Wells $treet
Subscribe
Cover photo

Is Your Christmas Gift Stuck Here?

Hunting down your package... and the facts.

Jane Wells

Oct 22, 2021
19

I keep hearing that one reason the supply chain crisis can’t be unclogged is because there’s a lack of warehouse space.

Here’s the theory: cargo can’t be taken off ships at the ports because there’s no room on the docks, because truckers aren’t taking containers to warehouses, because the warehouses have no space.

So I went to a warehouse for CNBC to see if there was any space.

There is space.

“It’s not very busy,” says Gustavo Padilla, a veteran of the logistics industry who is currently director of operations for the iDC warehouse I visited. “Right now we should be very crowded.”

This 330,000 square foot warehouse in Lynwood is owned by Duke Realty, a publicly-traded warehouse real estate investment trust. It’s close to the ports of Los Angeles and Long Beach. Trucks arrive here and drop off containers filled with goods. The boxes of TVs and fake Christmas trees are then picked up by other trucks to deliver to stores or distribution centers further inland.

However, not as many trucks are coming from the ports as expected during this glut, and it’s taking longer for other trucks to come pick up the goods. Padilla says boxes which should be on the warehouse floor for only a day or two are spending as long as a week here.

Here’s what I saw with my own eyes.

NOT ENOUGH TRUCKERS

We’ve never needed so many truckers, and the shortage which existed before Covid has now become a crisis. Truckers are limited by how many hours they can work. However, despite reports suggesting otherwise, a new law in California that could end the owner-operator model for independent truckers is tied up in court and is not an issue yet. I also can’t find any evidence that a new rule mandating cleaner-burning truck engines by 2023 is the reason why there aren’t enough truckers in 2021.

NOT ENOUGH LABOR, PERIOD.

Truck deliveries to the warehouse I visited are so inconsistent that even though iDC is running two shifts, it’s only using half the normal manpower. Instead of 80 people a shift, Padilla says, “Right now the first shift is running probably about 40 [people], the second shift’s probably running about 30.” That’s probably a blessing, because even though Padilla tells me they’ve raised pay, it’s still a struggle to find labor. “If we ask for, let’s say, 10-20 people, we will get three.”

AND THE BIGGIE: THE EMPTY CONTAINER FIASCO

Empty containers litter the landscape. Some “empties” are parked on state land under an overpass next to the iDC warehouse, where it may take two weeks for trucks to remove them.

Here’s how screwed up it is.

— Screwup #1: An empty container sits on a chassis, or trailer, which is a huge problem. Chassis are in high demand, because you can’t go pick up a full container at the port without one.

— Screwup #2: Truckers are not able to get an appointment at a port terminal to return an empty container — and free up that chassis— because the terminals have no room for the empty container. Space is taken up by full containers… and other empties that can’t get on a ship until the ship can find room to unload its cargo (do you see how insane this is?).

— Screwup #3: The ports of Los Angeles and Long Beach lease space to about a dozen terminal operators. These are privately owned companies, and they have individual rules about who can pick up what and when. So far, there’s no visible effort to coordinate the return of empties/chassis by letting a trucker bring a container back to *any* terminal that has space, regardless if it belongs there (yes, different shippers have different containers).

READ THIS THREAD.

Ryan Peterson is CEO of Flexport, which moves freight. He took a boat around the port to see for himself what’s happening, and he suggested some solutions to “overwhelm the bottleneck,” like:

— Temporarily change rules in truck yards so that more than two empty containers can be stacked on top of each other. This would free up chassis.

— Use all the available National Guard chassis on a temporary basis.

— Create a container yard on government property near a large rail hub within 100 miles of the port and have trains go back and forth bringing containers there. Then direct trucks to that yard to pick up cargo instead of the ports.

It’s an excellent Twitter thread which I highly recommend.

“It’s going to get worse before it gets better,” Gustavo Padilla tells me. Look, I know there are issues all along the supply chain. I know it’s a complex problem. But I have a nagging suspicion that the way business has been done around the port complex was problematic long before the pandemic, employing an inefficient set of rules and procedures that should have been changed long ago to withstand this surge in American consumer demand (or at least handle it better).

To quote Warren Buffett, “Only when the tide goes out do you discover who’s swimming naked.”

Of course, with shipping prices skyrocketing, maybe there are parties involved who are in no rush to improve efficiencies.

Just sayin.’

Subscribe for free to Wells $treet
By subscribing, you agree to share your email address with Jane Wells to receive their original content, including promotions. Unsubscribe at any time. Meta will also use your information subject to the Bulletin Terms and Policies
19

More from Wells $treet
See all

Why Am I Walking 500 Miles, and Spending $2,500 to Do It?

