It has been 12 years since the nonprofit organization PierPass Inc. was formed through the West Coast Marine Terminal Operator Agreement (WCMTOA), which includes terminals at the San Pedro Bay ports, to create and oversee an off-peak terminal gate program designed to combat congestion and improve air quality. In the years since, some challenges have emerged for supply chain stakeholders related to the cost and efficiency of moving cargo into and out of the ports.
John Cushing, president and CEO of PierPass, feels that the ports of Los Angeles and Long Beach should allow his organization to continue analyzing two alternative models to the OffPeak program. The ports have included a proposal for a universal truck appointment system alternative in their Clean Air Action Plan draft update. (Photograph by the Business Journal’s Larry Duncan)
To address industry concerns, PierPass is in the process of retaining a third-party consultant to evaluate two alternative models to its OffPeak program, which currently functions by charging a traffic mitigation fee for draying cargo into or out of the port during terminal daytime shifts. This is meant to encourage beneficial cargo owners to direct the truckers they have contracted with to pick up their cargo during night shifts. According to John Cushing, president and CEO of PierPass, the fee funds terminal night shifts.
“The program as it is structured currently has been in place for 12 years, and it has successfully diverted more than 40 million trucks away from the busy daytime traffic commute to the night side,” Cushing said. “Before we began the OffPeak program, about 88% of the containers were picked up and delivered during the day. Over the past 12 years, that number has consistently hovered around the 50% day, 50% night. So it’s doing a very good job of mitigating traffic.”
Still, there are issues with the program. “I think the biggest issue that comes to mind is that the day shift works from 8 a.m. till 5 p.m. and the night shift begins at 6 p.m. and goes till 3 a.m.,” Cushing said. Trucks seeking to avoid the daytime fee queue up between 5-6 p.m. to take advantage of the night shift. Some say the queues are creating congestion.
PierPass is working on a potential solution to the issue. “We have gone both to the Port of Long Beach and the Port of Los Angeles. And we have been working with them to identify land available within the ports where the trucks can go and park and wait for the night shift, the second shift, to start,” Cushing said.
Alex Cherin, executive director of the California Trucking Association (CTA) Intermodal Conference, said the gap between shifts creates a bottleneck.
“Given that this industry as a whole operates on pretty thin margins and is pretty competitive, most of the large importers adapted to the PierPass structure and changed their delivery hours, or their operational hours, from daytime to night,” Cherin said. “And what that resulted in is congestion and really sort of a choke point at 5 or 6 o’clock when the PierPass fee goes away. . . . That has created an enormous amount of stress on the system.”
Robert Loya, chair of the California Trucking Association Southern California Intermodal Conference, said that each terminal has different operating schedules, with some choosing to be open three nights a week, every other day, and so on. “It has really created an additional challenge for us to try to work with independent contractors to come on Saturdays and work nights,” Loya said.
To incentivize independent contractors to work off hours, trucking companies have to increase their payment rates, Loya explained. That cost is ultimately passed on to the beneficial cargo owner that contracts with the trucking firm. So, although the PierPass fee is being avoided by taking advantage of the night shift, other costs are incurred, Loya explained. He argued that the PierPass fee should take this operating cost differential into account.
“The biggest challenge . . . is you’ve got three or four different parties that are impacted by the PierPass fee. You have got the terminal operators, the steamship line, the cargo owner and the trucking company,” Cherin said. “And each of those four entities has their own metrics on how they are successful and how they measure success. The challenge is that PierPass is governed by one of those four parties that has a vested financial interest in the outcome of how that transaction goes. . . . What we have really been advocating for is sort of an independent joint powers authority or third party to come in and administer the PierPass program or PierPass-like program in a way that is fair for everyone and recognizes efficiencies across the board.”
METRANS Transportation Center, a joint partnership of the University of Southern California and California State University, Long Beach dedicated to solving transportation problems through research, education and outreach, conducted a study of PierPass in 2008. The study concluded that while PierPass was effective in mitigating traffic, there were winners and losers in the program.
The drayage trucking industry was not consulted in the OffPeak program’s development, according to the study. Fewer dock workers were employed for night shifts following the program’s implementation, which created delays for truckers. Truckers and the warehousing industry absorbed some costs of the program due to such challenges but do not receive any benefit from the PierPass fee, the study explained.
Genevieve Giuliano, one of the principal authors of the study and director of METRANS, said that such challenges still apply today. There have been many questions posed throughout the supply chain about the effectiveness of PierPass in respect to its fee structure and off-peak format, she explained.
Giuliano said that METRANS attempted to pursue a follow-up study of PierPass but was unable to get funding for it. “It has been basically a decade since we did our research. And I don’t think anybody has done anything since,” she said. “Things have changed. We went through a recession. . . . The ocean shipping industry has changed astronomically. . . . And the drayage trucking industry is somewhat different after the CAAP and the turnover of the fleet and so on. So nobody knows, really, how things are affecting who at this point.”
