Pacific Coast Container Terminal Competitiveness Study - TP 14837E

 

 

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CHAPTER 4 - MARINE TERMINAL SERVICE QUALITY

 

 

 

 

 

In this section we describe service issues, including terminal accessibility, productivity, and empty container availability. Service is as important as price in overall competitiveness. We compare service in Canada with service in the US and imply areas for improvement.

4.1 - Accessibility

Container ships are serviced 24 hours per day 7 days a week and rail cars are also loaded and unloaded continuously at all terminals. However, truck pick-up and deliveries can be made only during posted gate hours. Terminal Systems Incorporated Vanterm and Deltaport hours are 7:00 to 16:00 on Monday and 7:00 to 24:00 Tuesdays to Fridays or special openings after the posted times at a higher cost.¹ DP World’s Centerm truck gates are open from 7:00 to 24:00 weekdays and are closed Saturdays and Sundays.² The last reservation is accepted at 23:00. Operating hours in Canada for servicing trucks have been extended so they are 50 percent above Seattle, Tacoma and Oakland but still 30 percent less than Los Angeles.

However, we have been advised that the terminal reservation system is not fairly applied and is unpopular with many importers, exporters and truckers. Gate appointment systems have been used at Vancouver terminals since 1999.³ A mandatory reservation system was introduced by Centerm in August 2005 and by Deltaport and Vanterm in the spring of 2006.⁴ Registered companies can telephone the terminals to obtain reservations based on the size of their firm and other criteria. Reservations at all terminals can be made starting from 10:30 weekdays.

We were informed about the following terminal accessibility criticisms. All of these complaints relate to the truck reservation system and most could be addressed by changing the pricing system so that higher daytime rates offset the higher costs of afternoon and evening gate openings. Each of these criticisms came from at least three credible sources. However, we did not gather actual data or analyze the complaints.

• Perceived owner-operator discrimination – Many of the owner-operators are immigrants and have difficulty obtaining reservations, whereas the large trucking companies use primarily Canadian born truck drivers and are more freely allocated reservations. Small trucking companies complain that most reservation slots are allocated to large companies putting them at a competitive disadvantage. In Vancouver, larger companies moving more than 100 containers are given priority to bypass the line, whereas California law requires first-come first-served service.
• Delivery/Pickup inefficiency – Truckers cannot have a reservation to deliver an export container and a reservation to pick up an import container. They can only have one or the other.
• Increased import costs – Major importers complain that during the peak season from August to November months they are unable to get sufficient reservations during the day time. Afternoon service is offered only at a premium price. (Pricing is discussed in a subsequent section of this report.)
• Trade in reservations – It has been reported that some companies obtain more reservations than they can use and trade them to others at a profit.
• Increased turn times – Several trucking company operators complained that reservations have increased their truck turn-around times and have imposed extra costs on them. One company stated that the number of trucks needed for the same volume of containers in 2007 is double what is was in 2004. Truckers frequently cited the example of Los Angeles and Long Beach where reservations are not required and there are minimal waits at terminal gates.
• Constrained exports – Exporters complain that they must book two days ahead to get appointments, and ship unloading sometimes closes the in-bound lanes. In 2007, export container shipments were shut down several times in favor of import containers. Firms have hired more clerks and drivers to comply with the reservation system but still are often unable to get sufficient reservations to fulfill their commitments.
• Safety jeopardized – The system puts unnecessary time pressure on drivers leading to unsafe practices because the reservation grace period is short.

It was also reported to us that in Vancouver and Delta truckers are forced to waste time during lunch and shift change breaks. Although the lunch break is from 12:00 to 12:30, truckers report that workers frequently leave at 11:50 and return at 12:45. There is a similar 30 minute break at the shift change at 16:00. It was also reported that workers sometimes leave early on Fridays and there have been instances where this has resulted in containers missing their scheduled ship. The point of reporting for work is the lunchroom and the lunch break is typically about 45 minutes and shift change break about 20 minutes because time is required to move between the equipment and the lunch room. During the two 15 minute coffee breaks per shift, operations continue with a reduced work force. But increased staffing at higher costs would be required to eliminate the longer lunch and shift change breaks.

4.2 - Productivity

The primary productivity issue repeatedly mentioned by Vancouver and Delta terminal stakeholders is the slow speed of service for trucks. The only truck line-ups we saw in Los Angeles and Long Beach were at mobile vans offering lunches and snacks. Los Angeles and Long Beach container terminals are much faster in serving truckers than other terminals because:

• Import containers are stored on a chassis allowing truckers to pick them up without waiting for someone to load them;
• Export containers are driven to an assigned spot and unloaded immediately by fork truck or rubber tired gantry crane;
• Operating hours are longer; and
• More container and truck tracking technology is used.

