Readers bwilli123 and Carolinian flagged a must read post by Ryan Johnson, I’m A Twenty Year Truck Driver, I Will Tell You Why America’s “Shipping Crisis” Will Not End. You really really really need to consume it in its entirely. It makes a detailed, cogent case as to why the America’s ports are a mess and why there is no simple and even not so simple way out. No wonder Pete Buttigieg is in hiding, um, on paternity leave, rather than putting his hands on the supply chain tar baby.
I am going to run the risk of oversimpification to pull a few key points out of his compact and well argued post. They serve to reinforce his contention that Americans are royally fucked via where trucking industry deregulation (the first big deregulation initiative, thank you Jimmy Carter) has been amplified by neoliberalism: too many interconnected actors, so diffuse responsibility with contacts creating rigidity and incentives to do nothing, and cowards in government. I’ll argue that there are some steps that could theoretically be taken to get a little more flow through the stuck ports, but even those moves would be seen as too interventionist despite the high and rising cost of standing pat.
The severity of the supply chain crisis combined with the near-certainty that the only actor that could partially (stress partially) clear this logjam is the Feds. They are guaranteed not to do enough even if they understood how the moving parts interconnect.
So it is now a safe bet that the Democrats will suffer a wipeout in the midterms, even if Biden gets his big bills passed (some stimulus!) and there is no Covid surge. Worsening supply shortfalls, particularly of drugs and medical staples, will make the bad press of the Iran hostage crisis look tame.
Johnson describes two shortages: driver and equipment. From the driver standpoint, it sounds as if a crisis was bound to happen at some point, that there was a chronic shortfall of drivers that has tipped into a crisis. As he describes it, many trucking companies won’t even entertain port business because even an unusually speedy trip in and out of a port is still very time consuming. Drivers have to queue three times: at the entrance, for the container pickup, and the exit. These lines are typically bad because ports can’t be bothered to have enough staff.
Bad and now absolutely Gawd-awful waits results in drivers quitting or at least not signing up for port duty because most are paid by job, not by the hour (the exception are drivers who are Teamsters). This is their deal:
Most port drivers are ‘independent contractors’, leased onto a carrier who is paying them by the load. Whether their load takes two hours, fourteen hours, or three days to complete, they get paid the same, and they have to pay 90% of their truck operating expenses (the carrier might pay the other 10%, but usually less.) The rates paid to non-union drivers for shipping container transport are usually extremely low. In a majority of cases, these drivers don’t come close to my union wages. They pay for all their own repairs and fuel, and all truck related expenses. I honestly don’t understand how many of them can even afford to show up for work. There’s no guarantee of ANY wage (not even minimum wage), and in many cases, these drivers make far below minimum wage. In some cases they work 70 hour weeks and still end up owing money to their carrier.
So when the coastal ports started getting clogged up last spring due to the impacts of COVID on business everywhere, drivers started refusing to show up. Congestion got so bad that instead of being able to do three loads a day, they could only do one. They took a 2/3 pay cut and most of these drivers were working 12 hours a day or more. While carriers were charging increased pandemic shipping rates, none of those rate increases went to the driver wages. Many drivers simply quit. However, while the pickup rate for containers severely decreased, they were still being offloaded from the boats.
I am sure there are other equipment shortages, but the one Johnson focuses on is a dearth of chassis, as in the trailer that goes behind the cab. The container companies are supposed to supply the chassis (only a minority of trucking companies own their chassis), but in some over-my-pay-grade process, the containers get matched up to the chassis in port (Lambert had an article in Water Cooler than indicated that unlike rail cars, where railroads pull railcars of other railroads and settle up later, it seems as if these chassis are not fungible. If that’s the case, the need to get a chassis that is owned by or can be charged to the right container company would introduce another big layer of complexity).
So can any knowledgeable readers fill in details? When a truck comes into port, is it only working with one container company, so it *only* needs to dump the container it hauled and then find another (or a particular?) outbound container from the same container company? How does this get booked and how are the chassis managed? Or alternatively, does the driver drop off his container and chassis (as in unhook his truck from the chassis and not worry about the unloading) and then drive his naked cab around the port to where his new chassis and container are supposed to be?
Another way to free up a chassis is NOT to put a container on it to go to a final destination, but to move containers to a warehouse. As an alternative distribution process, this could actually make sense, move the stuff out of where the traffic jam is worst, then shift more of the distribution to final destinations from the warehouses. If done in a deliberate manner, some chassis would be shuttling containers to warehouses in a systematic fashion.
But resorting to warehouses isn’t done in a terribly organized manner, it’s just an expedient. The truck and driver and chassis are again tied up at the warehouse for Lord only knows how long. Johnson reports that former 20 to 30 minute pickups now often take 3 to 4 hours. That chassis has to go somewhere, usually with a container just unloaded back to the port. So the warehouses near ports are getting choked too:
Containers are being pulled out of the port and dropped anywhere the drivers can find because the trucking company lots are full. Ports are desperate to get containers out so they can unload the new containers coming in by boat. When this happens there is no plan to deliver this freight yet, they are literally just making room for the next ship at the port. This won’t last long, as this just compounds the shortage of chassis. Ports will eventually find themselves unable to move containers out of the port until sitting containers are delivered, emptied, returned, or taken to a storage lot (either loaded or empty) and taken off the chassis there so the chassis can be put back into use. The priority is not delivery, the priority is just to clear the port enough to unload the next boat.
What happens when a container does get to a warehouse?
