Just-in-Time Supply Chains are No More: The Next Inventory Management Paradigm Shift
Port closures and congestion are disrupting supply chains on both coasts, and shippers are working on getting their cargo to North America any way they can.
“In Los Angeles alone, there are more than 50 vessels getting worked, waiting to be worked, or anchored off the coast. This is a first-in-the-industry situation that we’re experiencing, and it has been going on for more than 13 straight months now,” said Paul Brashier, vice president of drayage and intermodal at ITS Logistics.
Every port has been affected by severe congestion since November of 2020, and now demand has further increased as shippers prepare for the onslaught of holiday freight, Brashier explains. “Everybody is hoping to get things into the country before the fourth-quarter surge and that is going to be a challenge and will affect all modes of transportation—not just drayage,” he explained.
Compounding the issue is the fact that delays at one port create a ripple effect along the whole coast.
“In Los Angeles alone, there are more than 50 vessels getting worked, waiting to be worked, or anchored off the coast. This is a first-in-the-industry situation that we’re experiencing, and it has been going on for more than 13 straight months now.”
“On the west coast, vessels usually call L.A. first. Right now, they dwell 12 plus days in LA and then this congestion moves to Oakland and Seattle. Due to the long dwell times in LA, shippers are pulling freight early from the port of LA which only compounds the congestion,” Brashier said, adding that the East Coast is experiencing the same thing. “On the east coast, with Savannah being so congested, you’ll see people pull freight off early in Charleston, but unlike Savannah, Charleston is unprepared to handle the influx. That’s causing congestion in areas that don’t typically feel it. Right now, every port is congested—I’ve never seen it like this in my career.”
With everybody’s supply chain in flux, some shippers are booking any route to get freight to North America. “I had a client that couldn’t get bookings to the U.S., so instead booked from China to Columbia, pulled it off and then booked Columbia to the U.S.,” Brashier said.
Tight capacity requires creativity and flexibility
There has also been a challenge with shippers having containers coming into ports they’re not accustomed to. This requires shippers and providers to get creative. “Container positioning, not just in the U.S. but around the world, is in bad shape,” Brashier said. “We’ve had to get really creative to continue to service our customers at a high level. As an example, we’ve had to utilize transload facilities and bring in dry vans to get containers terminated at their ports of origin. We’ve also had to use flip yards and flat beds to reposition empty containers to container yards all over North America.”
The need to flex and pivot makes it even more important for shippers to work with providers that offer multi-modal solutions across the country. “That regionally-based carrier that always pulls your freight out of L.A. or Savannah won’t be able to help you if your containers end up outside of those markets—then you’ll be trying to work with a new carrier that you’re not familiar with in the spot market,” Brashier said.
“We are also seeing over-congestion at the ramps and rail yards. Rail providers are not able to handle the onslaught of imports, which is causing shippers to pull containers directly from the ocean ports versus rail,” added Kasia Wenker, director of supply chain solutions at ITS Logistics. “Everyone is relying more on port transload facilities and OTR solutions, or multi-node DC networks for inventory staging. What we are experiencing is significant additional transportation costs outside of the ocean freight.”
“We’ve had to get really creative to continue to service our customers at a high level. As an example, we’ve had to utilize transload facilities and bring in dry vans to get containers terminated at their ports of origin. We’ve also had to use flip yards and flat beds to reposition empty containers to container yards all over North America.”
“Having more DC points are actually reducing the overall cost right now. With strategic DC locations across the U.S., we are giving our customers the ability to pivot where they store inventory based on these inbound constraints, and then we can provide final mile solutions for them,” said Wenker. “Everybody’s hands are tied at the moment, and not a lot of solutions are available. We are definitely getting creative on where to store the inventory and how to best to deliver it to help our customers meet their commitments.”
How ITS Logistics is helping shippers by managing transportation from start to finish
Visibility, inventory tracking and inventory control is critical, and dray providers are increasingly doing more inventory control and SKU management to help shippers navigate the current challenges.
“We have software that tracks containers as soon as they hit the ocean, and we’re tracking terminal activity, so we know exactly when a container is available to pull from the port. We’re also storing a significant amount of containers due to lack of receiving capacity at DCs, that means we need to track the contents of containers as well to help customers with inventory management,” Brashier said. “We’re coordinating with the client to say, ‘Hey, the product on these three containers needs to go directly to this fulfillment facility. 3PLs like us are stepping in and managing the supply chain on a SKU-by-SKU basis.”
“We can also direct the containers to multiple DCs across the country to mitigate potential fulfillment capacity constraints. Then our fulfillment team plans which DCs and labor to move the product to the final customer,” added Wenker. “Our services are all connected at the hip and manage the containers by SKU and DC destination.”
“We are also seeing customers taking their product further inland, versus transloading at the port,” said Wenker. “It is critical to have capacity in your standard distribution hub markets to offer alternative fulfillment capacity to your existing supply chain.”
“Shippers are having to manage a whole new supply chain paradigm, which requires the ability to shift gears and find alternative solutions to get product delivered where it is needed the most. The JIT supply chain approach that gained so much traction during the previous economic recession is clearly contributing to the congestion and supply chain breakdowns we’re seeing today,” Brashier said.
“With our customers, we see more inventory, multimodal solutions, multi-DC networks, full tracking technology solutions, and service providers fully engaged with the shippers planning at multiple levels—the next inventory management paradigm shift is here right now.”
Brashier and Wenker both agree that the situation should start getting better after the Lunar Year in 2022. They also note that the West Coast ports should get ahead of contract negotiations at the end of 2022 to avoid similar disruptions to what we’re experiencing now.
“With our customers, we see more inventory, multimodal solutions, multi-DC networks, full tracking technology solutions, and service providers fully engaged with the shippers planning at multiple levels,” said Wenker. “The next inventory management paradigm shift is here right now.”
To learn more about how ITS distribution, fulfillment and drayage services work seamlessly together to help you create a strategic plan for tackling this difficult market, give us a call today.