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One solution to the congestion problem: More inland ports
One of the lessons that supply chain stakeholders have learned during the COVID-19 pandemic is the vital role inland ports play in fighting congestion.
But what measures should be taken to fully utilize existing ports? Can — and should — new inland ports be developed? And what role can the railroads play in that?
FreightWaves spoke with three supply chain experts to get their thoughts.
Why the US needs to invest in intermodal ports
Congestion not only at the West Coast ports but also at inland hubs such as Chicago the past two years has made all stakeholders zero in on improving coordination along the supply chain.
“Imagine there’s a big movie theater, and you’re trying to exit out of a very small door. There’s just no solution that will help out when there’s that much volume but no coordination in trying to get out,” said Steve Wen, CEO of Dray Alliance, a software company that connects shippers with networks of drayage carriers. “So, either we need to have a more data-driven method of planning how things get in and out, or there should be another exit, which is the inland port idea.”
Indeed, stakeholders have realized that the supply chain needs to change to accommodate growing consumer demand and the e-commerce boom.
“As you look at e-commerce and how that’s evolving, it implies that you’re trying to get your inventory closer to the customer,” said Mark Yeager, CEO for 3PL Redwood Logistics. “What that means is using multiple midmarket cities as points of distribution, as opposed to [using] Chicago or Atlanta.”
One way to accommodate that is through better utilization of inland ports. Also known as dry ports, these sites provide inland shippers with typically rail access to coastal ports. Inland ports also allow the loading of ship cargo and imports onto trains at coastal ports. The cargo is then hauled to the inland ports, which may be hundreds of miles from congested coastal ports, for unloading and further distribution.
Inland ports could help create capacity at coastal ports by offering more slack to the overall system, Wen said. Inland ports could also relieve physical and regulatory constraints that some coastal ports, such as the ports of Los Angeles and Long Beach in California, face in building out port infrastructure.
There hasn’t been as much attention historically to investing in inland ports in the U.S., especially compared with other countries, according to Wen. But that might be changing: The recently enacted federal infrastructure bill designated $16.6 billion over five years to fund waterway and coastal infrastructure, inland waterway improvements, and port infrastructure, and it makes inland port projects eligible for federal grants.
State and local leaders are seeking to invest in inland ports as well. Utah’s legislature approved the creation of the Utah Inland Port Authority, which late last year worked with the Port of Long Beach and Union Pacific (NYSE: UNP) to move containers more efficiently from the ports to Utah. A group in southern Illinois is seeking to develop an inland port where the Ohio and Mississippi rivers meet.
What would investment in inland ports look like?
Inland ports host several modes of transportation, such as rail, via a short line or Class I railroad, and truck. They may also have access to an inland waterway, such as a river or lake, or they may have proximity to an airport.
An inland port’s access to multiple modes of transportation benefits shippers by providing them with options. For instance, by using an inland port that has not only rail and truck connections but also a marine connection, a shipper can consider moving product via barge upstream or downstream during off-peak times, according to Martin Lew, founder and CEO of Commtrex, a data firm that helps shippers connect with rail assets and service and transloading.
“If you’re a shipper and you’re trying to figure out how to create the most competitive pricing environment, the way to do that is through having modal flexibility. The more model flexibility they have, the more ability they have to be able to create different ways to move their product,” Lew said.
For instance, if a trucking lane shuts down, a shipper can turn to a rail line or to barge via an inland waterway when using an inland port. A shipper may also be able to use these modal options to help find more competitive pricing.
But inland ports also need to develop strategies to expand their user base. They don’t market themselves very well to potential users, according to Lew. The operators, which may include quasi-governmental agencies like port authorities, traditionally don’t invest a lot of money in marketing, so they don’t get the word out about the ports’ capabilities.
Inland ports can also consider upgrading their facilities to diversify the commodities they handle, Lew noted. Many such ports were built to serve an area rich with a specific commodity, such as coal or aggregates, and could add a blending facility for potential nearby chemicals shippers to accommodate other commodities, he said.
“A state agency or a quasi-government agency will have a really good read on where there might be available capacity, because they have the ability to go in and figure out why is this infrastructure latent or why is it being underutilized or not utilized at all. [They can ask] what can we do to ramp this back up because of all the XYZ commodities that are moving into the surrounding area,” Lew said.
“Shippers want more optionality, and an important part of their optionality is being able to figure out how they can have more staging areas, more storage areas, more transiting areas, more terminals, more ways for them to be able to cut across different lanes in a safe and a very inexpensive manner. And if you already have an infrastructure or rail track in a specific area that is not being utilized, that’s probably the easiest way of a good starting point.”
How can rail contribute?
The development of the Utah inland port involving Union Pacific has “great timing, because there’s a lot of potential commodity flow that is not leveraging rail but could be leveraging rail in that area,” Lew said.
However, the railroads also need to do their part in encouraging shippers to use inland ports.
For intermodal rail to take market share from trucks, the railroads need to provide shippers a rail transaction that has visibility, a reliable performance metric and predictability, which includes being more open about the performance dynamics of their network, according to Yeager. Those offerings could even trump the longer transit time that railroads have compared with trucks, he said.
“If the railroads really want to get market share from the trucking community, which I think is the goal long term and that’s an admirable goal, they’re going to have to produce a product that has the visibility aspects that a truck provides to the shipping public. And that’s going to require that they integrate with all the pieces: the dray, the terminal operation, the line haul and then the other side of the terminal — the destination and the destination delivery,” Yeager said.
The technology that the railroads incorporate should also provide visibility on the origin pickup and origin delivery so that the railroads know when empty and loaded containers are coming back into the system, according to Yeager.
“A trucking company would never work that way, where someone else manages the starting miles and the ending miles of a move. They recognize that it’s almost impossible to manage a network in that fashion,” Yeager said. “And so I believe that rail has to probably contemplate a pretty fundamental model change, which is supported and enabled by technology, in order to truly compete with the truck long term, especially an autonomous version of trucking.”
Being more open with that data can help stakeholders make more informed and holistic decisions about the health of the supply chain, noted Lew.
“I think now more than ever, the transportation industry supply chain needs more data sharing so that we have a better way to figure out where we can be improving the supply chain,” Lew said. “Without the data, without visibility into where the problem areas are, it’s going to be very hard to try to anticipate what problems you’re gonna have to solve the next time you know a 2021 hits.”
Another contribution that not only the rails but all stakeholders can make is to work together to determine where there should be a new lane, terminal or transit site, Lew noted. The traditional way of relying on one or two customers to justify the financing of a terminal takes a lot of work, and it may be a more fruitful process to use data and work with shippers, logistics providers, terminal operators and city agencies — as well as the railroads — to determine where there is a need that’s not being met, Lew said.
“Everybody wants to ramp up infrastructure. Everybody wants to ramp up capacity. It’s just the matching of the demand and supply sides that is the difficult part, because the demand side doesn’t always know what capacity is available, while the supply side doesn’t always know where the demand is,” Lew said.
“Shippers need to be more proactive about approaching logistics providers, terminal operators, short lines, railroads about what they want, and let the supply side try to come up with solutions that can solve the problem,” Lew said. “But that collaboration is something that needs to be more proactively done. And not done just when there’s an emergency … . That collaboration is something that I think needs to be done much more in advance.”
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Source: freightwaves - One solution to the congestion problem: More inland ports
Editor: Joanna Marsh