ProLogis Supply Chain Review
Trends from the World’s Supply Chain Leaders
Spring 2007
Professor Arnold Maltz, Co-author
Professor of Supply Chain Management
Arizona State University
Professor Thomas Speh, Co-author
Professor of Distribution
Miami University (Ohio)
Import-Driven Warehousing in
North America
I
mport-driven warehouses are those that specialize in handling
imports. While the majority are located near coastal ports, many also
are found at “inland ports” such as Chicago, Atlanta, and Dallas.
We conducted 23 interviews at ten major North American ports to
investigate whether import-driven warehouse exhibit systemic differences
from their domestic counterparts.
Import-driven warehouses, we found, are either dedicated strictly to
transloading operations or to a combination of transloading and customer
fulfillment operations.
Leonard Sahling, Editor
First Vice President
ProLogis Global Research
303-567-5766
[email protected]
www.prologisresearch.com
Inside this Issue…
Executive Summary.....................................2
The Import Supply Chain Process........... 2
Import-Warehouse Operations................ 4
Current Conditions in the Import
Supply Chain......................................... 5
Summary............................................. 10
About the Authors................................ 12
About ProLogis..................................... 12
Two key features distinguish import-driven warehouses from the rest
of the pack: (a) the extreme volatility of their daily workloads and (b) the
spottiness of accurate, timely information about ship arrival times and
container deliveries.
Import-driven warehouse facilities are typically long and narrow, with
multiple dock doors and abundant trailer parking lots and drop yards for
container storage.
Import-warehouse efficiency and productivity depend not just on
how well warehouse operators execute their own functions, but also on
how well the other players in the import process (e.g., customs brokers
and forwarders, longshoremen, drayage operators, steamship lines, and
stevedore companies) execute theirs.
Import warehouses face “lumpy demand,” largely because the
inbound containers are being transported by huge vessels that make
scheduled but infrequent stops.
An import-warehouse’s backlog can surge from zero to fifty containers
(or more) in a single day depending on the pace of unloading, customs
clearance, drayage, and the warehouse operator’s own efficiency.
Better inbound information and visibility could contribute to improved
planning and efficiency. However, accurate real-time information about
ship arrival times and status is spotty and subject to frequent revision.
Inconsistent communications between shipping lines, brokers,
draymen, and importers exacerbate the planning and execution difficulties
for the operation at the end of the line — the import warehouse.
“A modern container port is a factory
whose scale strains the limits of
imagination.”
— The Box, by Marc Levinson
(Princeton University Press, 2006), page 4
Gantry cranes unload containers from the ship to the wharf,
where they are either stacked or transferred directly onto
railroad flatcars or chassis for local truck delivery.
Executive Summary
As world trade grows, so does the volume of
container traffic through the nation’s ports.
Last year, the United States spent $1.88 trillion
on imports, much of it brought in via 46 million
TEU’s [twenty foot equivalent units] of container capacity.1
Like traditional factories, container ports also
need nearby warehouses. The initial promise
of containerization was to minimize handling
on the docks, and this promise has largely
been met. Many of the warehouses that have
proliferated near the ports (along with others
that are located far inland) are used as staging areas where inbound ocean containers are
unloaded and the goods processed, sorted,
and shipped to their next destinations.
it became clear that the import warehouse
is embedded within the import process and
that import warehouse operations cannot be
understood except in the context of the overall
import process. Accordingly, our key findings
apply not just to the import warehouse, but
also to the import process, the other participants in the process, and the interrelationships among them. (See Exhibit 1.)
What we found, in short, is that import-driven
warehouses do exhibit systemic differences
from their domestically-driven counterparts.
Granted, the sample size of our survey is too
small for the results to be regarded as definitive.
Yet we would point out that the warehouses that
we visited specialize in handling imports and
that their operators regard their ability to handle
container traffic as a core competency and key
skill that set them apart competitively. Hence,
though we cannot provide a definitive answer,
the market has.