A large portion of international containers must be hand unloaded because the products are not on pallets. It takes a working crew a considerable amount of time to do this, and warehouse work is usually low wage. A lot of it is actually only temp staffed. Many full time warehouse workers got laid off when the pandemic started, and didn’t come back. So warehouses, like everybody else, are chronically short staffed.
When the port trucker gets to the warehouse, they have to wait for a door…the driver gets a door and drops the container — but now often has to pick up an empty, and goes back to the port to wait in line all over again to drop off the empty.
At the warehouse, the delivered freight is unloaded, and it is usually separated and bound to pallets, then shipped out in much smaller quantities to final destination. A container that had a couple dozen pallets of goods on it will go out on multiple trailers to multiple different destinations a few pallets at a time.
Oh, and on top everything else, there’s a pallet shortage too.
Johnson explains why no one has any incentive to fix anything. Desperate shippers will pay premium rates. This may move them further up in the queue but does nothing to improve throughput. The intermediaries like the ports and the warehouses and the port trucking companies will make out like bandits. But they won’t pay workers more so nothing will get better.
Trucking companies that don’t now do ports won’t start doing ports to try to capture a windfall. Johnson explained:
Outside of dedicated port trucking companies, most trucking companies won’t touch shipping containers…There are also restrictions on which trucks can go into a port. They have to be approved, have RFID tags, port registered, and the drivers have to have at least a TWIC card (Transportation Worker Identification Credential from the federal Transportation Security Administration). Some ports have additional requirements.
Johnson pooh-poohs the Biden scheme:
The ‘experts’ want to say we can do things like open the ports 24/7, and this problem will be over in a couple weeks…But every truck driver in America can’t operate 24/7, even if the government suspends Hours Of Service Regulations (federal regulations determining how many hours a week we can work/drive), we still need to sleep sometime….. What we have is a system with a limited amount of trucks and qualified drivers, many of whom are already working 14 hours a day (legally, the maximum they can), and now the supposed fix is to have them work 24 hours a day, every day, and not stop until the backlog is cleared. It’s not going to happen. It is not physically possible. There is no “cavalry” coming. No trucking companies are going to pay to register their trucks to haul containers for something that is supposedly so “short term,” because these same companies can get higher rate loads outside the ports. There is no extra capacity to be had, and it makes NO difference anyway, because If you can’t get a container unloaded at a warehouse, having drivers work 24/7/365 solves nothing.
Having said all of this, Johnson actually provides evidence that there could be a way to alleviate the port mess. Given the shortages of chassis and pallets, it would only increase throughput somewhat, but that’s better than nothing. But I can’t see the Biden Administration having the guts and imagination to implement it (among other things, it would require comprehending that this situation really is dire and set to get worse and radical measures are justified).
Johnson has told us there are manpower shortage: the port truckers, at the ports, and in the port warehouses. The port truckers are the ones with special skills and credentials.
Johnson also said many quit because the delays made working a losing proposition given how their pay is structured.
Fine. Fix the pay. We did the PPP and this is operationally easier.
Have the Administration use its emergency powers (hopefully they can find them in its DoD authorizations; if nothing else, medical supplies and chips are critical for defense personnel and there are plenty of them in the US) to pay all port drivers 4x the Teamsters’ hourly rate if they drive a minimum of 50 hours a week for 10 out of the next 12 weeks. Give 2 weeks in advance as a loan for those that want/need it up front to rearrange their lives. Give trucking companies a 10% bonus for any of their former truckers (who worked for them in the last past year) who haven’t worked in the last two months who come back, paid in arrears, if they work 10 weeks or longer.
Teamsters get a stipend to bring their regular rate up to the same 4x.
This program lasts for a minimum of six months up though the earlier of when port backlogs are cleared (need some metric) or January 10, 2023.
This program would have the advantage (if it lasts long enough) of undermining the old job based pay for most port drivers. It could also pull in some drivers if it does not take too long to get the needed credentials.
Force the ports to hire more people to prevent/greatly reduce queuing at the entrance and exit. Here the Feds could use a combination of carrots and sticks, some subsidies for additional hires and pay increases (designed to be short term) and huge fines if they have preventable queues (longer than X minutes on average for entrance and exit; the Feds can install monitoring equipment; not sure how culpable they are for queues for loading and unloading containers but if they are largely culpable, fines for that too). The fines stay in place after the crisis has passed. The biggest ports need to run a tighter ship.
Force port warehouses to get faster throughput or face big fines. They could also get some incentives in terms of short-term stipends to raise hourly pay levels, synched to timing of the trucker programs. This is where the National Guard could deployed if needed until new hires are put in place.1 If we lived in a different world, the president would demand the heads of the port warehouses make an appearance, and tell them if they didn’t get their acts in gear, they would be nationalized.
Now the labor shortages are only one part of the problem, but the point is that this is more addressable than Johnson suggests if you assume a muscular government. That alternative likely did not occur to Johnson since it has been absent during his professional life, except to save the banking system during the financial crisis and mainly the well off in March 2020. It might take six weeks to two months to see across the board improvements in manning levels, while doing nothing assures more trucker attrition.
In other words, we can’t tell how much these measure would improve matters, but they would help. And they would also increase utilization of chassis and pallets. Again far far from ideal but better than where we are mow. And when as much has been accomplished as can be by addressing the worker end, the officialdom in a better managed world could see what needed to done about chassis and pallets.
But we don’t live in a world like that because markets.
1 The idea of having National Guardsmen drive port trucks (save the handful who might have done that once) is a non-starter. Not only does that require skill (just like forklift operators and think what happens when you use newbies there), but the trucks and chassis almost certainly have insurance policies that require properly credentialed drivers. And they are likely financed, and the loan agreements would presumably have similar provisions.