Cal Poly Studies Identify Solutions for U.S. Supply Chain Inefficiencies

Port and transportation efficiency is critical in an interconnected world driven by the need for timely and cost-efficient movement of goods. Weaknesses in the supply chain can have long-term negative impacts on the macro-economy, GDP growth, international trade, and inflation, as illustrated by the lingering effects of COVID disruptions on the global movement of goods. Agricultural products, which constitute the largest U.S. exports from the West Coast ports, have been particularly affected by backlogs at various nodes in the logistics chain (trucking, rail, ocean shipping, distributions centers and ports).

Cal Poly professors Cyrus Ramezani and Chris Carr have been conducting funded research (nearly one million dollars in grants since 2019) for the United States Department of Agriculture’s Agricultural Marketing Service (USDA-AMS). Their research is aimed at improving the efficiency of the intermodal transportation and logistics system, particularly for agricultural exporters.

 

Port of Los Angeles, where 30% of exports are agricultural products.

 

“COVID forced people to stay at home, shifting their normal and discretionary expenditures (travel and entertainment dollars) to online shopping. So we began to import a whole lot more stuff, and that put pressure on the entire logistics system,” Ramezani said. “It snowballed into a major growth in imports, while our exports remained stagnant or declined. COVID also impacted labor conditions at all nodes in the logistics chain. The upshot was an unprecedented backlog at every point in the supply chain. Our research developed recommendations to remove or reduce these backlogs and increase the fluidity of the logistics system as a whole, but with particular attention to the needs of agricultural exporters.”

A summary of the solutions their research has proposed includes the following:

Optimizing the supply of the "right" type of container and chassis. Ramezani and Carr’s research found no “one size fits all” solution for container and chassis shortages across all U.S. ports, but instead presents three strategies to mitigate and potentially alleviate equipment shortages that impact agricultural exporters at the ports studied (Port of Los Angeles, Port of Long Beach, Port of Oakland). One of the problems identified is the return of empty containers to Asia taking priority over filling those containers with agricultural exports. The researchers recommend solutions to ensure both containers and chassis are available to agricultural exporters during the harvest and export season. For example, shared ownership of a neutral chassis pool, subsidizing purchases of chassis and containers, and other incentive schemes (long term forward contracts) to serve agricultural exporters.

 

Increasing the availability of refrigerated containers. As global incomes have increased, demand for perishable goods has grown significantly, which in turn has increased demand for refrigerated containers. Ramezani and Carr studied the factors that impact the provisioning of refrigerated containers and proposed an econometric model to estimate the impact of key variables, including income, commodity prices, seasonal factors, political uncertainty and exchange rates on U.S. perishable exports and the "derived demand" for refrigerated containers.

Improving supply chain communication and coordination using new information technologies. Large companies such as Costco, Amazon, FedEx, UPS, Walmart, and Target utilize a central logistics system and backbone to provide data visibility across the entire logistics chain, but when it comes to containerized agricultural transport, data sharing tends to be broken and fragmented.

“Major companies often own much of their logistics chain and can negotiate preferential treatment in terms of shipping costs and speed of delivery. These firms also have access to best practices software to trace products' location around the globe, manage warehouses, schedule pick ups and drop offs, and run an efficient logistics system,” said Carr.

Smaller exporters, such as agricultural firms, do not posses the same advantages, but such enterprises can be helped by “subsidizing their technology purchases, and offering educational programs to assist in the adoption of digital technologies to manage shipments. We also proposed the creation of purchasing cooperatives so farmers can obtain better terms when buying digital technologies, or critical equipment like containers and chassis,” recommended Ramezani.

Improving fluidity at terminal and port facilities. Port fluidity - the speed by which containers are moved within port facilities - is impacted by the way containers are loaded at the port-of-origin and then unloaded and stacked at the port-of-destination. If this loading, unloading, stacking, sorting and re-stacking are pursued in ways that “optimize” stakeholders' needs, then appointment systems can make a significant difference and add value. However, this requires the stakeholders to share data in a timely manner, so that there is sufficient time to plan operations at each node in the logistics system. Without comprehensive data sharing platforms, port appointment systems fail to improve fluidity at port facilities. This research identifies procedures that enhance fluidity through adoption of new digital technologies at U.S. ports and marine terminals.

 

Port of LA from the air - @trekandphoto Adobe Stock

 

Alleviating congestion at seaports by constructing inland logistics facilities. Inland container ports handle shipping containers at locations away from a seaport and are typically linked to nearby ports by highways and rail. They have long been viewed as a solution to congestion and pollution at the San Pedro Bay (SPB) port complex, which includes the ports of Los Angeles and Long Beach.

Multiple feasibility studies have identified inland port locations to reduce pollution and congestion at the SPB complex, but the development of such facilities has been slow. Ramezani and Carr’s research addresses the impediments to the creation and utilization of inland facilities.

These studies have been positively received by the logistics industry, agricultural enterprises, and state and federal transportation agencies. For example, the Federal Maritime Commission invited the Cal Poly professors to present their research to their senior staffers and industry representatives. The authors also briefed Congressman Carbajal's staff on their findings. Finally, their findings have been highlighted in national press, including leading logistics publications such as the Journal of Commerce. To view Ramezani and Carr’s reports in more detail, click the following links:

• Intermodal Chassis Availability (Supply) for Containerized Agricultural Exports (2021) SSRN: Click here
• Determinants of Refrigerated Container Provisioning (2022) SSRN: Click here
• Integrating Terminal Gate Appointment Systems at the Port of Los Angeles (2022) SSRN: Click here
• The Impact of New Digital Technologies on U.S. Containerized Exports (2022) SSRN: Click here
• The Prospects for Developing Inland Logistics Ports in California (2022) SSRN: Click here

Acknowledgement Statement: This project was made possible by the work of the units in the Cal Poly Division of Research, Economic Development & Graduate Education to support student research, Learn-by-Doing, the Teacher-Scholar Model, proposal submission, award negotiation, compliance review, and post-award management. See more at research.calpoly.edu.