The Import Supply Chain Process
In some ways, import-driven warehouses operate like any other warehouse. Inbound product
is received, stored or cross-docked, and then
shipped to the next point in the supply chain.
The aim of this research study was to discover
whether warehouses primarily devoted to the
handling of imports exhibit systemic differences
from those that are domestically driven.
Each import warehouse must plan its receiving workload based on the performance of,
and information from, five different organizations — steamship lines, forwarder/brokers,
terminal operators, drayage companies, and
Customs/Border Patrol. The scale of the input
is highly variable and also potentially much
larger than the processing capacity of the
warehouse. Consequently, a warehouse’s
backlog can surge from zero to fifty containers in a single day depending on the pace of
unloading, customs clearance, and drayage
as well as the original ordering pattern of the
import customer.
We conducted 23 interviews at ten major
North American ports. From these interviews,
The import supply chain process — i.e., who
does what — was essentially the same at all ten
• Prologis Supply Chain Review
ports that we visited. Container ships call on
specified terminals within the port, which may
be operated by the steamship lines or by terminal operators. Ships often arrive in clusters
owing to weather and scheduling constraints.
Containers are unloaded by either fixed cranes
or mobile gantry cranes, depending on the terminal and the ship’s configuration.
Unionized longshoremen are the only ones allowed to unload containers from the ships and
to handle containers while they are on port
property. The ILWU wields substantial economic
power and influence over the West Coast ports,
and thus plays a key role in the import supply
chain process.
Typically, containers coming off a ship are
stacked on the dock to await pickup, though
some may be put on a [truck] chassis immediately. Alternatively, containers can be transferred from ships onto rail cars — directly if
“on-dock” rail service is available or indirectly
if the containers have to be drayed to off-dock
rail facilities. In either case, the rail cars will be
assembled into a unit train (i.e., one where the
rail cars are all routed to the same destination),
and those cars and the containers that ride on
them will be landbridged to inland ports.
Railroads provide two different kinds of intermodal links. Some unit trains haul the ocean
containers directly inland to international
intermodal facilities. Alternatively, unit trains
may haul 53-foot trailers (after transloading)
to separate domestic intermodal facilities. The
railroads operate two different kinds of inland
intermodal hubs; the equipment used to haul
ocean containers is not the same as that used
to haul 53-foot domestic trailers.
Most containers and chassis are the property
of the steamship lines. Importers are typically
given three-to-five days to pick up their containers, although the free-time period can be negotiable, especially for large customers. Beyond
this free period, importers will be charged a
daily rate — i.e., demurrage — for extended use
of the container.
Drayage companies are short-haul truckers
who pick up the ocean containers and remove
them from the docks. Pickups typically occur
in response to delivery orders (DOs), which
Exhibit 1: Key Findings of the Port Warehouse Study
The Import Process
• Varies dramatically in efficiency from port to port
• Involves multiple participants – steamship lines, stevedore companies, forwarders, brokers, port authorities, terminal operators, longshoremen,
drayage companies, warehouses, and rail and trucking firms
• Always impacted by longshoremen union rules
• Has no centralized single source of information
• Subject to frequently changed, “evolving” security measures
• Will have to cope with significant growth and congestion into the foreseeable future
THE IMPORT WAREHOUSE (vs. domestic warehouses)
• Functions as a transloading operation, a storage and distribution operation, or some combination of the two
• Is subject to even more external, difficult to control influences including weather, ship schedules, local geography, port congestion, chassis
availability, offshore manufacturer practices, traffic congestion, etc.
• Must cope with greater variability in partner performance, as reflected in substandard loading, inaccurate and missing information, and
unpredictable workloads because of variability in pickup and delivery times.
• Is therefore more dependent on managing relationships with numerous participants in the import process – steamship lines, brokers/
forwarders, stevedore companies, longshoremen, customs, drayage companies, and outbound transportation firms (rail and truck)
• Often must adapt to incomplete or imperfect information, especially from developing country sources and during the unloading process
• Will be moving further from the ports where containers are taken off the ship
Source: Authors.
www.prologisresearch.com • are placed by customs brokers after (a) goods
have been cleared [or pre-cleared] by U.S.
