Drayage and chassis management are fundamental to global transportation

Congestion, compensation, and choices impact efficiency.

As the last two months of 2024 wind down, business is booming at the ports of Los Angeles and Long Beach, California. In September, the Port of Los Angeles handled record volumes, and the National Retail Federation (NRF) expects volumes in the West Coast ports to remain high as the NRF points to an extended peak season, due, in part, to online shopping and the use of gift cards.

The East Coast ports report lower volumes as they attempt to recover from two hurricanes and the first International Longshoremen’s Association (ILA) strike in 50 years. With the potential of a second strike in January, if a final agreement is not met, shippers will continue to divert cargo to West Coast ports.

Historically, the ports of L.A. and Long Beach are some of the busiest in the nation. For the drayage companies doing business at these gateways, high volumes do not always result in increased profitability.

According to the Intermodal Association of North America (IANA), most drayage firms are small operations, with less than ten units in their fleets. Inefficiencies in the supply chain along with excessive detention at cargo facilities can directly impact already razor-thin margins. In addition, motor carrier rates across the board have dropped in recent months subsequently impacting profitability for many providers.

Congestion Contributes to Operational Inefficiencies at Terminals

For drayage firms, the first hurdle is securing an appointment at the terminals where containers must be picked up or dropped off.

“Many terminals have varying hours when trucks and drivers are allowed to be onsite, which requires careful planning by firms and drivers,” said Matt Schrap, CEO, of the Harbor Trucking Association (HTA).

He added, “In many instances, you wait days for an appointment to become available.” Rather than having employees constantly monitor when an appointment is open, technology can be helpful if it is used to notify carriers when an appointment becomes available.

While most firms use this technology responsibly, some book appointments when they become available, although they may not be able to use all the appointments they have selected. This can prevent other firms from being able to use the appointment times.

The second factor that can impact drayage operational inefficiency is the time spent waiting for access to containers. Because drayage drivers are subject to the same Hours of Service (HOS) rules as all truckers, a driver can run out of hours while waiting.

The Federal Motor Carrier Safety Administration (FMCSA) adjusted the HOS rules in ways that benefit some drayage drivers. They can now extend their radius of operation an extra 50 miles under the short-haul exemption. On-duty hours have increased from 12 to 14, but driving time is still limited to 11 hours.

Ensuring Accuracy in Billing Practices and Compensation Can Impact Efficiency

The next challenge to efficiency stems from the need to ensure the accurate application of detention and demurrage billing. In February 2024, the Federal Maritime Commission (FMC) issued a new final rule stating that detention and demurrage invoices must be directed to the party that has a contractual relationship with the billing party for ocean transportation and storage.

The requirement is intended to ensure that the party receiving the invoice has first-hand knowledge of the terms of the contract and is in the best position to understand and dispute charges if necessary. The rule protects third parties, such as motor carriers, who do not have a contractual relationship with the ocean carrier, from unfair billing practices.

“This is a great step forward for the industry,” said Schrap. “We support standardized and reasonable billing practices, which will ultimately improve overall efficiency since firms will not be constantly struggling to interpret the validity of charges.”

Being Able to Choose Chassis Providers Helps Drayage Firms Manage Operations

In the U.S., many container chassis are managed by companies like Direct ChassisLink Inc., (DCLI), Flexi-Van Leasing, and TRAC Intermodal. A past practice of some ocean carriers being able to choose specific chassis’ was challenging because it limited the ability of drayage firms to select chassis providers, making it more difficult to manage operations.

In February 2024, the FMC upheld a 2023 ruling that ocean carriers could not lawfully require that motor carriers use specific intermodal chassis providers to move containers.

The American Trucking Associations’ (ATA) Intermodal Motor Carriers Conference (IMCC) filed a complaint in 2020 against the Ocean Carrier Equipment Management Association (OCEMA), Consolidated Chassis Management, and the world’s largest ocean carriers alleging they violated the Shipping Act by requiring carriers to use specific default chassis providers and denying motor carriers the right to select the chassis provider for merchant haulage movements. This was viewed as a victory for trucking companies.

Safety, Technology Advances in Chassis Management

For companies like TRAC Intermodal, the focus is on making sure all new and refurbished chassis are not only available but also have the most current advances and safety attributes. The company has invested more than $1B to expand and modernize its fleet.

“Additionally, we deploy the latest technology that not only provides the location of where the chassis’ are located but more importantly, provide key telematics that allow us to enhance our utilization and our customer experience,” said Van Noel, EVP and Chief Operating Officer at TRAC Intermodal.

While he recognizes that congestion is a concern for anyone in the international intermodal supply chain, he said, “TRAC works to address this issue by providing a high-quality chassis to allow our equipment to turn as quickly as possible in and out of intermodal gateways.”

Port service providers help companies navigate the international supply chain

With all the many dynamics involved in every global shipment, from securing appointments to being compensated, and having access to chassis’ when and where they are needed, the drayage industry can be complicated.

“The supply chain is fragile, so any disruption can have far-reaching consequences,” said Schrap. “This business is not for the faint of heart.”

That is why some companies turn to port service providers like NFI to manage some or all aspects of the process. Brian Webb, President of Port Services at NFI said, “Our diverse service offerings allow us to navigate periods of unpredictability, such as volume surges, port strikes, and issues on water from the port of origin. We collaborate with our customers to create contingency plans and leverage the greater NFI network to provide flexibility.”

While acknowledging that delays and congestion can be challenging, Webb said, “NFI’s experience and relationships at the ports have allowed us to navigate challenges and create solutions to minimize delays.”

He said that NFI is focused on continuous improvement and encompasses cost reduction, culture, innovation, and more. The company is also making strides in sustainability, a regulatory requirement that could impact the supply chain in many ways.

Are Regulations the Solution for The Drayage and Chassis Operational Efficiency?

A report recently released by the National Academies of Sciences, Engineering, and Medicine stated that policy change would be an impractical solution to making the drayage and intermodal chassis industries more efficient.

However, according to the report, it would be beneficial if existing regulations were enforced more tightly, and more information shared. The report, commissioned by the FMC, recommended that the FMCSA review inspection records to ensure safety standards are met and if the study shows that monitoring is not stringent enough, the FMC and FMCSA should work together to increase chassis quality monitoring, and that the FMC should increase its practice of data sharing.