Eleven months ago, when Jon Slangerup took the helm of the Port of Long Beach, a critical link in the movement of goods around the globe, he was astonished by what he found.

The port, which moves $180 billion in cargo a year, was headed into an epic logistics fiasco, with ships backed up for weeks off San Pedro Bay. But “the biggest stunner,” said the former Fedex executive, “was how fragmented, silo-driven and inefficient the supply chain is.”

Together with officials from the adjacent Port of Los Angeles, “we will look at every possible way to improve that system,” Slangerup said in an interview last week. “The goal is to cut costs and improve speed. When we are done, it will revolutionize the entire marine supply chain.”

The effort comes none too soon.

As of two weeks ago, the backlog of idled ships at anchor, which had peaked at 28 vessels in mid-March, was gone. But the root causes of port congestion, in Southern California and around the nation, are far from resolved: mega-ships that most terminals are unequipped to handle; jumbled containers as carriers combine cargo shipments on bigger vessels; railroad delays; too-small bridges; truck-trailer shortages and labor unrest.

At Long Beach’s annual “Pulse of the Port” gathering two weeks ago, industry speakers vented their frustration before a crowd of 600. “Vessels are overbooked at every port,” said Donna Lemm, vice president of global sales for Mallory International Logistics, a Memphis-based freight forwarder of cotton, corn and other farm products.

Despite Southern California’s recent gridlock, exacerbated by a dispute over a new dockworker contract during peak holiday shipping, Long Beach’s 3,200 acre complex is well ahead of most other American ports in retooling to become what Slangerup calls “The Port of the Future.”

A 10-year $4.5 billion infrastructure program is half finished.

Only four years ago, the biggest vessels docking in Long Beach held 8000 TEUs (a capacity measure which stands for “Twenty-foot Container Units”). Today, the port hosts ships with 14,000 TEUs. By next year, it will be able to receive vessels with 18,000. And carriers are already building 21,000-TEU ships. Slangerup said this is a “dramatic transformation of the industry with massive, massive ships. These ships are as wide as ten-lane highways. They are as long as the Empire State Building is tall. They eclipse the size of the largest aircraft carrier.”

The gigantism is driven by economics. Using roughly the same amount of fuel and the same size crew, today’s big ships can transport two or three times the cargo of smaller vessels. That not only saves the carriers money, but it pollutes less – a key advantage as California regulators seek to curb ship emissions.

Los Angeles and Long Beach are uniquely able to accommodate mega-ships because of the unusually deep San Pedro harbor. And the twin ports, which are owned and run by the cities of Los Angeles and Long Beach, still offer the most direct and efficient trade route between Asia and the largest U.S. import and export markets.

But during the recent gridlock, Southern California’s complex lost business to ports in Canada, Mexico, on the East Coast and the Gulf of Mexico. A widening of the Panama Canal, although it won’t accommodate ships with more than 13,000 TEUs, could siphon off medium-sized vessels beginning next year.

The competition, Slangerup warns, “poses a threat to our market share and a risk to future revenue growth. Overall shipping trade is growing faster than we are, and global trade patterns are continually shifting.”

Meanwhile, until new infrastructure is in place and ports achieve what Slangerup calls “supply chain optimization” – with better technology and smarter systems to track and organize cargo – mega-snafus will likely continue.

When ships were smaller, an ocean carrier would load boxes at a single port such as Hong Kong or Shanghai. The containers were grouped in blocks, based on destinations such as Chicago or Atlanta, and on whether they would be transported by truck or rail. The system, called “block stowage,” allowed for rapid dispatching after unloading.

But as ships grew larger, they took on multiple blocks of boxes from different shippers, stopping at various ports. “Block stowage went out the window,” Slangerup said. “Containers are now loaded randomly. They look like a basket of Easter eggs as opposed to blocks of colors.”

The jumbled boxes, some weighing as much as 50 tons, are unloaded in massive quantities over about five days, crowding docks and leaving little space to organize them. Dockworkers must hunt for individual containers, restacking and handling them far more than in the past.

Both exporters and importers suffer from the confusion. “You’re told ‘I’m sorry, only two of eight containers sailed,’” said Lemm, the Memphis freight forwarder. “We can’t run a business this way.”

Slangerup said that at Fedex, “I helped build over many years a highly reliable ‘last-mile’ logistics system: custodial control from distribution center to customer. Information was the backbone. But in the marine supply chain, no information backbone links the entire system together.” He added: “Ocean carriers focus on their job. Terminal operators focus on their job. Railroads focus on their job. Truckers focus on their job. The Walmarts, the Home Depots focus on their job. And traditionally the port is just the landlord, investing in infrastructure.”

http://www.ocregister.com/articles/port-661141-ships-slangerup.html