Customs and Border Patrol and (b) all fees have
been paid including steamship charges, duties,
taxes, port charges, and forwarder fees. Some
import-driven warehouses are taking advantage of foreign trade zones and the CustomsTrade Partnership Against Terrorism (C-TPAT)
program to expedite customs clearance.
Increasingly, containers are being pre-cleared
through customs. To qualify, all customs documents must be completed and sent to U.S.
Customs before the ship docks. Once DOs
have been placed, the containers are ready for
pickup. Containers frequently are drayed from
the ports to drop yards rather than directly to
the warehouse, to avoid demurrage fees for
violating free time provisions.
Glossary of Terms:
1. Demurrage: a penalty fee assessed when containers
or other cargo are not moved off a wharf before the
free-time allowance expires.
2. Drayage: short haul truck transport from wharf to
rail yard, drop yard, or import warehouse.
3. Drop yard: temporary “parking lots” for containers
or cargo, located off the wharves and sometimes
next to rail yards or import warehouses.
4. Floor loading: containerized freight is usually not
palletized. Instead, the bottom layer of boxes is
loaded onto the floor of the container. As a result,
more boxes can be loaded into a container, but the
containers take much longer to unload.
5. Inbond: refers to imported product that has been
unloaded from the ship but still owes customs fees
and tariffs and thus has not yet cleared for entry.
6. Landbridge: railway transport of ocean containers
from wharves to inland ports, where the containers
are then unloaded.
7.
Stevedores: labor management companies that
provide equipment and hire workers to transfer
containers and cargo between ships and docks.
8. Transload: operations where inbound ocean
containers (or other cargo) are unloaded, palletized,
and then reloaded (typically into 53-foot over-theroad trailers), for railway or road transport to a final
destination.
9. Unit trains: railway trains where all the rail cars are
being routed to the same final destination.
• Prologis Supply Chain Review
Drayage companies typically are staffed by
owner-operators who are paid by the trip.
The productivity of draymen varies greatly
based on the congestion and efficiency of
the port and the distance to the warehouse
delivery point. Drayage operators can make
as few as two trips per day at crowded ports
in congested cities where the import-driven
warehouses may be located 50-to-100 miles
from the port, or as many as six trips per day
in less congested traffic locations. Productivity
also varies by time of day, as shown by the
relative success of the PierPass program at
LA/Long Beach.2
Drayage operators deliver the containers either
to an offdock train yard or to an import warehouse which may be operated by third parties
for multiple clients, third parties for a single
client, or by the importers themselves. We
encountered all of these variations. The largest
import warehouses — some of which have footprints exceeding two million square feet — are
operated by or for major retailers. Electronics
and automotive companies also have significant
container import operations.
Import-Warehouse Operations
Import warehouses are used either strictly for
transloading or for a combination of transloading and customer fulfillment.
1. Transloading operations are designed
to empty inbound ocean containers as
quickly as possible and reload the contents
into domestic containers and trailers for
transshipment further inland.
Domestic containers are larger than ocean
containers — 53’ x 8.5’(wide) x 13.5’(high)
for over-the-road trailers versus 40’x
8’(wide) x 8.5’(high) for ocean containers. Hence, the imported contents from
three ocean containers will fit readily into
two domestic containers, resulting in a
significant freight saving that offsets the
cost of the extra handling.3 (See Figure 1.)
Additionally, when the domestic containers
are loaded, inbound freight from the ocean
containers can be mixed and matched in
conformity with the latest demand information; and the domestic containers will
then be routed to an inland distribution
facility or directly to a retail store.
2. Customer fulfillment operations are
designed to unload the ocean containers,
sort the contents, and then hold the
inventory for disposition. In some
cases, the product has been imported in
anticipation of orders, and the customer
postpones commitment until demand
materializes. Some products may need
finishing, including special labels, different
pack sizes, or quality assurance checks.
