Logistics

Port of Los Angeles Congestion and its Effects

Kathy Monroy

March 12, 2021

As one of the largest container ports and leading gateways for import and export of the United States continues to struggle with one of its lengthiest and extreme congestions, shippers, brokers, carriers, and other interested parties withstand the on-going challenge and strive to find ways to counteract this bottleneck and its domino effect. 

Reasons for the Port of Los Angeles Congestion

There are many aspects to consider when trying to understand the LA Port congestion. This phenomenon has been happening since late 2020 and will continue, some say, until April or May of this year (2021). 

Here are some of the main reasons for the congestion:

   1. COVID-19

The Global Supply Chain underwent many changes and was hit hard during the global pandemic due to the change in the ways Americans consume. During the pandemic, many started to buy more goods through digital platforms instead of physical shops. Therefore, cargo volume increased, and the supply chain had to meet the consumer's demands promptly. 

   2. Larger ships

As consumer spending increased, more goods were bought and needed to be transported. Larger ships started to emerge to meet the needs of consumers to execute deadlines. During this congestion crisis, it's not just the number of vessels; it's also their size that has to be considered. 

ship next to a dock in a port

Ships that are currently at the ports are over 10,000 TEUs (Twenty-Foot Equivalent Units), some even over the 15,000 TEUs, which is much greater in size than in the previous crisis in 2015, 

   3. Lack of capacity

Even though cargo started increasing in late 2020, the resources to manage it did not. Naturally, if more goods need to be transported, human resources to fill in for those gaps and carry out the shipments must also be enlarged. 

For many companies, due to revenue issues, hiring more personnel was not possible. On the contrary, most businesses were letting go of many of their employees to keep their company afloat. 

   4. Inefficient Terminal Operations

As the containers started to use more space in yards for more extended periods, terminal operators had to find ways to increase their capacity and not affect the terminal's operation. The augmented number of containers led to stacking them higher in the yards, which at the end produced more delays since it takes longer to transport from yards to distribution centers and ultimately to their final destination. 

   5. Container Chassis Shortage

Chassis shortage has been a reality within the supply chain for a while now. In the past, carriers were in charge of providing container chassis to transport their goods on the ground. In their efforts of reducing overall costs, one of the most effective strategies was to sell all their container chassis and rely on the port's equipment. 

As cargo volumes increase and no additional resources are considered, the container chassis shortage continues.  

   6. Peak Season

Even though the first months of 2021 are flying by, the increase of cargo during 2020's peak season is yet to be covered. Although shipments have been delivered, trying to catch up has been a struggle, considering all the obstacles within the supply chain's logistics. 

Port Congestion's Major Effects on the Supply Chain

Every one of these aspects have its ripple effect that ultimately come down to significant delays on deliveries and not meeting deadlines. These delays are the biggest headaches for shippers, carriers, and brokers since it impacts their service and their customer's overall experience. 

The port delays also affect the shipper's revenue, as their cargo has to stay longer in the yards, they must pay surcharges by ocean carriers and marine terminals. 

Truck drivers are also presenting significant delays because they spend time transporting their loads and also have to wait for container chassis to become available to start their loading process.

Overcoming Port Congestion

As mentioned above, every part of the logistics process is affected when there's port congestion. It will probably continue to cause significant issues during 2021 if the problem is not assessed promptly and with the right strategies. 

Some have started to find ways to overcome the phenomenon by negotiating contacts with dockworkers and finding ways to convince importers to look towards the East and Gulf Coast ports to help alleviate the West Coast's congestions and diversify supply chains. 

There are also some crucial advancements and improvements made in China and Shanghai's equipment availability that will allow the crisis to be handled. 

Ways to Avoid Port Congestion

LA Port Congestion will be difficult to avoid since almost 40% of the imports and exports pass through the LA Port. But some strategies can help businesses avoid it or decrease its impact. 

  1. Distributing cargo with various carriers. 
  1. Creating better relationships with port operators. 
  1. Transport goods through other ports.
  1. Pre-planning and considering obstacles in the process. 

There are still many aspects to consider to improve port congestion, and even though some may see the light at the end of the tunnel, others foresee this crisis continuing during the first half of 2021.

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