Supply chain shortages continue to undermine the efforts of shippers and carriers as Black Friday approaches. Most carriers have now announced peak season shipping surcharges, and the USPS slowdown of first-class mail is now well underway. However, major West Coast ports have implemented changes to operating hours that may alleviate part of the burden and increase the number of ships processed through the backlog as the run to peak season continues. Let's take a look at what's really happening, what it means for the industry, and what shippers need to know about it.
There's massive unrest over whether peak season shipments will arrive on time, and part of the issue comes down to the backlogs plaguing West Coast ports. However, ports lack the guarantees associated with many carrier service tiers, but they do have one advantage and opportunity to increase throughput. They can extend their hours to give terminal operators a chance to offload containers and lessen the bottleneck. According to the Long Beach Post News, the Port of Long Beach implemented a 24/7 operations pilot program to go to 24/7 operations on September 21, 2021. Los Angeles followed in kind on October 13, 2021, in tandem with President Biden's aides' announcements that UPS, FedEx and Walmart will increase around-the-clock operations, according to the New York Post.
The increase in operational hours comes at the same time that the three companies mentioned have announced plans to increase their around-the-clock operations. It sounds as though all these companies will be running activity 24/7, but that's not necessarily the real impact and implication. The companies have committed toward "moving to 24/7 working during off peak hours." While helpful, this means that some of those companies may see gains in operating hours but will not yet be able to truly operate around the clock. But why?
The answer comes down to a simple issue; there's not enough people to do the work. Even if the containers could be offloaded around the clock as the news release implies, there's still a driver and talent shortage driving the capacity crunch. It's the perfect storm, but there's hope on the horizon. While the International Longshore and Warehouse Union has further made the commitment that they will staff the ports 24/7, it remains unclear how such changes will affect workers for Walmart, UPS and FedEx. There's another overlooked retailer in this mix too.
Target went to 24/7 operations several years ago, reported Newsbreak, but Target also has goals of increasing its activity levels during the off-peak hours of operation: "Target handles about 50% of its containers that arrive in California ports at night ... and is committed to increasing that amount by 10% over the next 90 days."
Walmart has made the commitment to increase off-peak-hour activity in the ports by 50%. FedEx and UPS, which are collectively responsible for 40% of all shipments in these two California ports, will also look to increase their off-peak-hours operations too.
The increased port activity movements will have one ultimate impact—more freight ready for OTR transport. In turn, more goods on the roads will help lessen the burden of the 2021 peak season and give retailers hope to avoid stockouts. Still, there's massive demand for all resources, and it's a known fact that the majority of invoices or shipping documents contain some sort of discrepancy. While those discrepancies do not always amount to incorrectly billed charges, they may cause other hiccups in the supply chain, such as inaccurate inventory levels or mismatched billing and settlement processes. Therefore, the added activity levels coming from a presumed 3,500 more containers moving through these ports weekly will inevitably add pressure for faster back-office management. In other words, more pressure to get shipments booked for OTR transport and invoiced upon delivery will lead to more overall errors. It's those errors that define the full context and rationale behind the need for a freight audit and payment solution that can aggregate data from all systems, normalize such data, ensure its accuracy, analyze it and derive meaningful, actionable insights to help shippers maintain control over total landed spend.
While the signs of a gradual slowdown in imports are starting to loom on the horizon, such as the slight decline in rates per TEU from Freightos since September 21, 2021, there's another reality to face. The coming peak season will push these ports past their typical limits. New strategies that rely on fact, using data to improve throughput, will be critical to increasing value in the ports and in the mix of carriers used for OTR transport, and more. Data is everything in today's supply chain, and these latest efforts by West Coast ports are another example of the absolute need to do more with less in an industry where less (for example, fewer drivers) is likely going to the norm for months to come. In the interim, stay in the know with the right supply chain data and IT solutions provider in your tech stack. Connect with Intelligent Audit to get started today.
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