In many cases, products from different
origins are combined into store-specific
assortments at these warehouses. These
warehouses are also used for “quota
buys,” where goods subject to import
quotas are bought when they are available
and stored for future use.
Import warehouses are often used to hold
seasonal inventory for future demand.
They may be used, for example, to store
fake Christmas trees, bought in January or
February and stored until the next holiday
season. The retailer thus avoids the peakseason shipping charges, and the cost
savings for non-premium transportation
far outweigh the inventory holding costs.
Those portions of import warehouses
dedicated to transloading operations are
physically configured to minimize the distance
between inbound and outbound containers.
The facilities themselves are long and narrow,
typically 60-to-120 feet in depth. They also
feature numerous dock doors as well as
abundant trailer parking lots and drop yards
for container storage.
Finally, the foremost mission of import warehouses is to consolidate imports from various
origins and deliver them to domestic distribution centers, to stores, or even to consumers. Hence, such warehouses must have good
access to outbound transportation, typically
truck for relatively close destinations (500
miles or less) or rail for longer haul shipments.
Current Conditions in the Import
Supply Chain
Import warehouse managers are not masters
of their own fates. Rather, their efficiency and
productivity depend not just on how well they
execute their own operations, but also on how
well the other players within the import supply
chain — the steamship lines, longshoremen,
freight forwarders and customs brokers, and
the Customs and Border Patrol personnel
— execute theirs.
Steamship Lines
Warehouse personnel, virtually without exception, pointed to the shipping lines’ current
standard business practices as a major source
of volatility and uncertainty in the import supply chain. Ocean carriers are building larger
and larger ships that make infrequent stops
at each port, causing import warehouses to
experience wide swings in demand.
When a ship docks, it may offload 90 containers in three days destined for a particular
warehouse, then leave and not return for four
weeks, or more. Beyond the problem of vessel scale, the oceangoing environment also
makes predictable arrivals difficult. Although
the typical ocean transit time from China to
LA/Long Beach was reported as 14 days, there
is considerable variability because of weather
and other factors.
Better information and visibility could contribute to better planning. Unfortunately, accurate,
real-time information about ship arrival times
and status is not always available. Warehouse
operators can track incoming containers via the
port’s website, the steamship company’s site,
or the customs broker’s information system.
However, several operators noted that these
ETAs are subject to frequent change. The
private/dedicated warehouses we surveyed
typically relied on the broker for container status and information, and in one case received
a daily log from a consolidator in Asia. By the
same token, several warehouses also reported
reluctance on the part of brokers to share information with a third party warehouse.
Longshoremen, Brokers, Customs, and
Terminal Operators
Once the ship docks, the containers have to
be unloaded and made available for pickup.
Readying them for pickup involves several
steps:
•
Physically handling and staging the containers on chassis
www.prologisresearch.com • •
Obtaining Customs clearance for incoming
goods that have not been pre-cleared
•
Insuring that all duties, tariffs, and other
fees have been paid
•
Informing both the drayage company and
the warehouse that the container is ready
for pickup and delivery
All of this activity centers around container
handling at the ports, and our warehouse
respondents highlighted several issues that
affect their performance:
1. Tariffs, Fees, Customs Clearance, and
Security
Today, the overwhelming majority of inbound
containers are precleared, handled through
a Foreign Trade Zone (FTZ), or inbond. For
example, the Miami warehouse we visited does
a considerable amount of transshipment where
goods are moved from one vessel to another
and never cleared for U.S. entry, while another
dedicated warehouse was located in a FTZ to
avoid the customs clearance issues that impede
the flow of imported goods through ports.
Customs clearance is mostly electronic today,
but we did find instances of delays before
containers were released. In general, forwarders/brokers will not release a container until
the various fees, tariffs, and duties (if any)
have been settled.