The benchmark for average truck turn times is 8 minutes, achieved Maersk terminals that do not require trucks to stop at the gate. In Vancouver and Delta drivers spend more than 52 percent of their on-duty time waiting or being processed at terminals.⁵ Trucks are not allowed to queue at the Vancouver and Delta terminal gates more than 30 minutes prior to their reservation time resulting in trucks waiting outside of the terminal property. In other words, the hour long wait times measured at Vancouver terminals are actually even longer when offsite waiting times are added in. These long wait times especially for small trucking firms are a major added cost for Canadian exports and imports.

In Los Angeles and Long Beach all the container terminals store containers on chassis. The terminal areas are much greater than in Canada and about half the area is used for parked chassis each with a container on it as shown in Exhibit 14. Truck tractors arrive at the terminal and pass quickly through multiple gates and drive directly to the container, hook up to the chassis and leave. There is no waiting to be loaded by a fork truck driver or other longshore worker. The largest terminals handling most of the volume have ample space for storage of containers on chassis. At the largest terminal, Hanjin, Long Beach, we observed some trucks driving directly to the ships side and being loaded directly on the pier without double handling.

Exhibit 14 - Container Chassis at Los Angeles & Long Beach October 2007⁶

 

 

 

In LA/LB each of the larger terminal operators has at least 1,000 chassis on hand. Most are their own chassis, but pool chassis are also used. Trucks arrive either loaded with a container or without any chassis. Each of the marine terminal operators has its own chassis but containers seem to leave on competitors’ chassis as well as their own. In Canada such chassis are stored off site and drivers arrive with an empty chassis and wait to be loaded. Containers at LA/LB are mostly handled by fork lift trucks. Empties are stored in stacks.

 

 

 

Several of the exit gates observed at Los Angeles and Long Beach such as Evergreen Shipping, do not have attendants but are automated. Truck drivers interact only with a computer terminal.

The hours of operation and turn times at marine container terminals measured in early December 2006 are compared in Exhibit 15. The largest terminal ITS (K-Line) Long Beach is open 7:00 to 3:00 Monday through Thursday and 7:00 to 17:00 Friday and Saturday. Long Beach Container terminal serving the Grand Alliance is open from 7:00 to 2:30 Monday through Thursday and from 7:00 to 17:30 Friday, Saturday and Sunday.

Exhibit 15 - Operating Hours and Truck Turn Times Comparisons 2006⁷

Marine Terminals	Hours/Year	Gate transactions/Day	Truck Turn Times AM Minutes	Truck Turn Times Midday Minutes	Truck Turn Times PM Minutes	Truck Turn Times Average Minutes
Los Angeles-avg	6,096		30			30
Long Beach-avg	5,214		20			20
Centerm	4,222	550	46	61		55
Vanterm	3,806	1,000	51	59	37	53
Deltaport	3,806	1,150	50	55	80	54
Oakland-avg	2,322		60			60
Tacoma-avg	2,348		60			60
Seattle	2,517					77
Average	3,650		45			45
Surface depots	3,800	2,400				31

The largest off-dock import warehouses and empty container yards in LA/LB operate from 7:00 to 21:00 six days per week. These companies are highly customer service oriented since this business is extremely competitive. The hours of operation for the export terminals are shorter. The largest lumber terminals operate from 7:00 to 17:30 six days per week. We observed that lumber transload facilities with shorter hours, 8:00 to 16:00 weekdays have less container loading business than the ones with more convenient hours.

In December 2006 the measured average time between approaching and leaving the terminal, called the truck turn time, at three Canadian marine terminals was 54 minutes with a standard deviation of 20 minutes. However, several trucking representatives said turn times during the peak season, August to November are often much longer. Los Angeles and Long Beach have the most convenient hours partly because California environmental regulations limit turn times to 60 minutes. Seattle has the worst average turn times at 77 minutes.⁸

The IBI Group found the number of loaded trips by truckers in Vancouver and Delta has decreased by 18 percent since 2003. In December 2006 drivers made an average of three loaded trips from an on-dock terminal, two loaded trips from an off-dock terminal and two empty trips per day. However, during the peak months September to November the average loaded trips is closer to Seattle and Tacoma’s 3.8 trips per day. In Los Angeles and Long Beach drivers average only 2 loaded trips per day, although about half the trips are within 40 km of the harbor. The off-dock mean turn time for the Vancouver terminals is 31 minutes and the mean travel time is about 32 minutes.

