Planet Money - Of boats and boxes

Episode Date: November 17, 2021

We take a trip to ports on the east and west coasts to ask what's on everyone's mind: why are they so clogged? And how can we fix it? | Subscribe to our weekly newsletter here.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. So, the ports are clogged. By now, we have all heard this. So, Erika, you went to see what's actually going on. All right. Testing. One, two, three. Port of Los Angeles.

I was driving over here and I had this thought, what if I miss the port? And it is literally impossible to miss the port. It's like its own city out there. It's wild. Was it bananas? Yes. Lots of ships just idling at sea.

There were thousands of containers and all these trucks. There's more stuff coming in than they can move. So as busy as it was, it's not busy enough. It's just piling up. So I guess we had some questions. Where did all these containers come from? Why is this port so big? How did we get this supply chain nightmare? Hello and welcome to Planet Money. I'm Erika Barris. And I'm Mary Childs. Today on the show, 36% of all the stuff we import comes in through the ports of LA and Long Beach. And it's stuck. We wanted to figure out why getting stuff into this country has gotten so difficult. We'll

find out how the system came to be. We go to three different ports to see how the links in the global supply chain became so badly broken. We ask the people trying to fix it what they're doing and if they can maybe get it fixed by the holidays. When I got to the port of Los Angeles, I called up Steve Flynn. He's a professor at Northeastern University. He spent decades studying maritime transportation and port security. And I called him to be my video tour guide. So I'm at, it says berth 35 to 84. I'm on Harbor Boulevard. I drove over the Vincent Thomas Bridge twice to get here somehow. Are you in an area where there's like fireboats and stuff

in front of you? There is a fire station. I'm at, yeah, I'm right in front of it. Steve knows there's a fire station in front of me because he knows the port so well. He basically has a map of it in his head. So he's helping me kind of poke around the port. And normally at L.A., ships didn't wait to dock. Now they're waiting an average of about 14 days. And one reason why L.A. is having problems right now started as a good thing. L.A. grew. L.A. Long Beach has built this magnificent port complex. LA moved the most amount of stuff as quickly as possible for the lowest cost as possible. And it was able to do that in part because it operates in what's called a landlord model port, meaning the terminals where ships dock are leased to private companies. And those companies could invest in making the waterways deeper to accommodate heavier ships.

So the port grew. It's deep enough for the biggest ships to come in, and therefore the ships can turn around very quickly. And there was a lot of space and essentially open real estate as the port really grew in the 1990s and into the aughts and into the teens here for it to handle the growing consumption of Americans that was coming from Asia. And this worked pretty well. LA is close to one of the places where we get the most stuff, China. Stuff came in on containers on ships, was unloaded and hoisted onto trains or trucked to

big warehouses, eventually going to Target or Walmart or an Amazon warehouse. It was this super efficient relay race where everything happened just in time. And so the truck has to arrive at the terminal just in time for it to be offloaded and then quickly reloaded. And so as we drove with this efficiency, we also discovered its size really helped. That there was an economy of scale of having essentially the super container ships, really mega ones. Bigger and bigger ships, bigger and bigger port. But then that created its own challenge of there was only a few ports that had the infrastructure that could handle ships of these size. So the system got more concentrated. The

goal was just to make it low cost to push as much volume as possible through the system. And that's it. That's how we got this complicated, absolutely perfectly tuned, no room for error system. Somehow, all these different entities, the ocean carriers, the port operators, the longshoremen, the rail companies, the trucking companies, the truck drivers, worked together in delicate concert. And like Steve says, this is how what made L.A. Long Beach so great, its huge, efficient, super concentrated, became its undoing. The contours of all this are probably very familiar, but when the pandemic started, factories closed and imports fell off a cliff. But then almost as fast as it stopped, it started again.

People started buying stuff. Way more stuff. So many people were stuck at home. So they shifted what they spent money on from, you know, going to a restaurant or on a vacation to a new fridge, a new couch. And the system just wasn't ready. There weren't enough truck drivers to get containers full of new couches and fridges to warehouses. So containers just sat on the docks at terminals. And until those were cleared, new ships couldn't come in and offload their cargo. All that perfect coordination and efficiency

had been built for relatively predictable demand. This deluge of buying threw off the system. Yeah, it is the most congested I've ever seen it. It's the most boxes that I have seen sitting in the yards to be moved out of the yards into either a railhead or to distribution centers or just on trucks to go to stores. The system is so fragile that when there's a backup of just one day, there's no real way to make it up. The stuff keeps on coming. Steve says the pandemic started the pileup, but it actually just revealed the system's fragility. And so things like thinking through what to do if you have a disruption, what's the plan, how are you going to coordinate that? None of the infrastructure for doing that is in place.