Security is also becoming an increasing concern for two reasons. First, if a container is set
aside to be x-rayed and checked by Customs,
it can be delayed two to three days. One of
the advantages of participating in the C-TPAT
program is that it reduces the probability
that containers will be physically inspected.
Second, security requirements are frequently
changed so that pickup processes cannot be
stabilized and planning is more difficult.
Figure 1: How Transloading Works
0ORT5NLOAD
#ONTAINERS
"EING5NLOADED
$RAYAGETO4RANSLOAD
$OCK$OORS
4RANSLOADING
&ACILITY"UILDING
Note: 6 ocean containers (each 40’x 8’[wide] x 8.5’[high]) = 4 domestic containers (each 53’ x 8.5’[wide] x 13.5’[high])
Source: Authors’ interviews.
• Prologis Supply Chain Review
“[K]eeping the ship moving is what
matters most. Only the biggest ports
are worth a time-consuming stop.”
— The Box, by Marc Levinson, p. 272
2. Hours of Operation
Container pickups usually are allowed only
during the day shift, Monday through Friday,
unless special arrangements are made. (See
Exhibit 2.) Verified exceptions to this general
rule are the Port of Vancouver, where at least
one terminal allows pickups until 8:30 PM; the
Ports of LA/Long Beach, where at least some
pickup service is available under the PierPass
program 24 hours a day during the workweek
and from 8AM-to-6:30PM on Saturday; and
New York/New Jersey where Saturday pickups
are allowed at Port Elizabeth. Working outside
these regular hours is extremely expensive
under the existing labor contracts.
Limiting ports’ hours of operation exacerbates
congestion at the ports, degrades the efficiency
of the import supply chain, and increases both
direct and indirect costs. Ships are unloaded
usually around the clock, but pickups must be
made during an 8-to-12 hour window. Hours can
vary by terminal within a port, further complicating pickup operations. The requirement for
daytime pickups also puts the drayage carriers
in heavier city traffic, a problem that is particularly acute in Miami, Seattle/Tacoma, and LA/
Long Beach. Restricting pickups to the daylight
hours also increases emissions from the drayage
vehicles.
Moreover, many warehouses do not operate
24x7 and cannot receive containers during third
shift hours. However, most of the import warehouses we interviewed did have provisions for
dropping trailers after regular business hours.
3. Chassis and Dock Space
Ports all have a limited supply of chassis available at any point in time, and these chassis
may or may not be pooled among shipping
lines. Plus, the docks have limited space, so
that it is not practical for every container, as it
Containers are stacked four, five, or six high. When the drayage
truck arrives, the container that the driver wants may be at the
bottom of the stack.
is unloaded, to be placed on a chassis. Instead,
containers are often stacked up to five or six
high, as they are unloaded.
Pickups are often constrained since the drayage
driver must have a chassis for the container,
and the container that he wants may be at the
bottom of a stack. Chassis shortages were
mentioned at several ports in our study. In
any case, the pickup requires a longshoreman
to locate the container needed and put it on a
chassis, adding extra steps to the process.
Some ports are experimenting with RFID tags
on containers to improve their ability to locate
specific boxes. One port (Vancouver) has
instituted a reservation system for pickups.
Also, some private warehouses reportedly use
their buying power to have incoming containers
placed directly on chassis, rather than being
stacked.
4. Delivery Orders and Other
Information
Pickups are not initiated until the forwarder/
broker issues a delivery order (DO) that serves
to admit the drayman to the port. We found
that DOs are still paper documents in most
ports, although a paperless entry system is in
place at New York/New Jersey.
www.prologisresearch.com • “As ships got bigger, ports got bigger.”
— The Box, by Marc Levinson, p. 235
emphasized at every port that we visited. In
fact, many third-party warehouses employ
their own draymen for pickup, and the private
warehouses typically insist on dedicated
drayage personnel. Most ports do not have
enough draymen for optimal service.
Once the correct container has been located, it is lifted onto the
drayman’s chassis and then transported either to an offdock train
yard or to an import-warehouse.
