Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, it seems
Speaker 1: like there are some tentative signs out there of easing
Speaker 1: global supply chains, yes, and no, I keep seeing a
Speaker 1: mixed bag. And also, I mean we kind of have
Speaker 1: to talk in terms of geographies as well. So I know,
Speaker 1: Bloomberg Economics literally just hit the button on a piece
Speaker 1: of research saying that there seemed to be some signs
Speaker 1: of improvement in the US and Europe, but in places
Speaker 1: like the UK, things are just getting worse. But of
Speaker 1: course even in the US, there's a lot of debate
Speaker 1: over what exactly it is we're seeing and what we
Speaker 1: should be looking at in terms of judging whether or
Speaker 1: not things are actually getting better. Right, There is not
Speaker 1: like one supply chain index, or one measure of prices
Speaker 1: or one measure of shipping time that can give us
Speaker 1: the answer. There's clearly a lot of different moving parts
Speaker 1: to all this, and so at this point, I think
Speaker 1: maybe it's safe to say things aren't still getting worse,
Speaker 1: I think generally speaking with at least in the US,
Speaker 1: but whether things are like sustainably getting better. Whether packages
Speaker 1: and containers are moving through our system faster still feels
Speaker 1: kind of ambiguous. Yeah, I think that's right. And of
Speaker 1: course we recently spoke with the white Houses Envoy to
Speaker 1: the Ports, John Porcari, and the White House itself has
Speaker 1: been putting out some blog posts and some stats saying,
Speaker 1: look at this improvement, and then other pieces of data
Speaker 1: say that that improvement is a mirage. So yeah, I
Speaker 1: think we're sort of established, just a lot of questions
Speaker 1: still out there. I think that's right. And also when
Speaker 1: we spoke to Porky, we said we were going to
Speaker 1: have to check in on the other side of all
Speaker 1: of this, which is with the actual Port of Los
Speaker 1: Angeles that the White House the Biden administration has been
Speaker 1: working with and see how things are actually going from
Speaker 1: their perspective. Well, that is what we're doing today, and
Speaker 1: so I'm very delighted we spoke to him back over
Speaker 1: the summer. We're going to be speaking again for an
Speaker 1: update on the situation at the part of Los Angeles.
Speaker 1: Jeans Saroka, the executive director at the Port of Los Angeles,
Speaker 1: thank you so much for coming on. Odd Loves, good
Speaker 1: to be here. Joe and Tracy, Thank you, thank you
Speaker 1: so much. So what don't you just uh, you know,
Speaker 1: give us the sort of very big picture how things
Speaker 1: look today. We're recording this December. Are the last time
Speaker 1: we had you on it was early August? Why do
Speaker 1: you give us a little bit of a comparison between
Speaker 1: what's going on right now and then, Well, if we
Speaker 1: talked back in the summertime, late summer and folks told
Speaker 1: me that we would be nearing and surpassing the all
Speaker 1: time record for holiday sales according to the National Retail Federation,
Speaker 1: and had a chance to all also simultaneously break the
Speaker 1: all time record for retail sales in the country. I
Speaker 1: think there'd be a lot of skeptics, led by me,
Speaker 1: but that appears to be where we're headed right now. Now.
Speaker 1: Behind that, there are a lot of There are a
Speaker 1: lot of storylines, There are nuanced effects, there are so
Speaker 1: many variables in each equation. There's a lot to unwrap
Speaker 1: here on today's podcast. But happy to be with you both.
Speaker 1: So what is it that you're watching now in terms
Speaker 1: of actually judging how much you're moving through the port
Speaker 1: Because we have this conversation with port Kari. A little
Speaker 1: while ago, we were talking, for instance, about the number
Speaker 1: of ships that are waiting off the coast, and he
Speaker 1: was emphasizing that we should all be looking at throughput
Speaker 1: and the number of actual containers that are moving through
Speaker 1: the port. So from that perspective, how are things going? Sure,
Speaker 1: I think we've gained some traction in a number of areas,
Speaker 1: but in all sincerity, it's like a game of whack
Speaker 1: a mole. You do a couple of things pretty well
Speaker 1: as a supply chain, and no one individual or no
Speaker 1: one entity is pulling every level, as you both well know.
