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Ecommerce, Overseas Manufacturing Contributing to Ocean Port Congestion

Gridlock at two major shipping ports in North America lines up ships waiting to dock and unload cargo at Long Beach and Los Angeles ports. On the Sunday morning during President's Day weekend, about 30 cargo ships speckled the Huntington Beach, Calif., coastline just south of the ports waiting for their turn.

The U.S. Department of Transportation (DoT) seems to know this problem well. It recently published a white paper — Beyond Traffic 2045 – describing major challenges and proposes possible changes to ease congestion. While it discusses all modes of U.S. transportation, some of the most interesting findings point to cargo shipments by vessels.

Ecommerce and overseas manufacturing contribute to the majority of the headaches. Billions of dollars now go through Long Beach and Los Angeles ports. In 2014, the DoT estimates the value dollar of cargo that went through the Los Angeles port at $285.4 billion, and the volume at 69.1 million tons. The value of cargo going that went through the Long Beach estimated at $109.3 billion, and the volume at 44.4 billion tons. Container traffic to all U.S. ports rose 19% since 2009, and nearly recovering to pre-recession levels.

Technological and innovation transform vehicles, infrastructure, logistics, and transportation services, but it also presents challenges. The challenges emerge when executives rely too much on technology to fix everything, and not enough on operational changes to accommodate shifting consumer buying patterns such as ecommerce. The study analyzes major trends, issues impacting the transportation sector, and how the increase of ecommerce will change logistics, create congestion on roadways and cargo vessels, and impact the environment.

E-commerce continues to become a way of life. In 2009, the study suggests that the average household reported purchasing three items per month online, and approximately 4% of retail sales were made online. Fast forward to 2014, e-commerce sales accounted for 6.6% of all sales, per the DoT. Consumer electronics, books, and clothing were the most common types of products purchased online. During the 2014 holiday season, U.S. consumers spent $53.3 billion online from desktop computers, up 15% compared with same days last year, per comScore.

It costs manufacturers millions

Los Angeles, Long Beach, and New York/New Jersey ports handle 49% of all foreign containerized trade entering and exiting the United States, per the DoT.

The paper also reveals some shocking numbers related to freight bottlenecks, as well as long and vulnerable supply chains created by inefficiencies. “Nike spends an additional $4 million per week to carry an extra 7 to 14 days of inventory to compensate for shipping delays,” per the DoT white paper. “One day of delay requires a container transportation provider to use an additional 1,300 containers and chassis, which adds $4 million in costs per year. A week-long disruption to container movements through the Ports of Los Angeles and Long Beach could cost the national economy between $65 million and $150 million per day. Freight bottlenecks on highways throughout the United States cause more than 243 million hours of delay to truckers annually, a loss of about $6.5 billion per year.”

It goes without saying that some action needs to be taken. Last week, the U.S. Chamber of Commerce President and CEO Thomas J. Donohue called on President Barack Obama to urge involved parties to resolve the West Coast ports dispute. He called it a growing crisis affecting manufacturing, and trucking and railroad companies.

Supply chain's automation dilemma

Supply chains continue to use more data, but it's the structural operations that now seem to trip-up daily operations. The study points out the freight industry's use of technology and automation, and how manufacturers and shippers are using technology to optimize their supply chain. It specially calls out the ability to understand where components or packages are at any time in the supply chain, pointing to the “technological advances in data analysis systems, automatic vehicle and container identification systems, and satellite navigational systems.” It seems the technology continues to forge a new path in supply chain efficiencies, but the old ways of physically moving the goods continues to stifle growth.

Automation will become a necessity, rather than a luxury, but operational procedures also require an update. The DoT states that during the past 30 years, international trade rose at a much faster rate than economic growth. U.S. exports nearly doubled. Total exports and imports of goods reached $3.9 trillion in 2013, accounting for 23% of U.S. gross domestic product. Without an overhaul of manual processes and standards the logistics and the transportation industries cannot move forward.

8 comments on “Ecommerce, Overseas Manufacturing Contributing to Ocean Port Congestion

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