Transportation

Supply Chain and LTL

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LTL means “less than load”. For those not in the know, a “load” means a full truck. Full trucks in the USA can be those huge 53 footers, or something smaller.

In industrial distribution for most products, we utilize LTL for the majority of our inventory. It’s a serious disaster right now.

I have been carping for the better part of a couple years about the issue. As with most things, there are several factors at play.

1) No new entries in the truck driving industry – we simply have a driver shortage, and have for a very long time. From what I am reading we are around eighty thousand short and the problem is only getting worse. All trades have this same issue. Kids growing up simply don’t want to do actual work, and would rather spend time making their money in front of screens or doing “soft labor” as I call it. Not that “soft labor” such as cutting hair or being an accountant are necessarily bad in and of themselves, mind you.

2) Nobody gives a f – this is harsh, but there it is. The work that is getting done, when it gets done in LTL is slow and sloppy. We have record amounts of damage and missing freight. It is absolutely maddening when you wait with these extended lead times for a specialized piece of equipment, and it finally arrives with a fork passed through the center.

3) I firmly believe that the cops, Teamsters and insurance companies have teamed up into a strange cabal to “slow roll” driverless vehicles. This is a bit of tinfoil had stuff I will admit but it is a theory I have had for a while. If we had driverless trucks a lot of these problems would be solved almost overnight, however there would be no speeding tickets to write, labor contracts to negotiate or premiums to collect. Well, virtually none anyways. This wouldn’t solve the issue of a lack of mechanics to service the vehicles, but that is grist for another post.

4) Lack of sense of urgency in government. As I have pounded the table on before, we need a “port team” or “transportation team” to get industry experts together, and start solving problems. Flying into LA and waving a magic wand over the ports, like has been done so far, is getting less than nothing done.

So the result is that we have this insane mess across the whole country. I have been trying to figure out ways to pick up freight that is within a reasonable range and trying other ideas such as even partnering with competitors or people outside of my industry to come up with a full truck to get a non stop delivery to the area.

A few anecdotal stories to end this rant.

I have a manufacturer that is 45 minutes from one of my stores. They sent out five pallets of stuff to me last Friday and it still isn’t here. The reason is that the trucking company has it parked at some sort of re-sorting facility as they lack drivers and need to consolidate their shipments. Meanwhile, people are getting cold.

This is an interesting article I spied the other day about a local chocolatier waiting forever for a skid of chocolate. I would bet a large amount of their extended lead time is transportation. It affects everything.

Rediscovering the Competitive Advantage.

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We’ve long understood that the cost advantage in freight transportation depends on distance, with railroads, and water carriers where waterways are available, making the longer hauls more cheaply, particularly with bulk commodities.  The cost advantage of rail over highway transportation appears for shipments travelling farther than five hundred miles, give or take.  The railroads, however, have been shying away from much of that intermodal business, that despite signs of strain in long-haul trucking manifesting themselves long before anybody heard of Wuhan, let alone of virology research there.

A week ago, I noted, “There are no short-term solutions, and the railroads have to think about how best to do shorter-haul and retail intermodal trains.”  Then an executive with a freight-forwarding company rented a boat to look at what was going on shoreside at Los Angeles and Long Beach and posted his impressions.  Among his suggestions to ungum the works was an all-hands effort by the railroads to get the containers somewhere inland and let the truckers pick them up there.

I don’t know if somebody in Omaha heard him, or if somebody noticed that there was money to be made.
Union Pacific, the Port of Long Beach, and the Utah Inland Port Authority have announced the launch of direct rail service between the Long Beach and Utah facilities to help address ongoing port congestion.

The executive directors of the two facilities, Mario Cordero of Long Beach and Jack Hedge of the Utah authority, said in a joint statement that the direct, regularly scheduled service “will allow cargo destined for all of the Intermountain West to be rapidly evacuated from terminals in Long Beach to Salt Lake City for further distribution throughout the region. Much of this cargo traditionally moves to Utah, Colorado, Nevada, and Idaho by truck, and thus must be removed from the port terminals one container at a time. Reengaging this direct rail service will allow removal of blocks of containers at a time.”

Cordero also said the agreement immediately reduces pressure on terminal storage, gates, chassis, and the local drayage community on the coast. … It’s a major step forward for exporters from the region.”
It’s a research project for another day to work out why those boxes weren’t already moving on stack trains to Salt Lake City rather than as one container at a time with a driver putting in more than a full day on the road between the coast and Salt Lake.  Several commenters on that post are noting that the reluctance of the railroads to go after those 500 mile intermodal moves goes beyond Union Pacific.  Perhaps, dear reader, you’ve heard of North Baltimore, Ohio.

How much money might Union Pacific have been leaving on the table?  A Railway Age analysis includes this.  “Millions of TEUs [a 20′ x 8′ x 8′ basic container load — Ed.] of international goods are imported to or exported from the Intermountain West annually, but only 10% of this cargo currently moves by rail. This initiative aims to provide consistent, reliable movement of cargo by rail, which improves fluidity and reduces delays of shipments already set to come to the Intermountain region, rather than increase cargo volume.”  The value proposition might have been there as early as 2018, and the allocation studies I referred to at the start of this post are over fifty years old.  And only now Union Pacific and Utah Inland are going after this traffic, and only now claiming the environmental benefits and less highway congestion??

I’m also puzzled by the way Our Political Masters are working the problem.  There’s now a Container Excess Dwell Fee in Los Angeles, applied to containers that aren’t railed out within three days or trucked out within nine.  Forgive me my age, but what ever happened to per diem charges for rolling stock in motion, and demurrage charges for rolling stock sitting around?  The per diem charge is the rental a railroad company pays to the owner of the car for a day, and there used to be a chess game called get-the-foreign-road-cars-interchanged-by-midnight, sticking the receiving road with the per diem charge; while the demurrage charge applied to a consignee who treated a freight car as free warehouse space rather than unloading it promptly and releasing it for service.

Power Line’s Paul Mirengoff suggests that the Biden administration’s efforts to untangle the ports aren’t likely to succeed quickly.  But if you’re thinking about parallels to incapacitated presidents current and past, some of the port jam-ups bring to mind the logistical nightmare that was mobilizing the American Expeditionary Force.  That, too, is outside my area of expertise.

Why, though, weren’t the freight railroads better positioned to go after some of those container hauls before the current emergency manifested itself?

(Cross-posted to Cold Spring Shops.)

Unpacking the Port

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I hate silliness – bureaucrats wielding power arbitrarily, ignoring consequences, etc. – ask me about our local Home Owners Association, for instance. But this Instapundit link is to a great, productive, tactful moment when analysis, persuasive writing, an understanding of his audience and human nature wielded the power of a leader, appropriate to such rare skills. Many of you (esp. Dan) have a better appreciation of the common bottleneck but even I can see this “impactful” (an ugly word but so appropriate here) of Peterson’s skill. Of course, why this is a “temporary” fix is another question. And why libertarians have a point about minimal control and why a disproportionately (well, disproportionate to the American tradition) strong state often stifles free enterprise.

What Would You Do if You Were Running Greyhound?

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Greyhound Lines is being acquired by the German company FlixMobility at a cost of $78MM…which seems small for a storied company with a well-known brand name which still provides important services in a lot of places…but I haven’t looked at the financials.   Certainly a much lower number than the 2007 acquisition of the Dog for $3.6 billion.

So, what should FlixMobility do with this property in the current market, economic, and technology environment?