Speaker 1: But soon as something gets a little bit more traction
Speaker 1: or on better footing, something else jumps up and you
Speaker 1: have to approach it right away too. So looking at
Speaker 1: what we have been doing, I'll give you a couple
Speaker 1: of indicators. One, the number of idle containers sitting on
Speaker 1: the ports marine terminals has decreased by six since October,
Speaker 1: and that's when we first started discussing with the industry
Speaker 1: the potential of levying a penalty for the aging containers
Speaker 1: sitting on our docks. Second, the ongoing productivity at the
Speaker 1: ship level continues at record pace. We're welcoming more vessels
Speaker 1: that are worked every day at the Port of Los
Speaker 1: Angeles than ever before and on average fifty better than
Speaker 1: when the surge began. And the other piece to this
Speaker 1: is that we're already to see those signs on the
Speaker 1: macro economic level of the u S that are so encouraging,
Speaker 1: including the statements by the National Retail Federation overall inventories
Speaker 1: at the warehouse level nationwide and the in store or
Speaker 1: in stock shelf where inventories at the retail level that
Speaker 1: are just about a percentage point below where there were
Speaker 1: a year ago. Let's talk about the ships that are
Speaker 1: docked out, because some have said, well, sure you can
Speaker 1: decrease the number of containers that are aging waiting for
Speaker 1: their simply by uh, just having them beyond the ships,
Speaker 1: and that ultimately it doesn't really change much the number
Speaker 1: of ships at least up the latest stats that I've seen,
Speaker 1: or at least up until recently, have gone up. What
Speaker 1: is going on with that? And is there some sort
Speaker 1: of Is there some sort of mirage here where those containers,
Speaker 1: instead of aging on dry land, are aging out on
Speaker 1: a boat. Yeah, one, I would say no mirage. But
Speaker 1: here again, oh, this is really nuanced, and I'll try
Speaker 1: to carry it through where we were, what we look
Speaker 1: like today, and where we're going in the future. Uh.
Speaker 1: Much of the dialogue around the ports, and again this
Speaker 1: is a global supply chain, but around the ports has
Speaker 1: been how many ships do you have sitting outside at
Speaker 1: what we call anchor? So we dutifully measured and reported
Speaker 1: on that daily, as you both well know, on our
Speaker 1: hero slide of our homepage at the Port of Los
Speaker 1: Angeles are a litany of statistics that we look at
Speaker 1: every day, including major ones that have drawn the attention
Speaker 1: of observers and industry partners alike, especially those vessels and anchor.
Speaker 1: And then recently, as of the sixteenth of November, the
Speaker 1: private sector industry folks decided to put a new process
Speaker 1: in place when it comes to the liner shipping vessels
Speaker 1: that come our way every day. So I'll explain this
Speaker 1: in two pieces. Where we were and where we are
Speaker 1: right now. We look dad and we show on our
Speaker 1: operations report every morning after our own nine hundred staff
Speaker 1: meeting here at the Port of Los Angeles, how many
Speaker 1: ships are in, how many ships are at anchor, what's
Speaker 1: on their way over the next three days. And that
Speaker 1: had been fairly traditional, so everybody could keep up with
Speaker 1: what's happening. On November six, the industry went to what
Speaker 1: they call a queuing system, and what they were trying
Speaker 1: to do was get after three areas that were problematic.
Speaker 1: Number One, pollution in and around our residential areas of
Speaker 1: the ports. With all these ships stacked up for an
Speaker 1: elongated period of time waiting to come into the ports,
Speaker 1: there was more pollution that had to be dealt with.
Speaker 1: Second was the safety of our crews and the vessel
Speaker 1: assets because they were coming over here sitting outside the
Speaker 1: breakwater very close to each other. We've experienced some high
Speaker 1: wind events recently that got the ships moving in the
Speaker 1: ocean going seas a little bit closer to each other
Speaker 1: than we would have liked. In fact, there was a
Speaker 1: lot of us that were really concerned about that. And
Speaker 1: then thirdly, the reason they were rushing over and sitting
Speaker 1: at anchor was because that was the protocol for putting
Speaker 1: in the requests for the dock workers, making sure we
Speaker 1: had enough folks on the job to work each one
Speaker 1: of those individual vessels. So the industry decided to do this.
