Comprised of the ports of Long Beach and Los Angeles, the San Pedro Bay port complex is the busiest in the United States, bringing in around 40% of the nation’s incoming cargo each year. Such massive volume requires many industry partners working together to get goods where they need to be, and the Southern California ports are working together to optimize supply chain efficiency.
“Supply chain optimization was an initiative that was launched in 2015 in response to massive congestion that hit the Southern California ports,” Noel Hacegaba, managing director of commercial operations at the Port of Long Beach, said. “It’s an effort by the ports to look beyond our terminals and our complex into the entire supply chain and identify with our industry partners opportunities to enhance efficiencies and improve speed and ensure reliability for our shippers.”
In 2015, the San Pedro Bay ports began an initiative to optimize supply chains to address “massive congestion,” according to Noel Hacegaba, managing director of commercial operations at the Port of Long Beach. Efforts continue today with an emphasis on increasing communication between supply chain partners. (Photograph by the Business Journal’s Larry Duncan)
The first step to ease congestion at the port complex was to tackle the issue of chassis imbalance between terminals. Hacegaba noted that an artificial shortage was created when certain terminals had excessive truck chassis available and others were short, causing delays in container throughput. To combat the issue, the ports worked with the three major chassis providers and helped establish the pool of pools, allowing the companies to combine their assets to be used interchangeably and seamlessly from terminal to terminal.
Another major advancement in supply chain optimization is the reservation appointment system, which allows for terminals to inject predictability to truckers as to when containers are available for pickup. As a result of the pool of pools and the reservation system, Hacegaba said Long Beach has seen the average truck turn times drop to 84 minutes.
“A key element of optimizing the supply chain requires closer collaboration and tighter communication,” Hacegaba said. “A lot of the initiatives that grew out of supply chain optimization are actual solutions. These are real solutions that are moving the needle when it comes to efficiencies and reliability. These would not have happened without that collaboration.”
In the area of information, Hacegaba said the port is noticing supply chain partners – such as shipping lines, railroads and trucking companies – are all making a concerted effort to improve their individual information systems. By upgrading systems, Hacegaba explained that historically isolated segments of the supply chain are able to connect through information sharing, which increases velocity and ensures reliability.
In addition to programs and initiatives for supply chain optimization, the Port of Long Beach has an aggressive capital expenditure program underway, investing $4 billion over a 10-year period.
The replacement of the Gerald Desmond Bridge is already underway, which Hacegaba said is strategically critical for velocity in the supply chain. He explained that the bridge carries 15% of the nation’s goods, so the new, wider bridge (three lanes in each direction, rather than two) will alleviate traffic delays. The new bridge is also going to be taller than the current bridge, which will allow for larger ships to pass underneath.
“The other big piece of it is our Middle Harbor project. This project essentially combines two aging piers into one mega terminal,” Hacegaba said. It’s posting remarkable truck turn times, averaging 34 minutes, which is significantly better than the average for the complex in general.”
Upon completion at the end of the decade, Middle Harbor will have the annual throughput capacity for 3.3 million twenty-foot equivalent units (TEU), which Hacegaba said is equal to the fourth largest port in America. In addition, the project is the greenest port terminal in North America, while being able to handle the larger 22,000 TEU ships and increasing on-dock rail operations. The terminal also has a dual appointment system, allowing a single truck to drop off and pick up a container in the same trip.
The last piece of major infrastructure improvement is optimizing the rail network and expanding rail capacity to move more containers through the complex. Hacegaba said currently, 30% of all Long Beach cargo leaves terminals on rail. However, he noted that the board of harbor commissioners envisions significant rail movement in the coming years.
“We estimate that one train can replace up to 750 truck trips. It’s a lot more efficient to move goods out of the terminal,” Hacegaba said. “Our latest long-term cargo forecast puts us at 40 million TEU by the year 2040. Last year, L.A. and Long Beach combined, we did about 15.5 million TEU. So the rail is critical to be able to handle that volume that we anticipate coming to our complex.”
The major rail project proposed by the port is the Pier B On-Dock Rail Support Facility, for which a draft environmental impact report (EIR) has been released. After alterations and comments, Hacegaba said a full EIR would be released for further consideration. The Pier B project has gotten the attention of many Westside businesses and community activists, who claim the project would be extremely detrimental to quality of life and business.
With the Port of Long Beach making such large investments in infrastructure, Hacegaba said the need for continued and additional supply chain optimization has never been more prevalent. He compared it to owning a $4 billion computer but operating it using Windows 95. While the hardware (infrastructure) is important, the software (supply chain optimization) is necessary to utilize the complex to its full potential.
“We see supply chain optimization as critical to ensure our competitiveness in the years ahead,” Hacegaba said. “We look at the market, and we see how competition has intensified over the last 10 years. And in order for us to maintain our competitiveness, we have to work with our partners to optimize the supply chain and ensure that the port users have a very, very positive service experience.”