The IBI Group calculated a reduction of 50 percent in turn times would increase truckers’ loaded trips per day by 26 percent. Most of the waiting time measured in 2006 was at the marine terminals and the incentive of lower fees for evening operations could increase the loaded trips by 20 percent.

Truckers we interviewed said the usual number of loaded trips is about four per day. Some importer representatives said their average is 2.5 loaded trips per day in the busy season. The waits are especially long after a holiday weekend. During our visits to terminals in mid September we observed long lines of trucks parked at import receiving centres in Richmond and Delta with drivers sleeping in their cabs possibly waiting for reservations. Deltaport was closed to truckers at the time and there was a 10-minute wait at the gate at Vanterm. There were no waits at any of the other container handling locations.

In addition to truck speed of service, other performance indicators of service include comparisons of the planned and actual vessel schedules, the TEUs loaded and unloaded per vessel day in port, yard utilization, the average daily import rail footage, labour fill percent and timeliness, demand for rail footage, planned versus actual train arrivals, and the number of gate transactions. We obtained data for only a few of these factors.

In Canada, productivity increases the more rail transport is used because there is not enough space at the marine terminals for parking containers on chassis for convenient pick-up. California terminals are much better equipped and organized to load trucks quickly.

About two thirds of the containers moved by CP and CN are 40-ft. units and one third is 20-ft. units.⁹ At Centerm 22 percent of overall terminal throughput are exports that arrive by truck. Productivity also depends on the efficiency of ship to shore container cranes, automated stacking cranes, rubber tired and rail mounted gantry cranes, reach stackers, forklift trucks, related control systems, and the teamwork of the crews of people operating this equipment.

The marine container terminals’ throughput per berth and lifting crane, and the lifts per crew per hour are compared in Exhibit 16. The values shown are averages for all the terminals in each port, although the newest terminals such as ITS (K-Line) and Hanjin in Long Beach, APM and Eagle Marine (APL), in Los Angeles and Oakland are more productive than the average. For example, APL’s Los Angeles terminal productivity is enhanced by an on-dock rail system with 10 electric intermodal cranes that can load and unload three full double-stack trains simultaneously, while handling another three full train lengths of railcars in off-dock storage.

Exhibit 16 - Productivity Comparisons 2007¹⁰

	Number of Terminals	1000TEUs/y Berth	1000TEUs/y Crane	Lifts/crew/hour	Container Dwell Days
Long Beach	7	185	81	25	3
Vancouver	2	513	186	24	4
Delta	1	476	159	24	3
Los Angeles	7	262	102	23	3
Seattle	3	183	71	22	3
Oakland	7	127	75	23	3
Tacoma	5	162	61	25	3
Average	6	214	89	24	3

 

 

 

Centerm, Vanterm and Deltaport exceed the average productivity of container terminals in the US. Terminal Systems Inc. is adding a third berth at Deltaport to increase capacity from 1.4 to 2.1 million TEUs per year by 2009 and has ordered equipment to increase Vanterm’s capacity to over 1.0 million TEUs by 2009.¹² Although Canadian productivity of 24 lifts per crew per hour is comparable to the US, there is room to improve. APL’s container terminals in Yokohama and Kobe, Japan, and Kaohsiung, Taiwan, achieve 36 lifts per stevedoring crew per hour.¹³

 

 

 

It would be useful to gather data and analyze the productivity of Asian inland terminals, inland transportation routes and marine terminals relative to those in North America. Such information may assist Canadian exporters in developing strategies for providing better service. Canadian exporters to Japan have long been active in this area and the leading companies, such as Canfor and Parish and Heimbecker are now becoming very knowledgeable about container terminals and trucking in various parts of China, Vietnam, and elsewhere.

In conclusion, the higher afternoon tariffs and the reservation system at marine terminals are areas of concern. Canadian terminal customers and truckers are dissatisfied with the higher prices for afternoon operations; the long waits for truck loading and unloading; and the counter-productive truck reservation system. Canadian terminals have shorter truck service hours than those in the US at Los Angeles and Long Beach. Although US terminals are generally more spacious with more equipment and capacity than Canadian terminals, productivity levels measured by the number of containers moved per berth, per crane and per crew are similar. In Canada, more containers move by rail and this helps maintain high productivity.

4.3 - Availability of empty containers

Exporters obtain empty containers from shipping lines, container manufacturers or leasing companies. The containers come from import distribution centres, marine terminals or from container storage yards. About 90 percent of the containers are owned by shipping companies, although major crop, forest products and mine concentrate exporters also have their own containers. For example, some of the barley moving through Columbia Containers, newsprint from Catalyst Paper and mine concentrates from Teck Cominco are shipped in exporter-owned containers. It seems that some exporters exert greater influence over their product routing and provide better customer service by using their own or leased containers. Some major importers such as Canadian Tire also have their own containers.

