in the port’s biggest quarter in its history with more than two-million TEUs moved through the port in the third quarter alone.
Although the port saw record volumes through the peak season, it experienced no chronic congestion problems as it had in the past. “In fact,” said port CEO Jon Slangerup, in his state of the port address, “trucking queues and turn-times dropped by a third and rail fluidity and velocity reached record levels of performance. And perhaps most satisfying was the fact that in the back half of the year, we began gaining market share after losing share for four years in a row.”
How did the port do it? That was the subject of Slangerup’s talk.
First, Slangerup credited the agreement between port labor and management which was reached in February with the help of U.S. Labor Secretary Tom Perez as leading to the rapid recovery of Long Beach’s congested terminals.
“While we were predicting it would take three months for operations to recover, it actually took half the time, just six weeks, to clear the backlog of ships at anchor and begin to approach pre-congestion levels of throughput and system fluidity,” said Slangerup. “Terminal operations and longshore labor delivered extraordinarily high levels of productivity, with record-setting gains that continued throughout the entire year.”
As the labor negotiations were going on, the port had already been working for several months with
the three primary chassis providers to create an interoperable chassis pool of pools, in a joint effort with the Port of Los Angeles. “In March the pool of pools was launched,” said Slangerup, “with an immediate positive impact on operations.”
At the same time, Long Beach inaugurated a new initiative called supply chain optimization, or SCO, also a joint program with Los Angeles. “Our SCO mission is to create a marine supply chain that provides end-to-end visibility and time-certain delivery of containerized cargo from origin to destination,” said Slangerup. “We are beginning to optimize efficiency, minimize costs and continually improve the speed to market of goods moving through our port complex” by employing advanced technologies, processes and metrics.”
SCO is also addressing peak operations, chassis availability, terminal optimization, rail capacity, trucking operations, and data management and integration.
The port of Long Beach also sought to engage shippers to win back their business. The port’s commercial operations team traveled the globe, speaking with more than 300 shippers, ocean carriers, and trade associations, “explaining what went wrong, how we were fixing things, and encouraging their participation in our SCO gatherings.”
With stakeholders willing to get involved in SCO, the port began to see volumes start to rebound.
Why did volumes rebound so quickly, and to record levels?
“That answer,” said Slangerup, “lies in understanding the compelling nature of our value proposition. Long Beach offers the shortest, fastest, and most cost effective gateway for movement of seaborne goods from Asia to America’s major consumer markets.”
The cost of diverting transpacific container volume to the east coast or gulf ports, through the Panama or Suez canals, adds to transportation costs and increases transit time by 20 to 40 percent, according to Slangerup. Shippers lost millions of dollars per day thanks to cargo diversion, “and they returned to Long Beach as soon as they felt confident that operations were back to normal.”
“So long as we protect and enhance our value proposition,” Slangerup concluded, “we have little to fear from other ports or the Panama Canal stealing our cargo and the jobs that come with it. Not to mention that over half of the container vessels currently on order will be too big to fit through the expanded Panama Canal.”
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