So imagine if the global financial markets, when they melted down in 2008, you had no central bankers, right? How would that work? Right. There's no central bank of the port supply chain system. So now that there is a crisis, there's no one who can look at the whole system and find fixes for it. So for anybody trying to get stuff through the port of L.A, they're like, how do I work around this? How do I get my stuff to market? So they're finding their own little patches and fixes and calling their friends and considering diverting to other ports, like this one just north of Los Angeles. So I would say on a daily basis, we're getting one or two, three inquiries about, can we come

through your port and bring our cargo there? Because we want to get out of the congestion. So you can imagine that's a big topic right now. Kristen Dekas is the CEO at the port of Wainimi. It looks nothing like the port of L.A. It is so much smaller. You'll see that there really isn't congestion here. Cargo is moving fluidly. And that's what our goal is to keep that in check.

Okay, LA is clogged. Wainimi is not. So I'm here to see if Wainimi can solve LA's problems. The tiny port of Wainimi brings in tons of cargo. Tony Ryan, head harbor master here, says it's mostly cars and bananas. Billions of bananas. So many that the town has a banana festival every year. Yes, these containers, they're a combination of full and empty. They're full of fruit from Central America. Today at the port, one ship is docked. Another one is coming in this afternoon. Then two more tomorrow. And then... Let me just get this one. This is important. Harb Master, Tony speaking.

Hey, Tony. Morning. What do you got? So Chiquita made up some time. Tony gets this call. A ship is coming in earlier than expected, and great. But one ship coming in a little early, deviating from the schedule, throws everything off. And Tony has to figure out, can we make this work? It looks like they may want to come in on arrival. Okay. Well, that's interesting news. That's a nice little wrench in the gears. We'll make it happen.

The first problem Tony needs to solve, do they have the workers, the crane operators, the truck drivers, a pilot boat captain to steer the ship into the harbor? They want to come in pilot time at 1 a.m. Oh, OK. So then the 2130 has now been pushed back to 1 a.m. OK. Are you going to work a hoot? A hoot is the overnight shift, you know, because that's when owls are up and hooting. A year ago, this port wasn't seeing this much traffic. They didn't really have to do hoot shifts. But imports to this port are up a lot.

And stuff just keeps on coming. So in the last few months, these shifts have become pretty regular. So, okay, Tony has sorted the workers. Next, he needs to make room in the harbor. He's going to have to shuffle some ships around. I'm going to see if we can slide them down because, see, that's going to domino effect with my Del Monte. They need to go to berth one, so Chiquita goes into berth three. Del Monte comes into berth one after She-Lan three. Now, Monty comes into birth one after Sheila leaves. Correct, correct. So that'll be the plan.

So that's the plan. Time to shimmy this giant ship into the harbor. See, what you're hearing now is the pilot on board the ship talking to the tugboats. This whole process took about half an hour. Eventually, the ship just squeaks in. It was a ton of work and coordination just to get this one ship in. And this ship holds like one-tenth the number of containers of one of those ships outside of L.A. and Long Beach.

Some of the ships that you see anchored off of Long Beach, they're so big they can't fit through the Panama Canal. That's what they call them post-Panamax ships. Bigger ships, more cargo. Makes sense at the time. There's no way to get these post-Panamax ships to come into this harbor. It's just too little and they don't have room to widen it, at least not anytime soon. But there is one way Wainimi can help relieve congestion at the port of L.A. right now. Cargo on those giant ships that would have gone to L.A. can go on smaller ships that can squeeze into this harbor. And that's what they're doing. It's already happening. Companies that are already coming into the Port of Wainimi, like

Del Monte and Chiquita, they're leasing out space on their ships to bring in stuff that they don't normally carry, like furniture, clothes, toys, musical instruments, alongside their regular bananas and mangoes and pineapples. The operations manager at Del Monte told me they're becoming like the Uber of container moving. So, OK, great. Maybe a bunch of little ships can help unload the big ships and bring some of the stuff to Wainimi. Like, every little bit helps, right? Except for one problem.

