Larry Keller, executive director of the Port of Los Angeles, ended his interview with Logistics Today saying this is a year for adaptation for the port and the international shipping community. It is clearly also a period of adaptation for Keller himself, as he announced his resignation later that same day.
The challenge that came with the opportunity for low-cost sourcing in China was the dramatic surge in eastbound traffic hitting U.S. West Coast ports. "The whole [port] community got run over this year," admits Keller. "Everybody underestimated just how quickly the sourcing of foreign investment was going on in China."
In retrospect, Keller says the indicators may have been visible. If the ports had been reading charter reports closely, they would have seen charter vessels being taken off the market and put into service, Keller notes. Instead of the phased adjustment that would have allowed, the port community has had to move into a critical response mode.
One of the most important steps, says Keller, is the movement of over 1,000 casual longshore laborers to "B" status with the International Longshore Work-ers Union (ILWU) and the hiring of an additional 3,000 people into the casual ranks. Though this offered some immediate relief, Keller feels the full impact should be in the first quarter of 2005.
Building up the labor infrastructure is important because much of what happens at a port is still a physical process. Though the 10-day lockout a couple of years ago was ostensibly about technology, Keller explains, "This is a physical job, and technology, while it works on the gates and the like, doesn't unlash a ship and doesn't put the containers on chassis."
Labor also figures into another initiative at the Ports of Los Angeles and Long Beach. The whole port community joined in to "extend the gate." The coordinated effort to add a second shift affects13 terminals in the port complex, Keller explains. Carriers dropping a container in one terminal can shuttle between terminals at Los Angeles or Long Beach to pick up a load and avoid returning empty.
"Once we work through this backlog — and they're talking about November — they want to have the first general terminal opening on a Saturday," Keller continues. "What this means is that instead of two or three terminals that would open, all terminals would be open on the Saturday." In coming months, he says, additional nights would be added.
Avoiding a future crunch as larger ships come into service will require more than additional labor and a second or even third shift. One advantage the port complex (LA and Long Beach) has enjoyed is an abundance of land for expansion. This has meant neither port has taken full advantage of the opportunity to grow vertically. By contrast, the Port of Rotterdam has started stacking containers-eight high and Keller says Hong Kong is stacking nine high.
The port complex at LA/Long Beach has been adding rubber-tired stacker cranes, and Keller is confident that with the labor additions at the casual and B levels, there is sufficient mobility among the workers to recruit and train operators. With an estimated 200 big ships (7,500 TEU and larger) on order, and a desire by shipping lines to call at fewer ports with these big ships, the problem won't be with unloading but with taking containers away fast enough.
Technology will be part of the solution. Linking vessel and terminal management systems will be critical to managing containers that are unloaded and stacked vs. put directly onto chassis. But another solution is to avoid stacking altogether through better utilization of on-dock rail capabilities.
Another critical connector, the Alameda Corridor, has a major truckway which does not have access to the important Terminal Island operations at the port. This six-and eight-lane highway for truck traffic can add a third link and remove some of the freight moves from the congested Southern California highways. Given the current state budget crisis, the ports have taken on the role of developing this connection.
Among incentives for liner operators is a process referred to as "cold iron" where a ship in port connects to dockside power instead of running its own engines to power onboard operations. The benefit to the port is a reduction in emissions — an estimated one ton of nitrous oxide per ship per day. Coupled with the slow zone in the port area which reduces daily emissions by another ton of nitrous oxide, the port becomes more environmentally friendly. This could help forestall other regulatory efforts to clean up the air at the price of port efficiency (notably a truck idling ban sponsored by state representative Lowenthal).
For ship operators, improved throughput coupled with lower costs through cold ironing a vessel in port could increase the attractiveness of calling at the Ports of Los Angeles and Long Beach.
The cost of congestion at the ports is masked somewhat by the rapid rise in volumes. What has been a rolling peak in volume is beginning to flatten out. There is still a seasonal effect from about September to November that is exacerbated this year by retail giant Wal-Mart Stores Inc. holding back some seasonal inventory in Asia and moving it in September and October (an estimated 55,000 containers per month). Other mass retailers took similar positions, says Keller, but he notes, "What's happened in the last two years is actually very slight." During January, February and March, ships were "well profiled," he adds.
Keller says Los Angeles has traditionally been a net gainer in market share, but he knows that diversions have occurred under current conditions. He estimates approximately 20 ships chose to divert to Oakland, Mexico, or Panama rather than wait to enter the port.
"There's a real sea change that's going on in LA-Long Beach, and it's very positive," says Keller, summarizing the current developments and initiatives.
If the Ports of Los Angeles and Long Beach can pull together all of the initiatives Keller has outlined, and their cooperation with the railroads pays off in helping repair some of the battered efficiency in those connections, 2005 could show significant progress. That's none too soon, according to Keller.
"Every time I get on a plane to Asia, I sit next to somebody who's relocating a plant or purchasing a plant or co-locating with a partner in Asia," Keller says. "So, we've been enormously grateful, particularly to [shippers and consignees], for the patience that they've shown. There could have been a whole different way of dealing with this thing, but they realize that the way we do business has changed."
Into the hot seat at the Port of LA
Bruce Seaton, chief operating officer for the Port of Los Angeles, didn't expect to go home on Friday night as the acting executive director of the busiest maritime gateway in the U.S., but it's a job he says he's been preparing for for 30 years.
"This is going to be a seamless transition," Seaton says, regarding the Sept. 17 resignation of port director Larry Keller. "We will continue working with our counterparts at the Port of Long Beach, the unions and our customers to see what we can do to alleviate the congestion," Seaton notes. "I've been managing the day-to-day operations of the port for the last five or six years," he says of his tenure as COO, a position that was created when Keller joined the port's executive team.
After 30 years with the port, Seaton has had an opportunity to become very familiar with its inner workings and with its various constituencies. He spent his first day as director talking to top union officials, community members, board members, politicians and customers.
"The port is pulled in a number of different directions, and our job is to maintain the momentum that we have, to continue the leadership in the environmental areas and the community outreach and still meet the needs of the shipping industry that calls here."
Seaton says he's only heard words of support and encouragement and no concerns over the transition, which takes place in the midst of the busiest retail import season at the country's busiest gateway with Asia.
"We've got a great team here at the Port of Los Angeles. We have shown leadership in a number of areas over the last several years, and many of the other ports look to us as setting a standard." He says the port will not rest on its laurels and that, if anything, his job will be to redouble efforts to continue growth and development at the port.
International Longshore Workers Union
Port of Long Beach
Port of Los Angeles
Wal-Mart Stores Inc.