Speaker 1: You were allowed to put in your requests or orders
Speaker 1: for dock workers as you left Asia Therefore, you didn't
Speaker 1: have to race across the Pacific simply just to get
Speaker 1: in line. You were allowed to stay a little bit
Speaker 1: further out, as agreed upon for industry protocol, and let's
Speaker 1: call it a hundred and fifty miles offshore. In that setting,
Speaker 1: you could sit farther apart from each other if you
Speaker 1: had to, and de risk that potential for collision in
Speaker 1: a high wind event. Thirdly, it moves all those emissions
Speaker 1: farther offshore and nowhere near the proximity of the res
Speaker 1: sidential areas here in Los Angeles and Long Beach. So
Speaker 1: that was the backstory to all this. Now, because we're
Speaker 1: the folks that are looked to for transparency and the
Speaker 1: posting of all these numbers and information, we had to
Speaker 1: get to work to re calibrate along with industry, how
Speaker 1: we would report out and create an apples to apples
Speaker 1: comparison of what we would have looked so today, as
Speaker 1: an example, outside of the waters of the ports of
Speaker 1: Los Angeles and Long Beach, under this new definition, we
Speaker 1: have ninety four ships that are waiting to come into
Speaker 1: the port to do their work if we use that
Speaker 1: same Definitioning back on November six, we would have had
Speaker 1: eighty nine ships sitting waiting to come into port. Most
Speaker 1: of us in the industry call that anchorage. At the
Speaker 1: Port of Los Angeles, specifically, we have forty three ships
Speaker 1: that fall into that category of waiting to come in
Speaker 1: to do their work, and if we use that same
Speaker 1: definitioning back on November sixt that would have been forty four.
Speaker 1: So again, the comparison of the definition was really important
Speaker 1: to get out to the public, to the media community
Speaker 1: and others, and we look pretty similar on those two
Speaker 1: specific dates based on what the private sector industry has
Speaker 1: brought forward as a new process. So I wanted to
Speaker 1: go back to something you said earlier about the number
Speaker 1: of containers that are, you know, sitting at the ports
Speaker 1: waiting to be loaded onto trucks or rail I think
Speaker 1: you said that that number is down something like six,
Speaker 1: was that right? That's correct, And those are the containers
Speaker 1: that we defined as sitting at the port nine days
Speaker 1: and longer back on October. So one of the reasons,
Speaker 1: or the big reason those are down is because you
Speaker 1: have threatened to impose this charge, this one fee on
Speaker 1: containers that are either stuck there I think for for
Speaker 1: nine days or in some cases it's six days or more.
Speaker 1: My question is, why not just start imposing that fee,
Speaker 1: Why just have the threat of it. I mean, I
Speaker 1: get that you've achieved a pretty dramatic reduction with just
Speaker 1: the threat, but at some point you need to sort
Speaker 1: of follow through on what you're saying potentially, And that's
Speaker 1: why the ability to charge this fee has been under
Speaker 1: my authority and will be so until the end of January.
Speaker 1: But we have kept the fee in suspension because we've
Speaker 1: seen progress in the industry. If you go back to
Speaker 1: our Emergency Harbor Commission meeting back at the end of October,
Speaker 1: I told our Board of Harbor Commissioners that I hope
Speaker 1: this is a miserable failure. That would mean quite simply
Speaker 1: that removing cargo and we would not collect any money.
Speaker 1: To date, we have not collected any money, and we've
Speaker 1: seen a decrease in those aging containers because everybody pulled together. Now,
Speaker 1: obviously there was a financial interest in this. People did
Speaker 1: not want to get penalized. People did not want to
Speaker 1: see a problematic situation get worse. At the same time,
Speaker 1: we were able to use this fee to also segment cargo,
Speaker 1: and there was admittedly cargo on our docks that was
Speaker 1: not needed right now at that snapshot in time, nor
Speaker 1: is it today. It may have been a little late
Speaker 1: as seasonal product that had already moved past its market.
