Tired of the Los Angeles and Long Beach port congestion that has delayed shipments, Brian Jablon considered every other option to avoid delivering his toy goods through the twin ports.
The executive vice president at Los Angeles-based Pacific Play Tents looked at ports in Portland, Seattle, Oakland, Oxnard and San Diego as potential entry points for his shipments of children’s tents, tunnels and accessories. He also looked at shipping goods via air freight.
But none was a viable option, he said, adding that for now, going through L.A. and Long Beach remained the least expensive option.
“The costs are horrendous,” said Jablon, who works for a family-owned company that employs 38 people. “The slowdowns are everywhere on the West Coast, and the cost difference between air freight and vessel freight are six to eight times greater.”
Meanwhile, his cargo is delayed by two to three weeks, and he’s still receiving holiday shipments at a time when he should be restocking for February, when the Chinese New Year shuts down Chinese factories for the celebration.
“It’s become a major, major problem,” Jablon said.
Businesses big and small have been looking at ways to either ship cargo by air or divert goods to other ports to bypass the West Coast congestion, caused by what port officials call a “perfect storm” of issues, including the lack of available chassis and unresolved contract talks between West Coast dockworkers and their employers.
That “perfect storm” has caused the ports of Los Angeles and Long Beach, the nation’s two busiest seaports handling 40 percent of U.S. imports, to lose business to competing seaports such as ports in Oakland, Georgia, others on the East Coast and even Canada, officials said.
A beef, pork and poultry exporter who weekly ships 300 to 400 containers of fresh and frozen meats from the West Coast recently told the Agriculture Transportation Coalition that the port disruption has prompted them to divert cargo away from the West Coast.
“There will be long-term negative consequences for U.S. meat packers if we become viewed by our foreign customers as an unreliable supplier,” the exporter said.
Clothing retailer New York & Co. had to spend about $2 million in additional freight costs to transport vital merchandise by air to ensure inventory. CEO Greg Scott said in a Dec. 3 earnings call that the company has also diverted remaining goods to East Coast ports and plans to continue doing that until deliveries through the West Coast can be more reliable, according to maritime trade publication Journal of Commerce.
Airports that handle air freight have also seen a recent boost in cargo volumes. Los Angeles World Airports saw freight air cargo jump from 161,064 tons in October 2013 to 174,175 tons in October 2014, according to the LAWA’s latest statistics.
At great expense, Gardena-based toy company Cloud b, which employs 48 people, had to airship container loads to supply products for customers because of the delays. Cloud b, which sells baby toys and products, earns 40 to 50 percent of its revenue during the holiday season.
United Parcel Service officials said the company has seen double-digit growth in air freight year-over-year, adding that the company began communicating with customers with their logistics needs as early as February.
“Based on what we’ve seen in the past, there’s this risk of congestion developing and that customers need to develop or refresh their contingency plans and plan and prepare,” said Eric Souza, director of global forwarding marketing for UPS.
Los Angeles and Long Beach port officials say it is difficult to quantify exactly how much business has been diverted away from their ports but believe the loss to be relatively small.
“We continue to see vessels coming to the port and are full,” said Noel Hacegaba, chief commercial officer for the Port of Long Beach. “We’re optimistic that this will not affect our long-term projections.”
Still, Taiwanese shipping firm Evergreen plans to drop the ports of Los Angeles and Oakland from its East Coast-North Asia service starting on Jan. 1 because of the congestion, according to Container Management.
“Unfortunately, we’ll have to earn that service back,” said Port of Los Angeles spokesman Phillip Sanfield, adding that the port is doing what it can to maintain market share because there are more choices today to send goods elsewhere.
For months, port officials have been working hard to mitigate and relieve congestion, including finding space at the ports to store chassis and containers and pushing operators to pool their chassis.
“We take this very seriously because we know how fierce the competition is,” Hacegaba said.
The competition is dealing with its own congestion issues and cargo delays as well. The Port Authority of New York-New Jersey is exploring alternatives, such as rail tunnel and running ferry services to move freight, while the Port of Rotterdam in the Netherlands will divert cargo to small terminals which could be sent to bigger facilities, according to the Journal of Commerce.
Even more, some industry observers fear the port disruption on the West Coast could have adverse effects in the long run, especially in Southern California.
“It has to improve,” said Guy Fox, chairman emeritus of the District Export Council of Southern California. “We need to get all the players together and resolve it. If it doesn’t improve, (imports through the L.A. and Long Beach ports) could drop (from 40 percent) to 30 percent. Then, there goes the jobs. Warehousing and distribution will move elsewhere.”
Companies have already been building their facilities and warehouses beyond the West Coast, in areas such as Charleston and Houston — cities with nearby ports in states with right-to-work laws, which don’t require employees to join or pay into a union, said Peter Friedmann, executive director of the Agriculture Transportation Coalition.
Manufacturing plants are also shifting from China to south Asian countries such as Vietnam, Bangladesh and India, which are closer to the Suez Canal and therefore to East Coast ports, he said.
“This disruption only encourages others looking at this transition to make the move,” Friedmann said. “Businesses can’t stomach an unstable, unpredictable supply chain.”