There are two problems with the paper delivery order procedure. First, delivery orders
sometimes were not issued promptly to the
warehouse, thus delaying the pickup. Second,
sometimes the fees and tariffs were paid and
the delivery order issued before the container
was physically ready for pickup, resulting in
delays on the dock or a wasted trip.
The discrepancy between physical status and
delivery order accuracy is part of a larger
problem — lack of visibility and information
accuracy. Although most of the warehouses
rely on the brokers and the shipping lines for
container-specific information, only a few companies had visibility between the docking of the
vessel and the notification that the container
was available for pickup.
Additionally, visibility to the exact contents and
destination of the shipment was not consistent, which hindered the planning of warehouse
operations. In fact, several steamship lines
will not show any containers available until all
the containers destined for the port are off
the ship. Expected time from vessel docking
to availability for pickup varied considerably
among ports. (See Exhibit 2.)
Drayage/cartage
Draymen are the direct link between the port
and the warehouse, and their importance was
• Prologis Supply Chain Review
Ports differ greatly in the number of pickups
per shift averaged by draymen. (See Exhibit
2.) These differences reflect variations in the
sophistication of the ports’ control systems,
traffic and port congestion, longshoremen efficiency, and information accuracy.
Draymen are essential to keeping port operations “well oiled.” It is they who respond to the
DOs as they are received from the broker/forwarder. Since DOs occasionally are “surprises”
and may also be incomplete or inaccurate, it
can be a challenge to have enough draymen
available when needed.
Equally important, draymen are dispatched to
pick up containers and move them from the
port before the “free time” at the port expires.
If a container is still at the port after the free
time period has expired, the shipping line will
assess demurrage charges of $85 per day or
more. Allowable free time varies across the
ports. (See Exhibit 2.)
Warehouse Operators
There are similarities as well as differences
between the operations of import warehouses
and their domestic counterparts. For example,
transloading is similar to cross-docking, except
that savings are gained by using larger outbound vehicles or unloading overweight containers. Other warehouse operations — e.g.,
receiving, putaway, staging, shipping — are all
substantially the same whether the goods are
from domestic or foreign manufacturers and
suppliers.
However, the level of control, information
support, and requirements for value-added
services are very different for imported goods.
One big difference, for instance, lies in the
huge variation in loads to be handled, often
with inadequate notice. Operators strive to
have the containers removed from the port
quickly to avoid demurrage fees incurred after
the free period has expired, and they also
strive to empty containers within 24-to-48
hours so they can be returned without demurrage charges.
Another major difference turns on the spottiness of reliable, timely information. One
third party said that information on domestic
inbound was far better than for imports, and
that domestic shipments could be received
by appointment with complete Advanced Ship
Notice information available. In contrast, this
third party receives little or no notice of a
container’s arrival until the broker starts the
entry as the ship arrives.
Imported product is also likelier to require
value-added warehouse services. Most containers from China, for example, have been
floor-loaded, and one of the services commonly provided by import warehouses is to palletize the product. Product quality has improved,
especially from China, but many warehouses
are still checking case contents on a random
basis for correct item, quantity, dimensions,
and condition. Quality checks are especially
common for new suppliers.
Import warehouses are also used commonly
to break import cases and then repack them
to be compatible with smaller store requirements. Labeling, tagging, and even pricing
may be done at the import warehouse in
conformity with store-specific requirements.
In Mexico, for example, we saw forwarder
employees sewing labels into apparel to meet
Mexican labeling standards. Some warehouses
also report assembling kits to individual store
specifications, especially where components
come from different origins.