Speaker 1: It may be a little early for next spring. And
Speaker 1: we were able to figure this out through the data
Speaker 1: mining in the Port Optimizer, our port community system. We
Speaker 1: worked with the retailers other large importers and said, there's
Speaker 1: no shame here, Let's just move this cargo away for
Speaker 1: the time being, so we could really move the product
Speaker 1: to market that needed to get there. Think of holiday
Speaker 1: products and parts and components for our factories across the nation.
Speaker 1: Let's go in a little bit more clarity about why
Speaker 1: the containers have built up so much in the first place,
Speaker 1: because I feel like I have two different ideas in
Speaker 1: my head. One is perhaps that the container owners viewed
Speaker 1: it as free storage, and maybe the inland warehouses are
Speaker 1: like capacity, so no rush taking it off the dock.
Speaker 1: The other thing that we've talked about before with I
Speaker 1: think you and some other guys is just that there
Speaker 1: is a traffic jam at the port for the dra
Speaker 1: truckers to even get the containers off the port, and
Speaker 1: that there's only so many of them that can get in,
Speaker 1: you know, in the course of a day, and when
Speaker 1: their traffic jam, they can't get them out. So what
Speaker 1: were in your view the underlying conditions that caused the
Speaker 1: build up to get as bad as it did, Joe.
Speaker 1: It was both, plus probably a dozen other issues. There
Speaker 1: were importers who admittedly brought in cargo just in case,
Speaker 1: not just in time as we had done in the past.
Speaker 1: Many folks knew that once we started to get wound up,
Speaker 1: as we saw the American consumer demand really increase, that
Speaker 1: they were going to have to get orders into factories
Speaker 1: in Asia as quick as they could and faster than
Speaker 1: their competitors. So maybe they ordered a few more lounge
Speaker 1: chairs or patio sets, maybe some flat screens well ahead
Speaker 1: of the time for the Super Bowl, which is the
Speaker 1: biggest sales time for TVs and a variety of other
Speaker 1: important commodities. On the other side, we add and saw
Speaker 1: many examples on the ground of importers having a very
Speaker 1: difficult time getting their containers off port property. And that
Speaker 1: could have been a trucker stuck in a long line,
Speaker 1: that could have been an empty return policy of a terminal.
Speaker 1: It could have been a bad order chassis or not
Speaker 1: enough chassiss at the right place. So it was never
Speaker 1: a situation we were just saying, Okay, this is the
Speaker 1: only reason we're going to go after it. Just like
Speaker 1: other areas of the supply I chained, they're so nuanced
Speaker 1: and there are so many reasons behind the inefficiencies that
Speaker 1: you just have to keep chipping away. So we did
Speaker 1: work with some of the large retailers and say, if
Speaker 1: you don't need your cargo right now, let's just move
Speaker 1: it to the side. And they were so gracious and
Speaker 1: working with us because they knew that they also had
Speaker 1: product that has to be speeded up to get to market.
Speaker 1: Then with the smaller and seasonal folks, we said, okay,
Speaker 1: if we can do this and get a little more
Speaker 1: maneuverability on our terminal tarmax, we're gonna get to your product.
Speaker 1: But we're gonna do it through a program called Accelerate
Speaker 1: Cargo l A where we turn this into a push system.
Speaker 1: It's not simply wait for the hours of operation and
Speaker 1: sign up for your appointment. We know where your cargo is,
Speaker 1: how long it's been here. We're gonna come to you
Speaker 1: and say this is how much cargo we have and
Speaker 1: we can move out every day you're going to commit
Speaker 1: to us that you'll take that about a cargo, you'll
Speaker 1: have the truck power, will circle with the chassis people
Speaker 1: in the terminal operators. It was every by working in
Speaker 1: that node to make sure we could deliver the other
Speaker 1: piece to this was also working with those notes if
Speaker 1: we needed a more standardized process on export and empty returns.
Speaker 1: That's why John Pocari was having the meetings three times
Speaker 1: a week with industry stakeholders and these were decision makers.
