Chassis Shortages Hit Hard: Why Are Shortages Such a Persistent Issue?

Posted - November 18, 2014

Chassis Shortages Hit Hard: Why Are Shortages Such a Persistent Issue?

Left to right: Sheila Hewitt, Mollie Bailey

By Sheila Hewitt, Vice President, International, Transplace and Mollie Bailey, Director, LCB International Logistics, Transplace

As chassis shortages continue to plague a number of U.S. ports, perhaps even threatening the holiday shipping season, it’s important to understand all of the factors impacting these issues and consider the huge effect they have on shippers, carriers and consumers.

Fundamental changes in recent years to the ownership and management of chassis have significantly contributed to the ongoing problem of shortages. These changes include a complete shift from the traditional model in which the ocean carriers that owned or leased containers managed all of their own chassis, to chassis pool operators and equipment leasing companies taking the role of third parties that own, lease and maintain the entire supply.

With so many changes occurring, the U.S. has been essentially seeking a global methodology of chassis management – countries outside the U.S. have always had a system in which third parties have managed chassis, not ocean carriers. And while ocean carriers have historically struggled with equipment imbalances, the U.S. third parties with these newfound chassis responsibilities have not been overly successful or organized with their management, and chassis management models also vary widely on a regional basis.

When chassis are not properly managed or repositioned, shortages and dislocations become a recurring problem in the highest volume marine terminals such as New York-New Jersey and Los Angeles-Long Beach. And it’s not just coastal ports seeing the effects of these shortages — Midwest ports, specifically Detroit, Chicago and rail container yards in the Ohio Valley, have also been heavily impacted.

But what parties in the transportation industry are the most affected by these shortages?

  • Shippers are bearing the brunt. Ocean contract holders get only so much free time before storage begins at the port or inland container yard – if draymen cannot source an available chassis, the container sits, and storage fees begin to accrue. When this happens, the shipper has no choice but to pay demurrage before the carrier will release the container.
  • Exporters struggle as well, particularly when product is not shipped in a timely manner and begins overflowing their staging areas — or they are forced to lease additional storage space. This also impacts inventory carrying costs, lead time and transit times, as well as required delivery dates.
  • Carriers do not make revenue if their equipment is not in use, and this shortage has continually added increased inefficiencies into the supply chain cycle. In order to maximize revenue, carriers need to have equipment turned as quickly as possible.

Additionally, in LA-Long Beach, the port terminals are simply running out of space. Ocean carriers are being forced to seek space in overflow yards, which brings about additional issues of tracking and security. Many port terminals have even resisted having to give up valuable container space for chassis storage.  With all of these factors exacerbating the problem, the shortages continue.

Stay tuned for Part 2, “Is There a Long Term Solution?” to find out more about this ongoing problem and discuss what those in the transportation industry can do to help turn things around!

What are some other factors from chassis shortages that you’ve seen affect your organization?