2020 Drayage Year in Review

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Year in Review: Drayage 2020

Aaron Brown, Senior Vice President of NFI Cal Cartage

What have you seen this past year in the drayage market?

I’d have to say 2020 was an unprecedented year, which is probably the most frequently used word to describe 2020. In the first half of the year, many of our customers had big slowdowns in their volume coming from Asia, and we were significantly impacted upfront on the supply side. Then, as the year moved on and COVID migrated over to North America and the demand side of the U.S. economy, we were pretty significantly impacted from a volume standpoint as well. 

Things started to pick up again around June and July, where a backlog of freight had been built up as factories were shut down in the early part of the year and Asia slowly started to reopen and capacity came back online. People started to migrate towards working from home, and purchases related to services and travel got replaced by purchases of manufactured goods, which really created a big boom to our volumes. At the mid-part of the year, we went from unprecedented slow volumes to unprecedented high volumes. From June through the end of the year, there were month-over-month record volumes in and out of the ports on both coasts, which created a big strain on the whole import supply chain including steamship lines, marine terminal operators, drayage providers, chassis equipment providers, and import warehouses. 

It was a huge challenge to respond when things were very slow and suddenly capacity ramped up in the back half of the year as everyone tried to accommodate for the backlog of freight that was being pushed through the ports.

How did trade agreements impact volumes or add additional complexity at the beginning of the year?

The phase one trade agreement with China probably contributed to a relatively muted start of the year. But as soon as COVID came onto the scene, that overwhelmed all other narratives related to the international supply chain. Regardless of the trade policies that were in place, if factories were shut down in China and demand wasn’t happening in the U.S., that was the prevailing storyline of the year. It was less about trade policy and much more about capacity getting shut down, then coming back online, and responding to huge swings in volume throughout the year.

What do you think was the most challenging part of 2020 for shippers?

Without a doubt, the biggest challenge for shippers was forecasting demand. As things started to slow down and import volume and export volume were both significantly depressed, nobody really knew how the back half of the year would go. From a shipper’s standpoint, there was very little data for them to forecast demand on.

As it became apparent that demand was rebounding very quickly and very significantly, sourcing the capacity within their supply chains to support that huge increase in demand was not really planned for and was a challenge. Competing for space on vessels, space in marine terminals, competing for chassis, drayage capacity, and transload capacity all became a problem. Service providers that support the import supply chain were trying to accommodate this huge increase in demand with a supply chain that was set up for very different volume levels. So, the biggest challenge was shippers trying to provide good forecasting for their providers, and the providers very quickly trying to accommodate unprecedented swings up in volume.

How did NFI help navigate that challenge?

Because it was such a challenging year in the drayage space, both on the downside and upside with changes in volume, it presented an opportunity for value-added drayage providers like NFI to separate themselves from providers that might be more commoditized. NFI was able to weather the early part of the storm very confidently as import volumes were dropping significantly. The diversification in our service offering enabled us to weather the storm extremely well. We’ve got a really strong balance sheet that I think showed customers that we can make it through not just good times, but tough times as well. 

From a service standpoint, being a drayage provider that is very technologically advanced from a visibility standpoint has been a big advantage for us and separates us compared to the competition. We have provided customers insight into the status of their supply chain and freight every step of the way, from when it hits the port to when it gets delivered and unloaded at the transload facility.

Additionally we’ve been able to accommodate huge increases in space to save customers a significant amount of money. By having a real estate competency, our team has been going out to source additional yards and warehouse space on short notice. We’ve provided relief for customers that might not have had space at their import warehouse or needed to get freight off the ports to stop the clock on demurrage charges.

We have also been able to provide flexible capacity solutions by leveraging multiple fleets across the country to meet the surge in demand. Leaning on our brokerage division to source additional capacity where it was needed has been advantageous.