Speaker 1: So we went after it with a wide of a
Speaker 1: lens as possible and keeping our perspective that knowing we
Speaker 1: got one piece right, we probably have three other pieces
Speaker 1: we had to get after. Next, I want to ask
Speaker 1: you as well about the the expansion to operating seven.
Speaker 1: How is that actually going and what obstacles have you
Speaker 1: had to you know, sort of surmount in order to
Speaker 1: expand the working hours, because I remember when you came
Speaker 1: on last we were talking about, for instance, the difficulty
Speaker 1: of the tightness of the labor market and the difficulty
Speaker 1: of you know, either convincing existing workers to work night
Speaker 1: shifts or getting new ones in who would be able
Speaker 1: to work that schedule, and we were also talking a
Speaker 1: little bit with various guests about local noise ordinances and
Speaker 1: pollution restrictions and things like that, and basically just the
Speaker 1: difficulty of moving to this twenty four hour schedule. And
Speaker 1: yet it seems like like you've made it happen. So
Speaker 1: what's changed on that front? All of that's true, Tracy,
Speaker 1: and your recollection is absolutely spot on. I'll take you
Speaker 1: back to October thirteenth, when I had the privilege of
Speaker 1: meeting with the President of the United States directly. We
Speaker 1: had other meetings with Secretary Bootage Edge, Brian des the
Speaker 1: director of the NBC, and so many leaders on the
Speaker 1: cargo ownership side. We at the Port of Los Angeles
Speaker 1: traditionally work about nineteen hours a day day shift from
Speaker 1: eight to five cleaning and sanitizing and equipment, then a
Speaker 1: night side shift from six pm to three am. We're
Speaker 1: trying to look at squeezing every hour of productivity from
Speaker 1: this port that we possibly could, and working that three
Speaker 1: to eight sift, or what we call the hoot shift,
Speaker 1: was another one of those opportunities. The President, in his announcement,
Speaker 1: was also trying to get this largely private sector supply
Speaker 1: chain on the same schedule as the port, meaning that
Speaker 1: the truckers who have eleven hours of service permitted to
Speaker 1: them by the federal government every day and if they
Speaker 1: run consecutive days must take time off, have to get
Speaker 1: on that schedule to be service better run at nighttime
Speaker 1: when there's a list traffic on our roads and freeways.
Speaker 1: The warehousing complexes of which we boast more than two
Speaker 1: billion square foot of space from the shores of the
Speaker 1: Pacific out of the Southern California Desert region, traditionally operate
Speaker 1: during the day, and both segments have a dearth of
Speaker 1: workers on the job right now. It's been stated by
Speaker 1: the American Trucking Association that we're short about eighty thousand
Speaker 1: drivers nationwide, and I would tell you here in Southern
Speaker 1: California's sports we could use probably three or four thousand
Speaker 1: more trucks. Nationwide. We have job openings for four hundred
Speaker 1: thousand warehouse workers and maybe eight to ten thousand here
Speaker 1: in Southern California alone. So we've got to when we
Speaker 1: can catch our breath one day here in the future,
Speaker 1: we need to look at how we turn these two
Speaker 1: segments into professions. Again, we may have to look at
Speaker 1: compensation and benefits. But we have to find a way
Speaker 1: as a broader industry, both public the federal, state, local governments,
Speaker 1: as well as the private sector transportation and customers of
Speaker 1: the port to see what we can do to attract, recruit,
Speaker 1: and retain folks in this area. My grandfather was a
Speaker 1: teamster strucker for the American Canned Company in New York
Speaker 1: City for forty years. He put children through school, he
Speaker 1: built a home on his own. Today, we've got to
Speaker 1: find a way to look at the jobs in that
Speaker 1: same way. It's an uphill climb. I know that that's
Speaker 1: a lot of work in front of us, but we've
Speaker 1: got to have enough folks in these segments to be
Speaker 1: able to operate on the same schedule. As an example,
Speaker 1: the ports can operate. So moving forward and open it up.