Kenneth O’Brien, chief operating officer of Gemini Shippers Group, said his company works with around 250 importers in the United States, with the Southern California gateway being the most critical entry point for the U.S. market.
“Moving things through the port and the velocity to get through the port is critical,” O’Brien said. “Typically, the port becomes one of the bottlenecks in the chain, in which there are many. So anything the port authorities can do to ease that and aid some of the velocity of that is hugely critical.”
Beyond velocity, O’Brien noted that predictability and reliability are probably more important. He explained that his company can work with its member companies to plan their supply chain around any given time frame. However, he said they cannot assist their clients when they build a plan around one time frame and then cargo is delayed. O’Brien said in many instances, clients will pay a little more and sacrifice a little speed to ensure reliability.
In order to accomplish desired velocity and reliability, O’Brien said Gemini advocates for its member companies to actively communicate with port authorities and supply chain partners to build relationships and keep one another informed in this complex industry of goods movement.
The Port of Long Beach is making smart moves for the future by investing in infrastructure and working to optimize its supply chain, O’Brien said. He explained that Gemini’s member companies, as well as other importers, are looking for ports that are making positive moves for the future and will continue doing business with those ports.
“We’ve got a direct line to [the ports], and they are listening. It’s not that way with every port. They have been a very good partner to hear what shippers have to say about what’s not working or what could be better and try and action it,” O’Brien said. “We don’t expect instant gratification. No problem is going to be solved in a vacuum by one party. It’s going to take all of us communicating on the issues and trying to find a solution.”
Mark Hirzel, former president of the board of directors of the Los Angeles Customs Brokers & Freight Forwarders Association, agreed, saying beneficial cargo owners thrive on reliability, which was lacking before the ports’ supply chain optimization efforts began. He said the most important thing the ports have done is simply starting the conversation among supply chain partners.
Historically, Hirzel said each sector has worked in the same area but never worked together. He said each group, from trucking to shipping to labor and down the line, was focused on its individual success rather than the entire port system, not thinking about the effects it had on other partners when changes were made.
Mark Hirzel, former president of the board of directors of the Los Angeles Customs Brokers & Freight Forwarders Association, said reliability is paramount to beneficial cargo owners, which is why further supply chain optimization is necessary at the San Pedro Bay ports. (Photograph by the Business Journal’s Larry Duncan)
When the San Pedro Bay ports began discussions of supply chain optimization, Hirzel said it gained the attention of the Federal Maritime Commission, bringing the issues to the national stage rather than just regional. According to Hirzel, this national attention is beneficial because San Pedro Bay supply chain issues are not unique but experienced by ports nationwide.
Though he acknowledges the efforts already made, he said reliability has a long way to go. He said he envisions anticipatory appointments where ship unloading schedules are more precise and relayed to trucking companies. Such a system would make trucking companies aware of exactly when a specific container is to be unloaded rather than being notified after the fact when trucks are already dispatched, delaying pickup another day.
The Port of Los Angeles has partnered with General Electric (GE) to tackle the issue of supply chain information sharing between the various sectors, according to Marketing Manager Chris Chase.
“Obviously, the challenge here in the harbor is you have many different modes of transportation meeting. Them talking to each other, especially electronically, is not as advanced as other parts of the supply chain are,” Chase said. “That’s an area we are concentrating on, and we’re in the midst of this project. We did a pilot earlier this year, saw some success. But the value really is getting more partners involved, and that’s what we’re working on right now.”
The port’s work with GE is centered around the idea of advanced notification and visibility between the various supply chain partners to create as efficient a port as possible. Through the system, Chase said all supply chain partners would be aware of how many containers are on a given ship, the size of the containers, which ones are leaving by rail and which ones are leaving by truck. The goal is the maximum amount of inter-port communication.
There is not a hard timeline for when the entire system will be up and running, due to the fact that the port has to get all its partners on board in order to have as much information as possible. Chase said the hope is for the program to fully take effect in the next year. He said there has been a tremendous amount of interest in the program.
“We’re making some good headway. People are very supportive, and now it’s just getting the actual connections done and building it out to handle the volumes we see here,” Chase said. “We’re very optimistic. Many of our partners are very excited about this and willing to try something different.”
Based on the pilot program and running models, Chase said the port estimates efficiency could improve 8%-12% overall once the full program takes effect. He explained that the full benefits of information sharing would likely not be seen for several years, after the program is fully built out.
Chase said he hopes the Port of Long Beach gets involved with the program early and that preliminary discussions have occurred, though no commitment has been made at this point. Based on the success of the project, Chase said GE would be able to work with other ports around the country, and even the world, potentially making it the standard for port supply chain operations.
“In my opinion, it seems to be going not quite as quickly as we all had hoped it would. For this to really work as it needs to, it has to integrate the entire port complex of the San Pedro Bay. It’s all interrelated,” Hirzel said. “The sooner we can make that visibility open to all the players and they can see what’s coming down the pipe, the better they can plan and the more efficient the whole supply chain can be.”