Dive Brief:
- FedEx plans to start selling capacity on the empty 53-foot containers it imports from China as part of a regular service offering that helps shippers bypass congestion, FedEx Logistics CEO Udo Lange said in an interview. The service will begin in January.
- The containers ship from a South China port outside of Shenzhen to a U.S. West Coast port destination north of Los Angeles and Long Beach. Shippers can cut 20 days' worth of transit time port-to-port through this service by avoiding bottlenecks at the San Pedro Bay ports, Lange said.
- FedEx imports the containers for eventual use in its domestic LTL arm FedEx Freight. "In the past this was imported empty, because it doesn't go on another ship," Lange said. "But we can now take this capacity and sell it to our customers and then go into a smaller port."
Dive Insight:
FedEx's upcoming service offering is one way the company is leveraging the size and scale of its logistics operations to mitigate supply chain issues for customers. But much of the focus still remains on easing congestion at the ports of Los Angeles and Long Beach, which handle 40% of the U.S.'s containerized imports.
"LA can be seen as the heart of the supply chain to a certain extent," said Lange, a participant of the White House Supply Chain Disruptions Task Force. "Now you have a clogged artery there, and you can't just pump it out anymore. Now you really need to do more drastic heart surgery and from then on reintroduce flow."
FedEx was one of several major companies in October that committed to using extended hours at the ports to increase throughput and ease congestion. But making the most of off-peak hours requires each link in the supply chain, including terminals, warehouses and drayage carriers, to operate on an aligned schedule. That's why the San Pedro Bay ports' shift to 24/7 operations will be a gradual evolution rather than an immediate shift, Lange said.
"It's a classic supply chain problem," he said. "You have so many players in there, and everything needs to line up so that you can deliver a stronger value proposition."
But stakeholders have found other ways to chip at the backlog. One issue at the San Pedro Bay ports Lange highlighted is the deluge of empty containers occupying space on docks that could be used for loaded cargo. Lange said he recommended ocean carriers deploy sweeper ships to pick up empties crowding the ports, an action they have since adopted.
"I think I called some ocean carrier CEOs personally, and the port directors did the same, and the government got engaged, and we were successful," he said.
The Port of Los Angeles has had 11 sweeper vessels pick up about 30,000 empties so far, with two more vessels coming to the port this week, Director of Media Relations Phillip Sanfield said in an email Friday. He added that it's unclear how many more sweeper vessels will arrive throughout December, as they come in unscheduled. The Port of Long Beach has seven sweeper vessels expected to arrive by the end of the year, Media Relations Manager Lee Peterson said in an email.
The San Pedro Bay ports are also mulling a dwell fee to incentivize faster container removal, and just the possibility of the fee "has created an impact" and provided more relief at the ports, Lange said. Since announcing the fee Oct. 25, the ports have seen a 37% drop in "aging cargo," according to a press release.
Lange said it's difficult to avoid the effects of container backlogs for freight already at a port terminal. However, FedEx's dwell time for new containers arriving at the ports has "significantly improved," he added. For containers moving by truck, he said dwell times are below eight days, while most containers scheduled for rail transport are moving within three-day windows — both quick enough by the potential dwell fee's standards.
But it will take more companies beyond FedEx to improve throughput at the ports, and Lange said other supply chain stakeholders are putting in their fair share of effort. President Joe Biden said in a White House roundtable last week that the shift to 24/7 operations at the ports has resulted in a 40% drop in containers idling at the docks for more than eight days, and Walmart has seen a 51% increase in its own throughput at the ports after shifting to 24/7 shipping.
"Everyone wants to get the goods out, and I think my learning out of my visit at the ports is you need to manage this more granularly than you did in the past," Lange said.