Speaker 1: This dialogue has been good. We still also only use
Speaker 1: a certain percentage of our truck appointments every day, again
Speaker 1: for a variety of reasons, some operational, some the cargo
Speaker 1: was just not needed, and others that we have to
Speaker 1: improve upon. Can you talk to us a little bit
Speaker 1: more about the role that Pricari and the White House
Speaker 1: have played. So you mentioned three meetings a week. When
Speaker 1: he came on the podcast, he talked about his role
Speaker 1: simply being like an honest broker, someone who was trusted
Speaker 1: by all the different parties. What happened or what has
Speaker 1: happened or what is happening in those discussions, and how
Speaker 1: does simply getting everyone on the same page allow greater
Speaker 1: throughput with the same physical resources as before. Without this
Speaker 1: and without John, I would say right now, we'd be
Speaker 1: having a very different conversation Asian show. This all started
Speaker 1: back in February when President Biden wrote up the Executive
Speaker 1: Order on Supply Chain that also asked for a deeper
Speaker 1: look into certain commodities, think these uh microchips that go
Speaker 1: into our phones are automobiles and our computers. And then
Speaker 1: the President created the Supply Chain Disruption Task Force TRI
Speaker 1: chaired by the Secretaries of Labor, Transportation, and Commerce. Next
Speaker 1: out of that shoot was the July virtual round table
Speaker 1: chaired by Secretary Bootage that had all private sector industry
Speaker 1: leaders joined in addition to the ports in Southern California
Speaker 1: and some others. Shortly after that round table, jump Acari
Speaker 1: was named as Port Envoy and we began going through
Speaker 1: all of the details, all of the personnel and all
Speaker 1: of the requirements of this industry. Had we not had
Speaker 1: that a nerve shift, beginning with President Biden's EO, all
Speaker 1: the way through the personnel moves he made, we'd be
Speaker 1: in a much different place. John's accessibility has been first
Speaker 1: and foremost one of the best things that's happened. He's
Speaker 1: been able to use that cashier to bring together the
Speaker 1: necessary decision makers in the industry. And while no one
Speaker 1: is declaring victory and we have a tremendously long path
Speaker 1: in front of us, I think we're a lot better
Speaker 1: for having John around and helping us get to those
Speaker 1: decision points we needed. First and foremost was dating back
Speaker 1: to the summertime, many folks thought that we were going
Speaker 1: to have a real rough go of it when it
Speaker 1: comes to the retail market and especially the holiday season.
Speaker 1: But as I reported to John and many many members
Speaker 1: of the media, including you, both are savvy, American import
Speaker 1: community began bringing holiday goods in as early as June
Speaker 1: because they saw the longer lead times, the transit times
Speaker 1: being extended, and so many complexities in the supply chain.
Speaker 1: Even though that created a real storm of cargo think
Speaker 1: keeping up with consumer demand holiday goods and seasonal goods,
Speaker 1: back to school, fall fashion, Halloween all converging at one
Speaker 1: time this summer. It really helped get us in a
Speaker 1: position to have some assemblance of progress leading up to
Speaker 1: the holiday buying season. Many folks also have said that
Speaker 1: they started shopping earlier this season at the recommendation of
Speaker 1: what they saw from the federal and state governments, what
Speaker 1: they heard from the ports, and what they heard from
Speaker 1: shows like this. Get out there a little earlier and
Speaker 1: see if you could take that time to start your
Speaker 1: holiday shopping season with an eye on just that in mind.
