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VOL. 133 | NO. 78 | Wednesday, April 18, 2018

IMC Official Discusses Transportation Challenges

By Patrick Lantrip

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Although Memphis has long been known as America’s distribution center, simply being in the right place at the right time isn’t always enough.

DONNA LEMM

For example, a driver and chassis shortage is crippling the city’s supply chain, said Donna Lemm, IMC Companies’ executive vice president of national sales.

Lemm, who is also on the Advisory Board of the Agriculture Transportation Coalition, sat down with The Daily News do discuss this and other issues currently facing her industry.

Q: What are some the biggest issues going on in the local transportation/logistics industry?

DL: “Rail congestion, truck capacity, driver and chassis shortages are all part of our biggest issues. As the largest marine drayage company in the nation, we are doing everything we can to keep freight moving for our customers.  It’s important to note that  ocean carriers are currently negotiating their service contracts that expire April 30. The translated message to shippers is that rates are going up for inland deliveries because of the issues at hand.” 

Q: Why do these issues matter?

DL: “Because never before have I seen the issue of store door delivery (truck delivery to the customer’s door) under such scrutiny, and I've been in the industry well over 30 years.”

Q: Why is that the case?

DL: “There is just not enough capacity out there to adequately service the current demand. The trucking shortage is very real. Imports continue to surge in the first quarter and exports in the Memphis market, specifically cotton, are in full swing.”

Q: Why is April 30 such an important date?

DL: “Because ocean carriers are negotiating now with shippers and NVOCC’s (Non-Vessel Operating Common Carriers) to contract cargo for the next year. We will see many ocean carriers backing away where they can from deliveries to the customer's door and moving to the port and railheads only, which means that the shipper will be responsible for the delivery.”

Q: Will there be any changes?

DL: “I believe that you’re going to see much more CY (container yard) freight contracted by the ocean carriers and that the responsibility of the delivery will move to the beneficial cargo owner (BCO). Drayage providers like ourselves will have to step up to the plate and help find solutions directly with the shipper.”

Q: Why are drayage rates going up for inland deliveries? 

DL: “There are a multitude of reasons for rates going up – not enough drivers, an ELD mandate, not enough chassis , extended wait times and congestion at the rail. Drivers need to be compensated for these wait times, and the drayage providers need to be compensated for the lack of productivity. Just this month, we instituted the largest driver pay raise in the history of our company. We are doing our part to keep drivers happy and the rest of the industry must do so as well. Shippers, warehouses and rails must respect the driver’s time and effort.  Over the past few weeks, we have seen selected ocean carriers sending emergency rate surcharges to their inland port customers. We’ve seen an average surcharge for inland cargo of about $300. Ocean carriers are having to go out and play the truck spot market to cover freight demand."

Q: What are some of the factors behind the rail congestion problem in Memphis?

DL: “First quarter 2018 brought a surge in imports coupled with bad weather. While these factors made things unbearable , the problem at the rail is systemic. We have to look at the root of these congestion problems at the rail, which is frequently a chassis shortage that causes the railroad to ground containers. What we’re also seeing is the space at these railroads is limited. When they see surges in freight, they begin grounding it. It was so bad in February that we referred to one of the railroads in Memphis as having ‘The Wall’ which meant the containers were piled so high, you couldn’t see to the other side.”

Q: What is the root of the chassis shortage?

DL: “We have a chassis model that’s broken and current forecasting is unreliable. In 2010, when the ocean carriers got out of the chassis business they basically said to the shipper, "I’ll deliver product in a container, but you bring the wheels." The European chassis model, in which the trucker provides the wheels, won’t work at the inland rails that mount containers upon train arrival. In an effort to maintain market share, carriers continued to offer delivery. They were then required to provide a free chassis for that store door move. In turn, we’ve seen contracting by some carriers with specific chassis providers, which has basically handcuffed the industry. Shippers choice and access to chassis have been restricted and this is the root of the problem."

Q: What can be done?

DL: “IMC Companies believes the answer to the chassis problem is choice and gray pool access, meaning the chassis may be used by any provider. We further believe, as industry stakeholders, we cannot resolve our issues in a vacuum. If we can bring the stakeholders together – including the shipper, trucker, ocean carrier, chassis provider, and the railroad – that maybe together we can address industry issues to find solutions for all, because the answer is not in continued congestion. The problems in Memphis are similar to inland hubs all over the country. We are happy to report that we are successfully bringing a Memphis Supply Chain Engagement team together on May 16, hosted at the IMC Companies headquarters. Our shared goal is to move out of our silos and find actionable resolve.  Times are tough. We can sit and complain, or we can roll up our sleeves and work to make things better. At IMC, we chose to find a better way, working together."

This interview has been edited for brevity.

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 0 291 21,272
MORTGAGES 0 160 16,194
FORECLOSURE NOTICES 0 23 1,487
BUILDING PERMITS 258 692 41,920
BANKRUPTCIES 1 117 6,579
BUSINESS LICENSES 0 23 3,097
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0