So even though the ship's ready to go, labor's ready to go, they don't have enough of these chassis to load these containers on. That's the problem right now, yeah. A chassis is like a flatbed with wheels. It's like the skeleton of a truck. But it's what makes a container mobile. So once a ship docks, a container's loaded onto a chassis, and then it's a trailer. It gets attached to a truck, but it's what makes a container mobile. So once a ship docks, a container is loaded onto a chassis and then it's a trailer. It gets attached to a truck. It depends on the port,

but chassis are generally owned by the individual ocean carriers that bring stuff into a port. So when one ocean carrier has a ship coming in and it doesn't have enough chassis, its containers kind of just have to wait stacked up at the port. And another company could have available chassis just sitting at the port. But there's no real way for a shipping company to be like, oh, hey, other shipping company, do you mind if I borrow those chassis really quick? So kind of counterintuitively, a port can end up with a whole bunch of chassis sitting there when there is also a chassis shortage. But I'm looking right now and I see like, I'd say, would you say like 100 of them?

Oh, I'd say about 200. Yeah, 200 chassis. Some are dedicated to their companies and some are, I don't want to say hoarded, but some are, they just, you know, don't want to share them, obviously. A lot of these chassis are standing by in L.A. Long Beach waiting for the, they don't want to bring them up here to support the little bit of cargo that comes in here because they're worried that if they come up here, then they may be losing out opportunities down there. So these chassis, they're owned by Del Monte or Chiquita. And these companies are trying to figure out where to get more. Del Monte, for example, is bringing chassis up from Texas and Central and South America. When a company calls and says they want to bring a shipment in, the port tells them,

yeah, we may have room to store your cargo and we have labor. But when they say, oh, but we don't have chassis, that kind of ends the conversation. For this port, this is the point of fragility. This is where everything breaks down. Chassis. And it's not just Wainimi. This is the point of fragility. This is where everything breaks down. Chassis. And it's not just Wainimi. This is a problem at just about every port across the country. There is one single port in the country that has figured out this chassis problem. We go there after the break. So the one place where chassis are not really a point of fragility is the port of Virginia. We went to Norfolk.

Can you guys tell me what you had for breakfast? What I had for breakfast? You really want to know? I had oatmeal, milk and banana. Now you know. Stephen Edwards is the CEO of the Port of Virginia. And here, chassis are less of a problem because Virginia is organized differently. It is not a landlord model like L.A. or Long Beach, where the terminal operators rent the space and run it themselves. Virginia, the state, actually owns most of its ports, and it manages all of them. Six little terminals, all under one company, in what people here call the Virginia model. We operate all the assets. We're responsible for the management of the port. All the terminals are operated by the Port of Virginia, and our subsidiaries, they're owned by us. The capital investments are made by us.

So we have a different business model entirely. And for a long time, that different business model wasn't really the better one. Since the 90s, while L.A. was thriving and growing and private terminal operators competing and investing, it was hard at times to get taxpayers to invest in the ports, so they stayed relatively small. But right now, the Virginia model is proving to be a tactical advantage. Like, say one terminal is too full at L.A. Moving, pivoting to another terminal means renegotiating contracts with all the other steps of the unloading process. The truck drivers and longshoremen and warehouse operators and railroad companies, all that negotiation could take months.

It's a bit like being in an airport, right? So you're expecting to fly out of gate A17. But heck, the plane's turned up late and now we're going to be diverted to gate A72. And everybody's got to walk from A17 down to A72. In Virginia, they're like, oh, is the port at, say, Newport Newsville? Come right over here to Norfolk. This central organization was key in their chassis supply management. It all started when the Port of Virginia realized they had all these chassis floating around the terminals. This was in about 2007. And just like at Wainimi, the chassis were owned and managed by each different ocean carrier, each brand. So when one ocean carrier wasn't busy,

their chassis would just sit there. And the Port of Virginia was like, this is super inefficient. So they told the ocean carriers, listen, let us take your chassis. We will pool them and manage them for you. This way, Virginia could mix and match the chassis from a central pool. And a lot of the ocean carriers agreed to do this, but some were reluctant. So the Port of Virginia told them, you are more than welcome to operate the old way and manage your own chassis. But you just can't keep them on our terminal. Which meant, practically, the ocean carriers would have to go find a field, buy or rent it, pave it, put a fence around it, maintain it, manage it, and transport the chassis to and from the port. So once they figured all of that out, they were like, oh, no, yeah, take our chassis. That's fine.