The Camino de Santiago
May 25
6
16

Dumb & Dumber: Twitter, Baby Formula, and The Ministry of Truth

Welcome to Wells $treet. If you’re new here, allow me to introduce you to Dumb & Dumber, a regular column that summarizes the latest stupidity in the business world. I believe that every story has a business angle, because, seriously, it all comes down to the bottom line.
May 19
6

Inflation Report From the Pig Farm: Bringing Home Less Bacon

Time to follow Wells $treet’s nose for news to a very smelly place, but that’s where I smell money, baby. If you like business stories that aren’t boring, check out my homepage.
May 18
1
6
Comments
Log in with Facebook to comment

19 Comments

  • Debbie Peterson
    Great story Jane. This affects ALL of us and we really appreciate keeping us updated and informed. Keep up the good work
    • 30w
  • Greg Whitehead
    Jane, this is such an important story, and there are so many different pieces to it. You're doing a great job describing all the different pieces. Please stay on this story and keep us informed. 🙂
    • 30w
  • Bryan Adams
    Ok, so I looked over the Flexport Guy's thread, I get that his plan is too throw so many ideas out there something sticks. Most of the ideas are a One way mission with greater expense. Seems the obvious issue of "One way" freight is over looked, unless…
    See more
    2
    • 30w
    • Author
      Jane Wells
      Good ideas, Bryan. I think some companies are reshoring a few things, but it takes time to “turn that ship around.”
      • 30w
  • Rochelle Robertson
    Appreciated this deeper look into the complicated problem with the shipping industry. Guess holiday shopping needs to start now!
    2
    • 30w
  • Ryan Kawailani Ozawa
    Writes Hawaii Bulletin
    I love that you went down there to take a first-hand look. Even from that vantage point, I imagine inefficiencies and gridlock all the way down. When Biden announced our nation's busiest port would move toward 24 hours operation, I was shocked that we …
    See more
    • 30w
    • Author
      Jane Wells
      Ryan, don’t get me started.
      • 30w
  • Ben Pitts
    Great article and analysis of the problem. Hope some one buts the Big Boy panties on soon and takes a lead. It would seem there is opportunity there in some of the nature the CEO was suggesting. Sixty miles west California has miles of open dessert and…
    See more
    • 30w
    1 Reply
  • Dara John Baltuskonis
    California, a democrat state is responsible alone.
    • 30w
    • Author
      Jane Wells
      Nothing is easy in this state. Nothing.
      • 30w
  • Dara John Baltuskonis
    More cover ups here's the mandates she claims she could not find. https://theicct.org/.../CA-HDV-EV-policy-update-jul212020...
    • 30w
    • Author
      Jane Wells
      According to the CA Trucking Association, AB5 still can’t be implemented because there’s a second case which may be stronger. https://www.freightwaves.com/.../supreme-court-denies...
      Supreme Court denies review of AB5-related case, but law still isn't impacting California trucking
      FREIGHTWAVES.COM
      Supreme Court denies review of AB5-related case, but law still isn't impacting California trucking
      Supreme Court denies review of AB5-related case, but law still isn't impacting California trucking
      • 30w
  • Dara John Baltuskonis
    The courts denied the case on OCT 5 https://www.reuters.com/.../no-scotus-review-california.../
    No SCOTUS review of California law's impact on trucking industry
    REUTERS.COM
    No SCOTUS review of California law's impact on trucking industry
    No SCOTUS review of California law's impact on trucking industry
    • 30w
    • Author
      Jane Wells
      Yes but see below for why AB5 still cannot be implemented.
      • 30w
  • Dara John Baltuskonis
    https://www.whitehouse.gov/.../fact-sheet-president.../
    FACT SHEET: President Biden Announces Steps to Drive American Leadership Forward on Clean Cars and Trucks | The White House
    WHITEHOUSE.GOV
    FACT SHEET: President Biden Announces Steps to Drive American Leadership Forward on Clean Cars and Trucks | The White House
    FACT SHEET: President Biden Announces Steps to Drive American Leadership Forward on Clean Cars and Trucks | The White House
    • 30w
    • Author
      Jane Wells
      Yes, I mention this, but it’s not until 2023. I can’t find anyone saying they’ve stopped driving a truck NOW because of this. Seems to be other issues.
      • 30w
    View 2 more replies
Share quoteSelect how you’d like to share below
Share on Facebook
Share to Twitter
Send in Whatsapp
Share on Linkedin
Privacy  ·  Terms  ·  Cookies
© Meta 2022
Discover fresh voices. Tune into new conversations. Browse all publications