Another big difference is that import containers have different handling characteristics
from those of domestic containers. There are
three key differences:
1. Weight: Overseas shippers fill each container as completely as possible. For dense
items such as engines or liquids, this strategy results in weights well above the legal
limit in the United States. Handling these
heavy containers is a line of business for
some import warehouses. They take advantage of being on port property or local
Exhibit 2: Port Information
Port
Time to Availability
(Typical)
Baltimore
1 day
Charleston
“Several days”
Pickup Hours1
8-4:30 M-F
Gulf Coast
Expected Pickups
per shift
Whse Strip
and return
Free Time2
3-4
5 days
3 days
4-5
3-10 days
1 day
4-5
2 days
LA/Long Beach
3-4 days
24 hours M-F; 8-6:30 Sat
2-3
5 days
Manzanillo, Mexico
1 day (reefer)
NA
NA
NA
NA
Miami
7 to 5 M-F
2-3
New York /New Jersey
8-24 hours
6-10:30 M-F and Sat
(some term)
1 hour per pickup
4 days
2-3 days
Norfolk
1-2 days
6-7 M-F
3-4
5 days
2-5 days
Oakland
1-2 days
8-5 M-F
4-5
5 days
2-4 days
Seattle/ Tacoma
1 day
M-F, day shift
Unknown
3 days
3 days
Vancouver, Canada
NA
7-8:30 M-F
Unknown
3 days
2 days
Source: Authors.
1
Pickup hours can also vary by individual terminal within a port complex.
2
Port standards; in some cases customers negotiate separate free time agreements.
www.prologisresearch.com • “Container shipping thrives on volume:
the more containers moving through a
port or traveling on a ship or train, the
lower the cost per box.”
— The Box, by Marc Levinson, p. 269
Summary
Thousands of containers are unloaded from each ship and
stacked on the wharf; and the drayage trucks will haul
them to nearby import-warehouses, one at a time.
exceptions to standard weight limits in place
around some ports, and they use tri-axle
tractors to move the overweight containers
to their facilities. Once there, the warehouse typically will unload the ocean container, reload the heavy goods into “streetlegal” domestic containers, and then send
the freight into the U. S. network.
2. Load Patterns: Import containers are
often “floor loaded” to take full advantage
of the available volume in the container.
Thus, unloading these containers is a manual process. Actual time required to empty
a container varies dramatically based on
the number of SKUs in the container and
whether the load is on pallets. Warehouse
managers reported times ranging from 2.5
hours with two people for a single-item
container up to 12 hours with three people
for a mixed consumer products load. In
contrast, containers with palletized freight
can be emptied in one hour or less.
3. Pallets: One of the consistent themes
from our interviews was dissatisfaction
with the shoddy pallets used on some of
the loads. Pallets coming from China were
judged as particularly poor quality and
unusable after unloading. Some managers also complained about the excessive
amount of “trash” that came out of some
import containers. Floor loaded product is
typically transferred immediately to pallets
for putaway in import warehouses.
10 • Prologis Supply Chain Review
Warehouses embedded in import supply chains
have the same objectives as those in domestic supply chains. They help match supply and
demand, generate transportation savings, facilitate longer, lower cost production runs, and
customize items to align with final customer
specifications.
However, the operations of import-driven warehouses are subject to much greater volatility
and less predictability owing to their longer
lead times, differences between truck and shipping economics, port constraints, and information shortcomings. Overseas manufacturers
can deliver low prices only with long production runs, and the goods are then bundled into
large shipments on very large container vessels to keep freight costs down.
These ships dock periodically at crowded ports
and discharge hundreds or thousands of containers. The containers are then delivered
to the warehouse one at a time by drayage
companies, albeit quickly to avoid demurrage
charges. The inconsistent communications between shipping companies, brokers, draymen,
warehouses, and importers exacerbate the
planning and execution difficulties for the operator at the end of the line — the warehouse.
We spoke to 23 different warehouse operators
whose primary business is handling imports.
They have formulated multiple strategies to try
to cope with this challenging environment. For
instance, they work closely with the drayage
operators to regulate the flow of containers,
and third parties often have their own drayage
personnel and near port drop yards to avoid
demurrage charges. Where possible, they take
advantage of extended port pickup hours, such
as the PierPass program in LA/Long Beach.
Import supply chains remain a work in
progress, and the warehouse continues
to play an important role.