So the Port of Virginia created their chassis pool. They now own 16,000. They lease them out for less than $10 a day. And right now they're the only port in North America that owns their own chassis pool. South Carolina, which is also centrally operated, got inspired and is creating their own chassis pool, which should be ready by early 2023. So owning your own chassis pool gives you a way to manage the chassis availability. There was a Thursday in September where our chassis team knew that on the Monday there would be a shortage. So they were able to reach out to the major importers to bring those back to the

port. And that probably freed up about 500 extra chassis for availability on the Monday morning. Like the port of Wainimi, they needed more chassis, but there was something they could do about it. So it's not as bad, but the port of Virginia still needs more chassis. Chassis that used to be checked out for two or three days are now gone for almost two weeks. Virginia has ordered more chassis, except guess what? Chassis are made out of things like wheels and steel and are created using labor and are shipped from China in containers. So... The Port of Virginia doesn't not have problems. When we visited, it was pretty quiet. Even the birds are quiet.

A ship had come in that morning, but they had already cleared everything out. Little trucks they call hustlers were moving containers here or there, getting them onto trains or ready to go onto trucks and onto the highway. But otherwise, it was almost peaceful. No clogging, no backup, no ships floating out on the horizon waiting their turn. Which is kind of amazing. That's really an achievement right now. But it's also this peaceful in part because it's on the wrong side of the country.

We import stuff from Asia through L.A. and Long Beach because it's closer. It's easier, or was easier, to get to Virginia or anywhere on the East Coast. It's a much longer trip. Remember, you got to go through the Panama Canal, it's a much longer trip. Remember, you gotta go through the Panama Canal, which some of those enormous ships can't do. The Port of Virginia says that some carriers are changing their routes, ditching LA for the East Coast for good. And maybe that is permanent. Maybe that will happen more. But even if so, it's still going to be marginal. The entire East Coast, the ports of Philadelphia, Baltimore, Charleston, New York, Newark, Savannah,

they all combined move so much less than just the port of L.A., like millions fewer containers. So whatever problem an ocean carrier is escaping in L.A., they're kind of just trading it for a new one at whatever port they choose. Wainimi, no chassis. Virginia, more far. When people talk about the problem at the ports, it's a million different little problems. The system is this enormously disconnected series of things in an incredibly delicate balance. Because it developed in this haphazard, organic, weirdly state or city-specific way, each part is a little different and each little difference has its own problem.

So all these individual businesses made individual choices to operate in the most profitable way. It's not economically sensible to pay way more for the more resilient thing, for using the smaller ports or the smaller ships on the off chance of a once in a lifetime pandemic. But the most profitable way is often the most fragile way. And collectively, the sum of all of these choices is extremely fragile. And the forces of our economy, the current structure, will always create this outcome. Even now, businesses are not super interested in making expensive investments to fix this snarl because it's probably going to go away. They have to pay up a little now for like a container, but that's still cheaper than trying to remake the whole system. So they're just planning to get through it.

Congress just passed a massive infrastructure bill and it gives the ports $17 billion, which will absolutely help. But for the most part, it'll be years before that money actually becomes a crane or a chassis. So it might be too late for this Christmas. Maybe this year, shop super local. We love to hear from you. We are planetmoneyatnpr.org and we are on all the social media platforms. We are at Planet Money.

This episode was produced by Emma Peasley with help from Andrea Gutierrez. It was mastered by Isaac Rodriguez. It was edited by Jess Jang. Alex Goldmark is our supervising producer and Louise Story and Ebony Reed are our consulting senior editors. Special thanks to Gene Sirocca,

Phil Levy, Nathan Strang, Raymond Rios, Jake Wilson, and Jessica Alvarenga. I'm Erika Barris. And I'm Mary Childs. This is NPR. Thanks for listening. What is this for, I'm sorry?

This is for NPR. Okay. This is Steve Mosby. He is a longshoreman at the Port of Norfolk. Do you have suggestions for L.A.? You've got to move the boxes. Boxes have got to be moved 24-7. You've got to move them. They want to fix their problem. You can't just take them off the ship. You've got to get them out of the gate, too.

I'll pass that along. All right. Thank you so much. gate too so i'll pass that along all right thank you so much and a special thanks to our funder the alfred p sloan foundation for helping to support this podcast