The Perfect Storm
To Our Valued Customers:
Part of why Laufer is “Built Different” is knowing what situations in the logistics and supply chain business will affect your bottom line. Below is a quick review of some recent impacts on the supply chain business due to tariff deadlines, container storage and workforce shortages. At Laufer Group International, we’re here to help you navigate these issues and find solutions which provide the least impact to your business. Contact your Laufer sales representative to see how we can help you.
The Perfect Storm
At the close of 2018, shippers front-loaded imports in anticipation of the January 1, 2019, tariff increase on imports from China to the US. The surge in imports, while expected, created significant challenges and bottlenecks, primarily in southern California terminals and for warehouses selected to receive all of this freight. It was the perfect storm: a surge in imports, holiday labor scheduling at terminals, chassis shortages, full warehouses, and an infrastructure not able to handle the surge.
Hindsight is 20/20: Shipping Early Did Not Avoid Expenses
At the end of 2018, importers from China had to make a decision. They could either do nothing differently in terms of scheduling orders and run the risk of cargo arriving post-January 1 with a potential 25% tariff, or do everything they could to avoid the 25% tariff and ship as much as early as possible. It is clear now that many importers chose the latter, but it did not come without increased costs. With warehouses full of cargo, and terminals fully congested, importers were forced to pre-pull containers to avoid demurrage and often kept them stored at truckers’ facilities or within their own facilities – often for days or weeks before unloading those containers. The additional expenses to manage this are now coming due, and they are surprising many importers: chassis expenses, pre-pulls, detention charges, storage fees, etc. It’s not uncommon for these charges to exceed $2000-$3000 per container. While this amount is far less than an increase to a 25% tariff would have been for most importers, this added expense is impacting the bottom line for importers as well as many service providers.
Where are all the Chassis?
One impact that Laufer has seen is the dislocation of chassis and a decline in availability. Even with chassis providers increasing chassis fleets in 2018, the industry still is plagued by a lack of predictable supply at many terminals. And the surge created by the threat of tariffs didn’t help. With so many import containers at truckers’ facilities and import warehouses waiting to be unloaded, it is preventing chassis from being returned timely and as expected. So even the chassis providers themselves are having a difficult time predicting availability because so many containers are in storage.
And Trucking is Still an Issue
According to Bob Costello, chief economist at American Trucking Associations (ATA), “We have a demographics problem, demand is strong, trucks haul over 70% of the freight tonnage, our average age is very high, [and] we don't have enough females," said Costello. "So much of it revolves around demographics."
Life on the road through a career in trucking is no longer appealing and unemployment in the US is at an all-time low. Truck drivers work long hours, they're away from home for weeks on end, and oftentimes sleep inside the trucks. In addition, in a job where the total number of driving hours determines their take home pay, there's new technology that monitors the limited hours a truck driver can work in a given day in the form of Electronic Logging Devices. The ATA says we'll need 898,000 more drivers over the next decade to keep up with growth and demand.
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