Warehouse managers are proactive about
gathering planning information, polling websites from shipping lines, ports, and forwarders
to get the best data about vessel arrivals and
container status. Most warehouses have standing relationships with other participants in this
complicated supply chain to minimize delays
and maximize efficiency wherever possible.
The warehouse managers whom we interviewed
proffered many practical, promising ideas for
how to improve the import supply chain process. (See Exhibit 3.) Meanwhile, the problems
are worsening. Containerships are getting
larger, not smaller, port congestion is mounting, and visibility remains highly imperfect. Land
is scarce near most ports, so new warehouses
are being built anywhere from 15-to-100 miles
away from the docks. In many places, labor
is also scarce, especially the temporary labor
most suited to the volatility of import arrivals.
In short, import supply chains remain a work in
progress, and the import warehouse continues
to play a vitally important role.
As containers are unloaded from ships, some of the
containers will be double-stacked onto trains and
then hauled to intermodal hubs at inland port cities.
Exhibit 3: Twelve Ways to Improve the Import
Supply Chain Process
Operating Condition
Good/Best Practice
Ship Arrival and
Unloading
Real time information on ship arrivals; container status
visibility throughout the unloading process; electronic
clearance.
Container pickup hours synchronized with ship
unloading hours.
Drayage Operations
Automated security for entrance and exit.
Real time monitoring of dwell times and ability to
minimize port congestion.
Centralized chassis pool.
Endnotes
1
The first popular freight containers were 20 feet long,
hence the unit of measure (TEU). Today, the majority of
containers are forty feet or even longer, but there are still
twenty foot containers in use for dense traffic, and so the
TEU remains the unit for measuring container flows.
24-hour delivery availability at the receiving warehouse
and/or drop yards.
Warehouse Operations
Access to a single reliable source of complete, accurate information.
Under the PierPass program in LA/Long Beach, port
fees paid to pick up a container are lower if the pickup
is made on off-hours i.e. late second and third shift. The
program has been successful in spreading out pickups to
relieve congestion although some coordination issues with
longshoremen and warehouses have been reported.
2
3
A good discussion of the economics of transloading can be
found in Robert C. Leachman et al., Final Report: Port and
Modal Elasticity Study, Southern California Association of
Governments, September, 2005, pp. 76-84.
Located to minimize inbound/outbound traffic congestion; either near port, near outbound transport, or on
dedicated rights of way.
Access to a pool of temporary labor.
Configured to support transloading, heavy hauls, and
distribution as appropriate.
Outbound
Transportation
On dock doublestack rail capability.
Adequate, timely truck capacity.
Source: Authors.
www.prologisresearch.com • 11
About the Authors
Arnold Maltz: Associate Professor of Supply Chain Management, in the W.P. Carey School of
Business, Arizona State University. He spent 12 years in transportation and distribution prior to
earning his Ph.D. and has done research and taught in Argentina, Denmark, Israel, Peru, and Mexico
as well as in the United States.
Thomas W. Speh: the James Evans Rees Distinguished Professor of Distribution at the Richard T.
Farmer School of Business, Miami University in Oxford, Ohio. He is the author of numerous books
and articles in logistics and supply chain management, and past president of the Council of Logistics
Management and the Warehousing Education and Research Council.
ProLogis Supply Chain Research Reports
Additional supply chain research reports are available. To download PDFs of these additional reports, please go to www.prologisresearch.com.
About ProLogis
ProLogis is the world’s largest owner, manager, and developer of distribution facilities, with operations
in 80 markets across North America, Europe, and Asia. The company has $26.7 billion of assets owned,
managed, and under development, comprising 422 million square feet (39 million square meters) in 2,466
properties as of December 31, 2006. ProLogis’ customers include manufacturers, retailers, transportation
companies, third-party logistics providers and other enterprises with large-scale distribution needs.
Headquartered in Denver, Colorado, ProLogis employs more than 1,250 people worldwide.
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