Cushing explained that over the years, supply chain stakeholders who sit on the PierPass Advisory Committee have requested that the program be revisited. Last October, PierPass convened the advisory committee with the marine terminals comprising WCMTOA and more than 70 representatives of importers, exporters, trucking companies, logistics firms, government agencies and more to discuss the issue. Since then, a series of meetings were held to identify OffPeak program alternatives.
In May, two alternative programs were selected for further analysis, and PierPass is now in the process of hiring a third-party consultant to lead the effort, according to Cushing. The two alternatives to be studied are a universal appointment system model and a peel-off model.
In a portwide appointment system model, all terminals would use a common system for truckers to arrange pickup or drop-off of a container. Each appointment would carry a fee, according to Cushing. “The fees would be assessed on all containers, whether they are picked up in the day or the night. So that’s one alternative,” he said.
Cherin and Loya are supportive of a universal appointment system. “We have been advocates of a universal appointment system. Get rid of the PierPass program. Control the 50/50 cargo [shift distribution] with appointments,” Loya said.
Giuliano, too, has advocated for the universal appointment model. When METRANS submitted recommendations on the state’s Sustainable Freight Action Plan, a universal appointment system was included, she said.
“If you’re really going to get mileage out of an appointment system, it has to be universal so that the truckers have enough information to be able to schedule as efficiently as possible,” she said. Having appointments for cargo pickup and drop-off would help terminals increase productivity by optimizing the use of their space, she explained.
Still, it would not be a simple process to implement. “The appointment system is complicated when you go across the entire port because every single terminal does something slightly different. They have different loads. They have different time patterns of demand,” Giuliano said. “And of course, the software is different. So right now, if a truck driver wants to use an appointment system of multiple terminals, they have to have multiple sets of software because [the terminals] are all doing their own thing,” she explained.
“We have to go beyond that and develop a common software and a common communication system,” Giuliano continued. “And then you’d have to figure out how you coordinate across the terminals. It’s not that it’s not technologically feasible. It really is. But it would require adjusting practices at different terminals.”
The other model to be studied is a peel-off program. “In the portwide peel-off, all containers would come off the ships and they would be sorted as to whether they would be going local delivery or Inland Empire or over the road or to the railyards, for example,” Cushing explained. “The terminals would say how many trucks they could handle per hour. Trucks would come down . . . to the terminal, and they would be given the next container as it comes off and be told where to deliver it on their way out the gate.”
Loya was critical of this concept. “The peel-off program does not work for several reasons,” he said. Beneficial cargo owners (BCO) typically contract with trucking companies for their services directly or through a third party – such a program would completely change this system.
“Right now, I get to negotiate with my BCOs what my trucking rate is. If I am now dealing with 7,000 BCOs, how do I know what rate I can negotiate?” Loya queried.
Such a system would also take control away from BCOs. “If I am, for example, a big BCO like Target, well, they go through a vetting process of all trucking companies,” Loya said. “They will no longer have control of which trucker picks up their cargo because it’s whatever comes off the top of that pile is what’s given to the next trucker.”
A system in which a destination would not be predetermined would also likely force trucking companies to adopt employee models instead of using independent contractors, according to Loya. “It goes into a situation where now we’re into a federal issue, where now . . . dictating how we should be doing business,” he said.
Giuliano noted that a peel-off system would likely benefit terminal operations. “You can imagine that on the dockside, that would be quite efficient, because then I don’t have to organize my containers in order of who is going to pick them up,” she said. “But it is difficult on the landside because then the cargo owner doesn’t really know when the container is going to arrive. . . . And the truck driver doesn’t really know where he has to go until he picks up the container.”
The Clean Air Action Plan draft update includes a proposal to implement a universal appointment system for Los Angeles and Long Beach terminals by January 1, 2019. The document notes that of the 13 terminals, eight already use appointment systems, and two more are in the planning stages to adopt such systems. A universal system “could improve traffic flow and reduce truck turn times, vehicle miles traveled and associated truck emissions,” the document states.
Cherin and Loya said they advocated for the proposal to be included in the plan but that they still would like PierPass to continue on with its study of alternative models. “I think the Clean Air Action Plan is really more advisory language when it comes to the appointment system and the metrics,” Cherin said. “And the PierPass consultant [analysis] is really more of a revision to the program itself.”
Loya added, “Irrespective of what needs to happen, there needs to be an oversight committee as a joint powers authority to ensure that we are looking at things fairly – all solutions. So you can do the study, but it’s probably going to be more tailored to what the terminals want.”
Cushing said he submitted a comment on the Clean Air Action Plan explaining PierPass’s upcoming analysis of the alternative models. “It’s not clear why the ports are pushing for one model over another. We would rather have the ports stay engaged in the analysis of the two alternatives,” he said.
“One of the things I am not sure anybody outside of Southern California knows is that Long Beach/L.A. is the only place where we have a PierPass program with actual fees,” Giuliano noted. “And that definitely affects business at the port. Nobody knows how much. And it would take a real genius to figure that out. But nevertheless, it is one thing that adds to the price of doing business in Southern California. So it’s really important to make that fee as efficient as possible, and in other words, can we get something out of it to make the system work even better.”