The last thing that we really pride ourselves on is the relationships we hold with steamship lines, marine terminals, and chassis leasing companies. To be able to lean on those relationships, and provide good information to our customers on a real-time basis has been a real value-add for our shippers. With our insight, they can make decisions on what’s going on with their freight in the ports as it makes its way through the supply chain.

How was NFI able to leverage our relationships with the ports to navigate demand?

One of the challenges in drayage this year has been returning empty equipment back to the marine terminals. There’s a number of restrictions that limit the locations where you can return specific ocean containers. Sometimes an ocean container is not able to be returned at the place where it was picked up, or can’t be returned at the location where your next import container is coming into. Because of the relationships NFI holds with the marine terminals, our team has been able to get containers to a location where it’s efficient for shippers to pick up the next import. If those relationships didn’t exist, we either would not have been able to return a container that day (likely incurring a per diem fee), or we would have had to return it to a different location and then move to another terminal where we could pick up the next import box. By leveraging our relationships, we gain efficiency in our return and pickups that many competitors otherwise would not have been able to negotiate.

Another way that we work with marine terminals is if there are containers that are on customs holds, or if they’re in restricted areas and they’re not available to be picked up, we have the ability to pick up a phone and call a contact at one of the marine terminals to work with them directly, get it resolved, and get the box moving onto its next final destination. I think that’s something that’s unique about the relationships that we built up with the marine terminals over the last several decades.

Lastly, we have leveraged relationships in the severe chassis shortage this year. Dwell times, both on dock and off dock, have increased significantly. There’s a number of additional containers that are sitting off port that are either waiting to be unloaded or waiting to be returned, which has created a huge shortage in chassis across the market. We are a preferred customer of many of the largest chassis providers in the country and were able to increase our fleet significantly, by several hundred chassis over the last several months, at a time where chassis were not able to be had.

How do you foresee the drayage industry as a whole evolving based on what this past year’s experience has been?

I think the big thing that we learned in the back half of the year was the import supply chain is not built or capable of handling surges of volume to the point that we saw. What we’ve been dealing with over the last several months was not just a replenishment of inventories and the surge in the backlog of freight that didn’t make it through the port the first half of the year, it’s also the normal peak season surge that we typically see in the third and fourth quarter. On top of that is the carry-forward of freight from next year that shippers are trying to bring through the port early in advance of another potential shutdown, in fear of being left without inventory on hand. 

Another thing I would anticipate to be an enduring change is a diversification in ports of entry. Shippers, who may have been heavily reliant on a single port of entry and didn’t have a diversification strategy, will be looking to increase ports of entry in the future. Having more flexibility to divert freight to different geographic areas, depending on congestion, is important to avoid getting caught in a backlog and keep freight moving. If you are overly reliant on the ports of LA and Long Beach, you’re probably looking for an East coast option, or even multiple East and West coast options. 

On top of that, port diversification will create more opportunities to even out volume across ports. The bulk of NFI’s business is really representative of imports in total. It’s heavily concentrated in Southern California and the Port of LA and Long Beach, but I would expect to see greater market share being taken by either ports in Northern California or the Pacific Northwest, and then also the Southeast and the Northeast. What that’ll do is help to ease out the import freight over time and make the overall import supply chain more efficient.

One of the things that I think really sets NFI apart when helping shippers navigate through a port diversification strategy is the scalability that we have within our drayage operations. We operate in all of the major marine terminals on the East and West coasts. For a shipper that might be looking to increase their ports of entry, but still want to consolidate their partnerships with a single provider, we have the ability to scale up and provide a very consistent level of service regardless of where shippers are looking to bring freight in. 

Aaron brings his expertise to the NFI Cal Cartage drayage team, where he works to seamlessly provide end-to-end solutions for NFI customers. As one of the largest drayage providers in North America, NFI Cal Cartage operates at all major ports, rail terminals, and logistics hubs, leveraging the services of nearly 1,500 owner-operators. To stay up to date on port drayage and other industry news, subscribe to NFI Cal Cartage’s monthly newsletter.