What’s the best medicine for port congestion? Imports are surging and ports in major metropolitan areas present an attractive proposition for importers: quicker speed to market with a high density of consumers within a short distance. However, with surging volumes, this close access to a large concentration of consumers is a recipe for congestion. Port congestion has many causes and effects and is not unique to any one area in the US. As of January 2019, the average container turnaround time for port terminals located in the Port of NY/NJ have varied between 1 and 4.5 hours. Why does port congestion occur? How can port congestion impact your business? And, what can you do to circumvent these effects? Find out below:
Why does port congestion occur?
Volume & Anticipation – Whether it’s peak season, natural disasters, upcoming tariffs or government shutdowns, the anticipation of a future event can cause shippers to simultaneously ship in excess to stock up on inventory. With established and expected tariff changes coming up, many importers are trying to beat the clock to bring product into the US ahead of tariff implementations. The Chinese New Year production shutdown happens each year which inflates volumes towards the end of the 1st quarter. Harvest season drives up agriculture imports at different times throughout the year. Rough seas and storms can wreck havoc on vessels expected arrival to port which can make workloads uneven.
Population density – Many of the cities with largest populations are on the coasts, with most of them being located near major ports. Once a container arrives, it will ideally not need to travel far to its next destination, which allows the shipper to save on transportation costs. A port that is located close to major popular centers enables shippers to bring containers to a nearby warehouse for future distribution or ship direct to their customer’s distribution center. However, with population density comes commuter traffic to and from the major population centers. Since most ports operate during normal business hours, carriers can be stuck completing with this traffic, especially in the morning and afternoon.
Port terminal operations – Port terminals have a business to run, and this may require operational changes to attract and handle new customers. These changes may cause peaks in volume or lengthen the container turnaround time. Just like vessel delays impact your planning, vessel delays impact the terminals ability to plan and execute that plan.
Shortages – Whether it’s labor or equipment, there are major shortages affecting the entire transportation industry. Since are less truck drivers on the road, each driver needs to handle more freight and delays at the port could seriously disrupt their workflow. Just like your business, holidays impact labor availability and when the volume doesn’t slow down, backlogs are created. Inconsistencies in volume or volume spikes make it difficult to plan how much equipment is needed, and in turn make it a challenge to service these volumes.
How can port congestion impact your business?
Demurrage – On port “free days” are provided on imports to allow carriers time to pick up the container. Intended to combat congestion, demurrage fees kick in when your container is not retrieved from the port before its last free day. Demurrage charges can be hefty and can add up quickly, especially if you have multiple containers sitting at the port terminal. Ocean shipping is already expensive and adding demurrage to the equation can seriously impact your profit margins. See the next section for some techniques to avoid demurrage.
Per Diem – Off port “free days” are provided on imports to allow carriers time to deliver the container and return the empty to the port terminal. So, you avoided demurrage charges—but wait—you now need to worry about per diem charges from the steamship line. The day the container is removed from the port terminal, the clock starts ticking. The container must be unloaded and returned empty to the port terminal within the allotted time frame or per diem charges will begin. See the next section for some techniques to avoid per diem charges.
Delayed shipments to customers – The longer it takes your carriers to retrieve your container from port, the long your customers will be waiting for your shipment. Don’t expect customers to be understanding of shipment delays due to port congestion.
What can you do to help circumvent these effects?
Stay up-to-date on port and terminal news – Whether you seek out the information yourself or you partner with a reliable logistics/drayage provider who can communicate updates with you, it’s important to be aware of the ever changing port conditions. Consider asking the terminals if there are any delays in vessel unloading and container transactions. For information on the Port of NY/NJ information try visiting their website and social media pages (http://www.panynj.gov/port/) or the websites of the individual terminal operators.
Communicate – The further in advance that you alert your carriers to containers being loaded on vessel, the better they can plan for the arrival. Your carriers will have a grasp of the port congestion situation leading up to the arrival of your containers, which will allow them to better prepare for potential delays.
Work with your receiving facility – Just like your carriers, your receiving facility needs to know what’s headed their way and when. Does your receiving facility operate by appointment? How long does it take them to unload a palletized container vs. a floor loaded container? Proper planning with your receiving facility is essential for avoiding per diem charges from the steamship line.
Stagger containers across multiple vessels – Rather than shipping all your containers at once, consider staggering your containers across multiple vessels. This limits the impact on your supply chain due port congestion or vessel delays. Depending on your carrier, this may be necessary to allow them enough turnaround time before worrying about the last free day (you should also consider utilizing multiple carriers to improve turnaround time). Certain steamship lines partner with certain port terminals, so the more steamship lines you utilize, the better you mitigate your risk. It’s well worth asking your steamship line which port terminal the vessel will be docking.
Utilize multiple reliable carriers – Do your carriers have the resources to handle multiple containers in a single day? Would delays at the port cause serious issues for them? While there aren’t many things you can control when it comes to port congestion delays, selecting the proper carriers is one major factor that can change the impact that port congestion has on your business.
At Port Jersey Logistics, we manage your transportation and provide solutions to help avoid the negative effects of port congestion. Smaller carriers may not be able to recover from port delays, but our carrier network was designed to provide coverage at ports nationwide. If your carriers are struggling to navigate the challenges of port congestion, contact us today to discuss your options.