In Argentina and Australia, containers for shipping crops must be shipped empty to the loading terminals.¹⁴ In Canada, most empty containers come from Toronto and Chicago, and return empty through Saskatchewan. But stopping the container involves a repositioning charge of about $1,200, making it uneconomical for most grain. In the US, inland cities take more advantage of these empty containers and competition from containerized transport has pushed grain elevators, transloaders, transporters and trade financiers to become more innovative and efficient to the benefit of farmers.¹⁵

CN has crop stuffing stations at Saskatoon and Edmonton. CP has container filling stations in Regina and Calgary. CP’s Regina container yard is being relocated to a new larger site west of the city. TW Commodities operates container stuffing stations for chick peas and lentils on CP near Swift Current.¹⁶ Kleyson Transport, Winnipeg, operates container filling stations in Saskatoon, Edmonton and Calgary.¹⁷ The major source loading locations, including Alliance Pulse, Viterra, and Simpson Seeds, are described in Section 2.4.

Canadian crop exporters can buy a used 20-ft. container approved by the American Bureau of Shippers for $1,400 and a 40-ft. one for $2,400, including duty and customs clearance. In Los Angeles, used 40-ft. containers are cheaper, only $1,600. New containers cost $1,900 and $3,200 respectively in Vancouver. However, some farmers in Saskatchewan have been quoted $9,000 for a new ISO approved container. In Canada, the lease rate is $2.80 per day for 20-ft. containers and $4.00 per day for 40-ft. containers. Although it varies, the purchase price of a new container is about 20 percent and the lease price is about 2 percent of the value of the product contained.

Although containers are inexpensive, a 6.5 percent import duty is an obstacle to the free flow of containers from international shipping lines. By Canada Customs regulations, an empty container can be used for only one domestic move without import duty. About 20 percent of international containers shipped to Toronto are used for moving loads back to Edmonton or Calgary but most of the containers cross Saskatchewan empty.¹⁸ US law allows a one-year duty free period but Canada has a 30-day, one move limit. Some shipping company and leasing company containers can remain duty free in Canada for 180 days if they meet multiple complex conditions. However, major Canadian importers such as Hudson’s Bay and Canadian Tire do not qualify for the 180 day allowance.

Previous Transport Canada research shows the longer duty free period in the US gives importers and exporters more container movement flexibility and lower costs.¹⁹ Although the amount of money involved, $200 per container, seems insignificant, the required Canadian customs documentation seems onerous compared with the simpler US system. Container repositioning costs to the less densely populated Prairie cities are an even greater obstacle to increased source loading of food exports.

Most containers have been used to import steel and auto parts and require cleaning and inspection. It is more difficult to get 20-ft. containers in Regina and Saskatoon than in Vancouver because the containers are typically owned and controlled by the shipping lines. Hapag Lloyd has been the main company exporting containerized Canadian agricultural products. Hamburg Sud and APL also handle some agricultural products. However, the larger import lines such as the CKHY and New World Alliance are less involved, which is resulting in an imbalance in container flows for agricultural exporters in Western Canada.

Crop exporters require clean containers such as the ones used for importing retail goods. The 20-ft. import containers are used for machinery, metals, and chemicals and may have oil stains or other residuals that farmers cannot accept. This quality requirement imposes extra costs on the shipping company. Although some shipping companies have withdrawn from the market, others are increasing the number of containers in their barley and flax seed trade.

About one third of the overall empty container storage capacity in Delta and Vancouver is directly at the terminals and two thirds is off site. In Los Angeles and Long Beach there is ample storage for empty containers on the marine terminal site and we observed only one small 1,500 container off-dock storage site. Los Angeles, Long Beach and Oakland have container tracking systems that allow truckers to pick up empties throughout California.

Vanterm stores empty containers mainly for the CKHY Alliance and about 10 percent for OOCL. Centerm stores empty containers for the New World Alliance and does not seem to store a significant proportion of its containers off-site. About 20 percent of the containers exported from Vancouver pass through one of 10 container storage yards listed in Exhibit 17. The largest empty container storage site is Delta Container near Deltaport with about 4,000 containers in storage about half from Evergreen Shipping and 20 percent from NYK. The second largest storage yard is Coast 2000 in Richmond serving mainly OOCL, Yang Ming, and Hanjin. Delta Container and Coast 2000 are open until 20:00 and 21:00, respectively.