Speaker 1: So are there ever any areas of tension that might
Speaker 1: arise between you know, an appointee from the federal government
Speaker 1: and business. I mean, I know you're owned by the
Speaker 1: City of Los Angeles, but you're still a business trying
Speaker 1: to generate revenue and some income for the city. And
Speaker 1: I can imagine, for instance, when um John Porcari says that, well,
Speaker 1: maybe we should be rerouting a lot of containers two
Speaker 1: different ports that actually have the capacity to move them,
Speaker 1: I could imagine that that might be something undesirable for
Speaker 1: the part of Los Angeles feel in normal times, Tracy
Speaker 1: you're correct, but at this point in time, within operating
Speaker 1: at a hundred year pandemic with consumer buying surge the
Speaker 1: likes of which we've never seen supply chain disruption worldwide,
Speaker 1: but maybe more acute here in the United States because
Speaker 1: the size of our economy and the spotlight that's been
Speaker 1: on us, this was a time, I feel that you
Speaker 1: had to take off your local hat and do what
Speaker 1: was in the best interest of the country for economic recovery,
Speaker 1: pulling people together and everything in between. It also just
Speaker 1: happens to be the case that the cargo that traverses
Speaker 1: the Port of Los Angeles reaches each of our nation's
Speaker 1: four hundred and thirty five congressional districts. Therefore, automatically, it
Speaker 1: is a conversation of national significance. And we have talked
Speaker 1: about bringing some of these new entrants to the trade
Speaker 1: carrying smaller quantities of cargo on smaller vessels, bring those
Speaker 1: to other ports, whether it be Oakland, San Diego, Winini
Speaker 1: up in Ventura County. If the four corner strategy had
Speaker 1: to be deployed again by certain importers, meaning bringing more
Speaker 1: cargo to the Eastern Gulf Coast, if that's part of
Speaker 1: the equation that's okay too. But still, even with all
Speaker 1: of the details and all of the concerns in this
Speaker 1: US supply chain today, bringing more or more cargo through
Speaker 1: the Southern California Gateway is the best opportunity we have
Speaker 1: right now to make a difference for the US economy.
Speaker 1: But again, it just comes down to situational awareness and
Speaker 1: doing what's best for the United States of America. What's
Speaker 1: the opportunity with the infrastructure money that's been allocated to ports,
Speaker 1: what what will that do for the ports system or
Speaker 1: specifically your report? I think specifically for our port it
Speaker 1: will allow us to accelerate projects that we classify as
Speaker 1: shovel ready. We have the financial wherewithal and capability, and
Speaker 1: that's how we were able to invest through cycle and
Speaker 1: keep three thousand construction jobs going when it was difficulty
Speaker 1: in other sectors. As we've talked about before, those shovel
Speaker 1: ready projects begin with a workforce training and development center
Speaker 1: that will be the first of its kind in the
Speaker 1: United States. As we know, technology, robotics and the transition
Speaker 1: to this next level is going to be difficult on
Speaker 1: the workforce, but we cannot leave them behind. So this
Speaker 1: Workforce Training Center is designed to reskille, up skill, and
Speaker 1: promote opportunities for the next generation of worker. Think of
Speaker 1: a mechanic who goes to work with a toolbox today.
Speaker 1: They may be upgrading and fine tuning that equipment with
Speaker 1: a computer tomorrow, and those are the skills they're gonna need.
Speaker 1: Second is repurposing land. As we've seen more of this
Speaker 1: cargo flow and how it's changed, we're gonna have to
Speaker 1: repurpose land and developed what we call grade separations flyovers,
Speaker 1: so we're not getting in the way of local commuters
Speaker 1: and school buses, but allowing for trucks and trains to
Speaker 1: move and remove bottlenecks. That's what's going to happen here
Speaker 1: in Los Angeles. And over the last ten years, the
Speaker 1: federal government in U. S. Congress have out invested the
Speaker 1: West Coast ports at a rate of eleven to one.
Speaker 1: That means about eleven billion dollars has gone to ports
Speaker 1: on the eastern Gulf Coast compared to a little more
Speaker 1: than one billion dollars here on the West Coast. And
Speaker 1: with forty of the nation's imports coming through Southern California,
Speaker 1: I think the best return on investment for the American
Speaker 1: citizen is right here in Los Angeles and Long Beach.
Speaker 1: At the very beginning of our conversation, you described a
Speaker 1: lot of these supply chain strains as sort of being
Speaker 1: um like whack a mole, you know, you kind of
Speaker 1: get a handle on one of them, and then a
Speaker 1: new issue pops up. What are the major issues? Now?
