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Overcoming Supply Chain Challenges: Navigating a Chassis Shortage

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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



The coronavirus pandemic has caused both governments and businesses to question some of the assumptions that have underpinned global trade for decades. By the time the dust settles, the world’s approach to trade could look quite different.

Extended global supply chains brought unprecedented economic efficiencies generated by extreme specialization of production and the ability to reduce costs through just-in-time inventories. These benefits are now being weighed against the risks created by the lack of redundancy and the consequences of severe disruption when key suppliers are not available. Rising economic nationalism and strategic rivalries are prompting multinational companies to rethink their investment and production strategies.

Weighing security over efficiency

In the balance between economic efficiency and security of supply, the pendulum may be swinging back toward security. This shift will apply not only to essential medical supplies and medicines but across the full spectrum of trade. Many automotive production facilities in South Korea, Japan and elsewhere were forced to suspend operations at the onset of the coronavirus outbreak when the flow of critical components from China was interrupted.

Companies may not only rethink supplier relationships. They might also consider further diversifying their own production. Take for example the recently announced decision by Taiwanese semiconductor giant TSMC to build a $12 billion production facility in the state of Arizona, which may represent an attempt to mitigate business risks emerging as a result of geostrategic rivalries, in particular between the United States and China. The compelling economic rationale for TSMC’s Arizona facility is not readily apparent. The costs of semiconductor fabrication are relatively higher when compared to TSMC’s facilities in Taiwan, where the bulk of its manufacturing is done.

Reducing over-dependence on Asia supply chains

The TSMC facility might represent an industry step toward a more U.S.-based high technology supply chain. But there might actually be less to the proposed plant than meets the eye. By the time it is operational in 2024, it is expected to produce semiconductors based on existing (rather than next generation) technologies, and it will lack capacity to produce at a game-changing scale. The 20,000 silicon wafers the Arizona plant is expected to produce each month is only one-fifth the capacity of the larger Taiwan-based fabrication facilities.

However, as the Trump Administration has been vocal in its desire to repatriate elements of vulnerable supply chains wherever possible, the move could also represent an opportunity to hedge against the risk that more production of critical industrial products will be compelled to be manufactured and procured in the United States, something other governments are contemplating as well.

At the recent G20 Finance Ministers meeting in Riyadh, French Finance Minister Bruno Le Maire — a staunch advocate of deepening economic integration — posed a question which just a few years ago would have seemed inconceivable:
“Do we want to still depend at the level of 90 per cent or 95 per cent on the supply chain of China for the automobile industry, for the drug industry, for the aeronautical industry or do we draw the consequences of that situation to build new factories, new productions, and to be more independent and sovereign? That’s not protectionism — that’s just the necessity of being sovereign and independent from an industrial point of view.”

Le Maire’s comment captures the policy debate officials around the world are wrestling with, even in countries that have traditionally been strong pro-trade and pro-integration advocates.

Doubling down on regional trade agreements

Broader strategic considerations were undoubtedly at play in the decision. Taiwan’s position as a global supplier of chips – as well as a highly sensitive flashpoint in U.S.-China relations – means that TSMC is inevitably caught up in the technology and strategic rivalry between the U.S. and China.

TSMC’s investment may not be a bellwether that U.S. companies will re-shore or that multinationals will flock to the United States. More likely, companies will build more diversity into their supply chains with more emphasis on regional trade and less reliance on a single trade partner.

This could have big implications for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Although neither China nor the United States are currently parties to the CPTPP, the agreement is a useful vehicle to achieve greater trade and investment diversification for its current members. As a self-selected, voluntary grouping of economies ostensibly committed to promoting trade and investment among members, the CPTPP could provide some degree of insulation against the surge of export restrictions.

With the CPTPP positioned to take on greater relevance in the post-COVID-19 world, Thailand, South Korea, Indonesia and the Philippines have indicated interest in joining. Japan seems to be the informal new member recruitment manager, with Japanese officials already working closely with their Thai counterparts on the mechanics of accession.

Japan’s role is not a matter of happenstance. Japanese officials understand the dangers of over-reliance on a single market. Japan relies on China for about 37 per cent of its imports of automotive parts and 21 per cent of its imports of intermediary goods overall. In light of the COVID-19 disruptions, Japan is making a concerted effort to reduce its supply chain dependencies on China. The recent stimulus bill passed by the Japanese legislature allocated US$2.2 billion to help Japanese manufacturers shift production out of China.

A lasting impact

The COVID-19 pandemic will recede at some point. But its impact on trade will endure. The world can expect to see less China-reliant supply chains and increased use of regional trade agreements, providing a particular boost to the economies of Asia that multinationals see as the alternative to China.


Stephen Olson is a Research Fellow at the Hinrich Foundation. Over the course of his 25 year international career, Stephen has lived and worked in Asia, the Middle East, and the United States, holding senior executive positions in the private sector, international organizations, government, and academia. He is currently a Visiting Scholar at the Hong Kong University of Science and Technology.

This article originally appeared on Republished with permission.