 

 

 

Exhibit 17 - Container Storage Yards September 2007²⁰

Container Yard	Owner	Clients	Number Stored	Throughput in 2006 (1,000 TEU)	Turn Time Minutes
Deltaport	OTPP	Evergreen, CS, Zim	3,000
Vanterm	OTPP	Hanjin, Cosco, OOCL	1,500
Centerm	DP	MOL, Hyundai, APL	1,000
Subtotal on dock			5,500
Delta Container, Delta		Evergreen, NYK	4,000	40	24
Coast 2000, Richmond	SSAM	OOCL, YM, Hanjin	2,500	40	44
Container West, Rich		OOCL, Cosco	1,400	35	26
Westgate, Surrey		Hyundai, Emirates	800	15
Fraser Surrey Port	McQuarrie	Evergreen, Cosco	600	10	25
TDK Logistics, N West			600	10
Bridge, Delta	Maersk	Maersk, Cosco	500	10
Marco, Vancouver		K-Line, Cosco	300	25	40
Metro, Delta		Hanjin	200	10	20
Ocean Cont., Delta			50	5
Other			50	20
Subtotal off-dock			11,000	220	31

 

 

 

The ready availability of containers from these storage yards in the Vancouver area makes it convenient for exporters to bring their products to Vancouver and to transload them into containers there. Forest products are generally brought to Vancouver by truck or box car. Crops are brought to Vancouver by hopper car. Specialized companies then transfer these products into containers and take the containers to the marine terminals just in time prior to the ship leaving.

In conclusion, a much higher proportion of empty containers at Vancouver are handled away from the marine terminals than in Los Angeles and Long Beach, leading to a greater number of empty truck hauls in Vancouver. About 90 percent of empty containers are controlled by shipping companies and these containers are more readily available at the port than inland. However, Transport Canada has carried out research to increase container movement flexibility and has invested in improvements to container yard access in Regina and Saskatoon that may contribute to making it easier for inland exporters to obtain empty containers.

 

 

¹ Terminal Systems Inc., Vancouver. http://www.tsi.bc.ca/t3/index.php?id=46

 

 

² DP World, Centerm, Vancouver. http://portal.pohub.com/portal/page?_pageid=347,1,347_111366:347_156386&_dad=pogprtl&_schema=POGPRTL

³ Roche Lteé, Group-conseil, Montreal, QC and Levelton Consultants Ltd., Longueuil, QC, Terminal Appointment System Study, March 2006, p.44. http://www.tc.gc.ca/innovation/tdc/publication/pdf/14500/14570e.pdf

⁴ IBI Group, Vancouver, BC, Container Simulation Project, BC Ministry of Transportation Container Trucking Forum, April 25, 2007 p. 41.

⁵ IBI Group, Vancouver, BC, Container Simulation Project, BC Ministry of Transportation Container Trucking Forum, April 25, 2007.

⁶ Photos: Hanam Canada

⁷ Source: Calculated from Port data and IBI Group, 2007

⁸ Port Jobs Organization, Seattle 2006. http://www.portjobs.0r/bigrig_shorthaul_exec.pdf

⁹ Marinova Consulting et al, Use of Containers in Canada, Transport Canada, 2006. http://www.tc.gc.ca/policy/report/acg/containers2006/ExSum.htm

¹⁰ Source: Calculated from Port data except as noted

¹¹ APL, Transportation Research Board, quoted by John Vickerman, Transystems, Norfolk, VA Emerging Canadian Port & Intermodal Opportunities: A Capacity Assessment, October 3, 2006.

¹² Norman Stark, President and CEO, TSI, May 31, 2007. http://www.portvancouver.com/shipping_trade/docs/TSI Norman Stark May 31 07.pdf

¹³ John Vickerman, Transystems, Norfolk, VA, Canada Asia Maritime Conference Notes, 2006.

¹⁴ DDC Consulting, Dec. 2004 Assessment of Overseas Container Service Issues and Opportunities for Saskatchewan Exporters. http://www.rreda.com/

¹⁵ Wellspring Management, Chicago, IL December, 2006. www.gredco.rochelle.net/DCEOstudy.pdf

¹⁶ TW Commodities, Swift Current. http://www.twcommodities.com/contact.html

¹⁷ Kleyson Transport. http://www.kleysen.com/momex/NavCode/contact.list/Division/8

¹ Marinova Consulting at al, 2006.

¹ Dr. Jake Kosior, Supply Chain Solutions International, and Dr. Barry Prentice, University of Manitoba, A Review of Regulations Governing Use of International Marine Containers in Canadian Domestic Cargo Carriage, December 2005. http://www.tc.gc.ca/policy/report/acg/containers/Menu.htm

¹ Source: Throughput compiled by Hanam Canada, Turn-times by IBI Consulting

 

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