2018 is barely a week old, but the potential for a significant change in how container terminals at the Los Angeles-Long Beach port complex do business could already be on the horizon.
That’s because this February, a consulting firm retained by the 12 terminal operators in the Southern California seaports is expected to return a report detailing its recommendations regarding ways to modify and potentially expand the operation of PierPass, the nonprofit created by those terminal operators to address multi-terminal issues at the ports, including congestion, air quality and security.
Currently, under PierPass’ OffPeak program, a traffic mitigation fee of $70.49 per twenty-foot container (TEU) and $140.98 per forty-foot container (FEU) is charged to firms moving cargo in and out of the ports during the dayshift peak period of 8 a.m. to 5 p.m. on weekdays. The collected fees are in turn used to finance the labor and other costs associated with the operation of weekend and nighttime shifts, which begin at 5 p.m.
But the dozen terminal operators, which collectively operate as the West Coast Marine Terminal Operating Agreement (WCMTOA), have been exploring ways to improve upon the current business model over the past 12-plus months.
“The current model is where we assess a fee on all loaded containers, non-intermodal, that are picked up and delivered during the first shift—we call it the ‘peak.’ We use that money to fund the second shift, the OffPeak shift,” PierPass President John Cushing explained in an exclusive interview. “So we agreed to look at some alternative models.”
In doing so, the terminal operators got the supply chain stakeholders involved in the discussions via a fall 2016 workshop that included importers, exporters, customs brokers, trucking companies, ocean carriers, port authorities, and even elected officials.
“And so we were approaching it from all angles; we got everyone’s input,” Cushing said.
Push Vs. Pull. Three distinct alternative models came out of these discussions, according to Cushing, one of which was called “dynamic pricing,” wherein the container fee would go up and down during the day to incentivize different hours of operation, similar to the way some toll roads are more or less expensive depending on the time of day.
“That one was shot down by everyone in the room,” he said. “It just got too complicated to manage.”
The other two alternatives, however, received a much more positive reception. One was a port-wide appointment system, with a flat fee to pay for the second shift, while the other would include a “peel-off” system, also with a container fee to cover the second shift.
“The idea of the port-wide appointment system would be that all the terminals would have appointment systems and to mitigate traffic, because mitigating traffic is the primary reason behind all of this,” Cushing explained.“To mitigate traffic, the terminals would put so many appointments during the day, so many during the second shift, and then spread them out throughout both shifts. And the idea would also be to have a flat fee on every container, so that it’s not just those picked up or delivered during the day to fund for the night shift.”
The second alternative, the port-wide peel off system, would operate much like an airport taxi queue. Drayage trucks would come to the port, they would line up, go into a terminal and the terminal would “peel” the next container off the top of a pile, rather than sorting through the stacks to find and pick a specific box. The container gets put on the back of the truck, and off they go to the destination.
“Some call it a push model instead of pull, pushing the container out of the gate instead of them being pulled,” Cushing said.
The changes being considered are the latest evidence that container terminal operators are looking to move away from the traditional model used by the U.S. Postal Service, where they give you a paper slip and you have to go down to post office to pick up your package, to a UPS/ FedEx type of model, where the package is left for you, and you get notifications and tracking numbers to stay informed while the package is in transit.
At present, a consultant hired by the WCMTOA, Philadelphia-based consulting firm The Tioga Group and its Southern California-based partner, World Class Logistics Consulting, are looking at these two alternatives, as well as other ways of providing further traffic mitigation benefits at the ports.
More than 40 million truck trips have been diverted out of weekday daytime traffic in the Los Angeles area since the program began in 2005, according to PierPass.
More than 40 million
truck trips have been
diverted out of weekday
daytime traffic in the
Los Angeles area since
the PierPass program
began in 2005.
Sea Change. Despite its success, there’s been talk from both inside and outside the PierPass program that a refresh is needed.
During a panel discussion about PierPass at the IANA Intermodal Expo in Long Beach, Calif., last September, Steve Hughes, president and CEO of trucking company HCS; Peter Schneider, vice president of trucking company TGS Transportation; and Sal Ferrigno, vice president of SSA Terminals, all said they believed the program needs to be revamped.
“There’s one thing to fix, and that’s [cargo] velocity,” Hughes said. “PierPass did a great job in its original intent, but it absolutely needs to be updated and I think a flat fee and an appointment system is the correct path, because we’ve got to get velocity.”
Schneider pointed to the schedule of the organized labor that staffs the terminals as a potential issue.
“Getting rid of the break between first and second shift and having full operations running during lunch and dinner, so that the flow of traffic is from 8 (a.m.) to 3 (a.m.) nonstop, that would probably be the easiest,” he said.
Such comments and suggestions are among those that The Tioga Group was hired to evaluate.
“They’re analyzing the way the terminals are operating today, and then they’ll use that as benchmarks to look at the two alternatives.” Cushing said of the consulting firm. “We expect to have their analysis completed and recommendations by February.
“What will take place is we will look at basically three alternatives,” he said, adding that a port-wide appointment system and a peel-off idea aren’t the only options. “One would be to continue as we currently are, and that is something that the consultant will have to look at as well, because the program is successfully mitigating traffic to about 50 percent day, 50 percent second shift.
“Will they say that changing the program will not be as effective as we want it to be? We’ll see.”
As far as the two abovementioned options go, Cushing noted that neither would require full implementation to begin from scratch. Currently, three-quarters of the terminals at the adjoining ports already have appointment systems, so implementation of a port-wide program would involve bring- ing that other 25 percent of the terminals up to speed.
He also said that virtually all the terminals within the ports of Los Angeles and Long Beach already run some sort of variation on a peel-off program today, adding that the systems might be as simple as dedicated blocks of time for one or two importers.
“There’s one thing to fix,
and that’s [cargo] velocity.
PierPass did a great job in its
original intent, but it absolutely
needs to be updated
and I think a flat fee
and an appointment system
is the correct path, because
we’ve got to get velocity.”
president and CEO, HCS
Mike DiBernardo, the deputy executive director of marketing and customer relations for the Port of Los Angeles, told American Shipper that the port has no objections to either proposal.
“The port is in favor of either of these alternatives combined with a port-wide reservation system,” he said. “We hope these alternatives will produce truck turn times of under 60 minutes per transaction, as we would like to see truck drivers make three to four truck moves a day.”
“We also look forward to the findings of the Tioga Group study to examine alternative models for traffic mitigation,” said Lee Peterson, a spokesman for the Port of Long Beach. “Our goal remains the same: to ease traffic and maximize terminal efficiency.”
“Ultimately, the decision has to be made by WCMTOA alone,” added Cushing. “It’s their program.”
And once that decision is made, it could set in motion a sea change that could eventually reform the way cargo is moved in and out of the sprawling port complex, as well as serve as a model for other ports around the country to follow.
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