LOS ANGELES — After struggling with delayed holiday season shipments of Asian-made goods because of port congestion, industry concern is mounting about the impact of the end of global apparel and textile quotas Jan. 1 on the ports of Los Angeles and Long Beach, Calif., the busiest in the U.S.
While the backup of cargo ships, railroads and truck lines has eased for the moment, several factors may create a perfect storm scenario for products to navigate before they finally make their way to retailers and shoppers.
The elimination of quotas, which will likely supercharge China’s low-cost production pipeline, means some retailers are delaying spring deliveries to the first part of next year to benefit from cheaper prices. In addition, the arrival of the Chinese New Year on Feb. 9 means most Chinese ports as well as Hong Kong’s will close the week before the holiday, creating a frenzy in January for the shipping centers that process 43 percent of all container traffic imported into the U.S.
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“There’s going to be a natural bottleneck getting here,” said Joseph Harris, vice president of sourcing and product development at Pacific Sunwear, an Anaheim, Calif.-based teen retailer with 969 stores nationwide and in Puerto Rico. “Every retailer is looking at options from drop-shipping [avoiding warehouses by sending product directly to stores] to flying in merchandise. We’ve developed contingency plans, making allocations for some product made closer to home.”
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Gottschalks Inc., which operates 63 department stores and 10 specialty apparel stores in six Western states, said that it is working closely with vendors in anticipation of potential port gridlock. The company has been diverting product to Seattle and Oakland to cope with the escalating freight at the ports.
“Vendors are telling us that the first quarter is going to be challenging,” said Scott Manson, senior vice president of merchandising at Gottschalks, which is based in Fresno, Calif. “But, we’re not going to try to manipulate or over-strategize the sourcing process or we may lose business.”
Industry experts said such prudence makes sense since delaying shipments isn’t necessarily a savings slam dunk.
“Some of our clients are doing this and they run the risk of congestion, extensive customs examinations and ships being caught in the winter storms,” said Robert Krieger, president of logistics provider Krieger Worldwide in Los Angeles. “A client may lose that sale, and if they lose that, they may lose a customer.”
The potential port traffic jam arrives after a five-month backlog during the recent peak holiday shipping season. The 12- to 15-percent surge in cargo this year was double what industry analysts had anticipated.
The port of Los Angeles processed 4.9 million cargo containers year-to-date through August, up 4.45 percent compared with last year. Meanwhile, the port of Long Beach handled 4.65 million cargo containers year-to-date through October, an increase of 21 percent from the year before.
For now, the ports are a little less busy for several reasons. The number of ships arriving daily is about 35 to 50, down from a peak of 82 in early November. Less cargo, diversions to other ports, such as Oakland and Seattle, and a boost in the employment of dockworkers helped the ports play catch-up, said John Smith, supervisor for the Marine Exchange, a nonprofit group that monitors port traffic.
In August, the dockworkers union and major shipping lines here agreed to hire 3,000 nonunion workers — later increased to 5,000 — to cope with rising demand.
U.S. government officials say the elimination of quotas will make the Customs process less complicated because they won’t be as focused on determining whether goods can be admitted to the U.S., making it less likely that shipments will be held up.
But some stakeholders say the improvements aren’t enough. Patty Senecal, vice president of trucking firm Transport Express in Los Angeles and the chairwoman of the inter-modal committee of the California Trucking Association, said congestion still exists on the docks.
“It’s a little bit misleading as far as the trucking industry goes,” Senecal said. “We’re still averaging five to seven hours per transaction per terminal compared to two hours, which means trucks can be one to two deliveries behind. We’re suffering immensely. Freight delays may mean customers receive their shipments late, and they may issue chargebacks which affect all of us.”
Senecal is looking to the Inland Port Task Force formed by Los Angeles Major James Hahn in July for some relief. The committee, comprising shipping lines, terminal operators, importers, trucking companies, railroads and the dockworkers union, seeks to create a staging area for trucks in San Bernardino or Riverside counties, located 45 miles to 60 miles east of Los Angeles. When the ships arrive, cargo would be off-loaded to railroads or trucks and relocated to another area, rather than stacking up on the docks where space is scarce.
“Why use the ports as a warehouse?” said Yusef Robb, spokesman for Hahn, who said proposals to secure warehouse space are under consideration. It’s a strategy that Union Pacific Railroad also plans to implement in the next six to nine months, said Union Pacific spokesman John Bromley.
Senecal said she is also optimistic about the extra attention the ports will receive from the federal government in a more direct connection to policy makers. This week the Department of Transportation is opening its Southern California Gateway office in Long Beach run by an ombudsman who will monitor conditions at the port and report directly to the U.S. Secretary of Transportation Norman Mineta. The move is a reflection of the booming transportation industry and its economic importance, said Robyn Boerstling, public affairs special assistant for the transportation department.
“There’s been expressed interest by stakeholders that the federal level gets involved for guidance on challenges and solutions to the issues at the ports,” she said.
An unknown for the shipping industry is its transformation to a 24-hour operation, a private-sector program announced in August in response to port-area traffic congestion.
An extension of operating hours, originally slated for November, has been bumped back to the first quarter of next year. The delay stems from getting the new workers at the ports up to speed along with acceptance from the trucking industry, which wasn’t brought in on the original negotiations. Truck drivers may only work so many consecutive hours under federal law.
“If our drivers are idling, then they’re burning up legal hours of duty,” Senecal said. “We have to see how productive the night gates will be and how the traffic continues to move through the ports.”
Shipping around the clock is a move that Self Esteem, a $150-million juniors resource, welcomes.
“We work on a three-shift system anyway so it works out better for us,” said owner Richard Clareman.