Overcoming Supply Chain Challenges: Navigating a Chassis Shortage
When the COVID pandemic disrupted supply chains, its ripple effects were not immediate but have now presented new obstacles just as the industry was finding solutions. One pressing dilemma faced by the industry is the shortage of chassis, causing potential cost increases and inefficiencies.
One very serious example now facing the industry is a shortage of chassis, which is threatening to introduce a new round of cost increases and inefficiencies.
The pandemic slowed down the process of manufacturing new chassis. This could not have happened at a worse time. In the United States, each year, we now deliver approximately 35 million domestic and international containers from some sort of hub to a customer. Yet we currently have only 700,000 chassis available to facilitate those deliveries.
Many of those chassis should have been scrapped years ago, and the industry has been engaged in that process for the past five-to-eight years. But you can’t scrap chassis if you don’t get new ones, and chassis manufacturers are currently putting buyers on waiting lists that can require a wait of 18 months.
In lieu of a purchase, many carriers are looking to rent chassis, but supply is limited. Exacerbating the problem is the fact that other supply chain pressures at ports have turned too many chassis into long-term storage units, which is keeping them out of circulation for transport.
A supply chain without enough chassis is a nightmare scenario. Imagine the inefficiency of loading each container individually from an ocean carrier onto a flatbed trailer. Imagine the delays at ports – and the resulting demurrage fees – as carriers are forced to plod through such a process. It seems impossible that we could face such a situation, but the risk of it grows the longer the industry lacks the number of chassis the current volume demands.
The situation is presenting some real coordination challenges for 3PLs, carriers and shippers. Whether we’re talking about one-day or half-day moves within 100 miles of a hub, or longer moves of 300-to-500 miles from a hub, it is always difficult to coordinate getting the right number of chassis in the right location for the number of containers coming back.
Even the major carriers who own their own fleet of chassis to match their containers have to rely on available chassis to handle overflow during heavy-volume periods. Smaller carriers might have a pool of 10 or 20 chassis, but they will also do a lot of chassis leasing. Right now one company, an investment group known as Apollo, owns the majority of chassis that are available for lease in the U.S.
Leasing can solve a problem in the moment, but any carrier is better off owning its own chassis. It’s critical for them to control the way their containers are being turned so chassis aren’t being turned into storage units. New chassis usually cost between $15,000 and $25,000, which is not a small investment but pales in comparison to the cost of not having them.
But when you have to wait 18 months to get the chassis you need, you do what you have to do. That is what far too many smaller carriers are facing right now.
And small carriers represent the bulk of the nation’s capacity right now, so they need solutions. Many of them who work with us are turning to what we call a power-only move, in which we get the driver and the tractor, then coordinate the equipment they need via rental or short-term lease. We spend considerable time making sure chassis are available, either from one of our pools or from one of the leasing companies we work with.
This problem is about to hit critical mass as peak season approaches. Most economists believe volume in August, September and October will be higher than in recent years. If it comes back as hard as the predictions we’re hearing, it’s going to suck up a lot of capacity and exacerbate the problems caused by the chassis shortage.
We’re already seeing the effects at the ports of Los Angeles and Long Beach, where growing volumes of cargo are being stored directly on the ground. Carriers hauling containers from the port of Chicago say they’re scrambling while providers search for enough mechanics to fix the chassis they have.
The only real solutions, until more chassis become available, are to tighten up protocols, use technology to maximize container visibility and take advantage of experts like 3PLs to eliminate as many inefficiencies as possible in the process.
Shippers and carriers cannot magically create more chassis, but they can safeguard themselves from the serious consequences of the shortage by improving their own operational efficiencies. The added benefit is that once the chassis shortage is resolved, these improved efficiencies will continue to benefit them.
Karl Fillhouer is the Vice President of Sales and Operations of Circle Logistics, a privately held third-party logistics company committed to delivering on three core promises to their customers: No Fail Service, Personalized Communication, and Innovative Solutions. Circle Logistics leverages its technology, industry experience, and employee ingenuity to develop industry-leading transportation solutions. For more information, visit https://circledelivers.com/.
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