Insights - September 2017 - 21

MEGAVESSELS - from page 19

'Orderly and Successful'

freight sorting issues to match dozens of customers and destinations. Rail freight loaded at on-dock facilities needs an additional
sort.
One potential solution Smith and Kellaway both cited was to
do more effective planning at the originating port to smooth out
the process on the arrival end. Kellaway noted that could help
shippers improve predictability as well.
"The burden is falling on the truckers to sort this out. Draymen
are doing a lot of extra work," Smith said, with split moves of chassis and containers, which means more trips to different places.
Veteran intermodal executive Larry Gross, president of Gross
Transportation Consulting, makes no secret of his view of megavessels.
"The ocean carriers let this thing loose," he told Insights. "What
you are seeing is what happens when one side of the supply chain
tries to optimize their leg. All of the other pieces of the supply
chain puzzle have been sub-optimized to optimize the ocean carrier's line haul."

Economist Walter Kemmsies, a managing director at Jones,
Lang, LaSalle's infrastructure group, made the case for megavessels, particularly when other players are prepared.
"The adjustment to megavessels has been a lot more orderly
and successful than some would have you believe," he said. "The
ports and terminal operators were experienced. They knew they
had to scale up."
"On the land side, it hasn't always worked very well,"
Kemmsies said, creating the largest barrier to efficient growth.
"It's all about creating the networks. Everyone has to be equally
responsive. Otherwise, they become the bottleneck."
He praised railroads' multi-billion-dollar infrastructure investments.
"Railroads can only take so much freight. Roadways haven't
kept up. We need that highway piece to work better because it is
impacting all the others," he believes.
States and planning organizations that set policy based on
highway congestion need to do more.
Kemmsies cited Georgia's success in matching infrastructure
adjustment to larger vessel size. In a specific case, a planning
agency that prioritized projects altered its cost-benefit analysis to
reflect greater value for grade crossing investments to help the
supply chain and lowered the need for a bike path.
The JLL official underscored another key point. "These
ships do not make money if they are sitting on the docks," said
Kemmsies, explaining that if a port doesn't work right, ocean carriers can choose to go elsewhere, hurting truckers that rely on that
business, and to a lesser extent affecting railroads that typically
serve more ports.

'Twice as Big'
"If you are a terminal," Gross said, "your volume isn't growing
much, but the chunks of freight are twice as big as they used to
be. That means not only giant cranes and more parking area as
all of your terminal costs are increased. But your revenue is not."
"There is a corresponding surge of outbound and inbound
volume for draymen. What do you do with all that capacity when
the ship isn't there?" Gross added.
He believes that if the non-ocean costs of the conversion to
make the total supply chain adjust to megavessels had been considered at the outset that the shift never would have happened,
noting that ever-larger ships haven't translated into ocean carrier
profits.
The shift to megavessels occurred, he said, because most of
the costs are being borne by people who didn't get the benefits.
In fact, ocean carriers have had their own financial troubles with
the megavessels coming into 2017 as overcapacity and low rates
ravaged their earnings before pricing improved this year as trade
rebounded.
Gross pointed out that he wasn't saying the challenges can't
be overcome, since it is obvious the freight is still moving steadily.
He also cited a complication arising from the broad exit of ocean
carriers from supplying chassis.
"Ocean carriers can't afford to say no to any customer when
markets are weak," Gross said. "They need all the volume they
can get. But they haven't exited chassis supply agreements with
BCOs. So the shippers will say 'keep giving me a chassis or we
will go to someone who will.'"

Switching Ports
"Most of the cargo that is being dropped off at a port is discretionary," Kemmsies said, meaning it can be switched between
ports, based on the most efficient box dropoff point outside the
immediate arrival area. "If you have trouble with congestion, you
move to another port in those cases."
He also noted that places such as Southern California and the
New York area have so much regional cargo volume
that it affects port choice.

Photo courtesy The Northwest Seaport Alliance

September 2017 | Intermodal Insights 21



Table of Contents for the Digital Edition of Insights - September 2017

President's Message
IANA News
Silver Kingpin Award Winner Bob Huffman’s Story: On the Move
ELD Mandate Draws Ever Closer: How Ready Are You?
Megavessels Trigger Sweeping Intermodal Supply Chain Changes
IANA Salutes Intermodal Truck Drivers
EXPO’s Comprehensive, Dynamic Education Program Covers Intermodal Landscape
Speakers, Moderators Have Wide Range of Professional Credentials
Welcome New Members
Insights - September 2017 - Cover1
Insights - September 2017 - 2
Insights - September 2017 - 3
Insights - September 2017 - IANA News
Insights - September 2017 - 5
Insights - September 2017 - 6
Insights - September 2017 - Silver Kingpin Award Winner Bob Huffman’s Story: On the Move
Insights - September 2017 - 8
Insights - September 2017 - 9
Insights - September 2017 - 10
Insights - September 2017 - ELD Mandate Draws Ever Closer: How Ready Are You?
Insights - September 2017 - 12
Insights - September 2017 - 13
Insights - September 2017 - 14
Insights - September 2017 - 15
Insights - September 2017 - 16
Insights - September 2017 - Megavessels Trigger Sweeping Intermodal Supply Chain Changes
Insights - September 2017 - 18
Insights - September 2017 - 19
Insights - September 2017 - 20
Insights - September 2017 - 21
Insights - September 2017 - 22
Insights - September 2017 - IANA Salutes Intermodal Truck Drivers
Insights - September 2017 - 24
Insights - September 2017 - 25
Insights - September 2017 - 26
Insights - September 2017 - EXPO’s Comprehensive, Dynamic Education Program Covers Intermodal Landscape
Insights - September 2017 - 28
Insights - September 2017 - 29
Insights - September 2017 - 30
Insights - September 2017 - 31
Insights - September 2017 - 32
Insights - September 2017 - 33
Insights - September 2017 - 34
Insights - September 2017 - Speakers, Moderators Have Wide Range of Professional Credentials
Insights - September 2017 - 36
Insights - September 2017 - 37
Insights - September 2017 - 38
Insights - September 2017 - 39
Insights - September 2017 - 40
Insights - September 2017 - 41
Insights - September 2017 - 42
Insights - September 2017 - 43
Insights - September 2017 - 44
Insights - September 2017 - 45
Insights - September 2017 - Welcome New Members
Insights - September 2017 - 47
Insights - September 2017 - 48
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