Speaker 1: What's your area of focus and what's taking up the
Speaker 1: most of your time? If you could be as specific
Speaker 1: as possible. Sure, I think it all starts with consumer
Speaker 1: demand and it remains elevated. And that's great because sevent
Speaker 1: of our g d P is driven by us buying products,
Speaker 1: and I'm no different than anybody else. Right now, we've
Speaker 1: got to look at what fulfillment means compared to traditional
Speaker 1: bricks and mortar retail sales and have a good focus
Speaker 1: on that. So that's breaking down a segment or two
Speaker 1: within that import retail system that maybe we need a
Speaker 1: finder look at. We've got to be able to scale
Speaker 1: better as an industry, both up when we see these
Speaker 1: surges and back down during what we call slack season
Speaker 1: or or ebbing of the flow. The next piece are
Speaker 1: are all these undercurrents that have happened since COVID nineteen began. Remember,
Speaker 1: even dating back to the days of the Trade policy
Speaker 1: and the previous administration, we went about eight months importing
Speaker 1: twenty less than we normally do, and then we pivoted
Speaker 1: so quickly to all of us buying more product than
Speaker 1: ever before. So this surge predominantly has been the American
Speaker 1: importer are just trying to keep up with the consumers demand.
Speaker 1: We next will have to manage an early lunar new year,
Speaker 1: so the imports will remain elevated, and we're seeing that
Speaker 1: in the number of ships coming across the Pacific right now.
Speaker 1: Then in the second quarter, the retailers and home improvement
Speaker 1: stores are telling me they're going to focus on inventory
Speaker 1: replenishment because our inventory sales ratio is still the lowest
Speaker 1: that's been in a decade. While we have seen inventories
Speaker 1: move up, they need to get better. According to the
Speaker 1: experts built within all of this, because of the import strength,
Speaker 1: empty containers have piled up, and there's been a big
Speaker 1: conversation among John Pacari's meetings of how we get those
Speaker 1: empties evacuated to keep the terminal Tarmax fluid and make
Speaker 1: sure we have the most maneuverability possible. Because we saw
Speaker 1: what happened when imports piled up. Everything got gummed up
Speaker 1: right there at the marine terminal. I don't want to
Speaker 1: have the same issue repeat itself with empty containers. So
Speaker 1: we've asked and in some cases imployed our shipping lines
Speaker 1: bringing these sweeper vessels, bringing as much capacity as you can,
Speaker 1: even though there's not much in the marketplace right now,
Speaker 1: but use every available slot to get these empties out.
Speaker 1: Focus on what you can do for the American sport
Speaker 1: and turn those containers as quickly as possible so we
Speaker 1: can keep the sense of fluidity and it all pans
Speaker 1: out because we've seen our container dwell times. So the
Speaker 1: time the container sits be cut in about half for
Speaker 1: trucking and down to presearche lows for our rail product
Speaker 1: right now. So again, all of these kpi s and
Speaker 1: measurables are looked at every day and each one has
Speaker 1: a knock on effect right now, empties, But again, Tracy,
Speaker 1: to your point, we're not just focused on empties and
Speaker 1: letting everything else run. Empties have risen to the awareness
Speaker 1: level that we need, but we're still looking at that
Speaker 1: stream of another dozen KPIs that we have to manage
Speaker 1: every day. So you mentioned the lunar new year, You
Speaker 1: mentioned the eventual Q two or stocking the and that's
Speaker 1: going to be a huge source of demand. Continued at
Speaker 1: that point, I don't know if we're looking at middle
Speaker 1: of two, would you expect to see the number of
Speaker 1: ships at anchor and some of these other metrics start
Speaker 1: to meaningfully to climb. Yeah, that's the gold show. I
Speaker 1: can't predict exactly when we hit this certain number or
Speaker 1: or what the ships sitting at anchor will look like,
Speaker 1: but I'm starting to see a little more clearly what
Speaker 1: segments of upcoming demand will be. And it's based on
Speaker 1: the expert advice what our data mining is showing us.
Speaker 1: But it will give us a chance if we do
Speaker 1: these next couple iterations the right way as an industry,
Speaker 1: as a collective, we got a chance to position ourselves
Speaker 1: next summertime to pivot into a peak season where we
Speaker 1: have a real chance to improve that supply chain certainty
Speaker 1: that has been so elusive to date, any concerns about
Speaker 1: the omicron variant tracy. Every day there's something in the
Speaker 1: news that's impacting the supply chain. And that's one of them.
Speaker 1: With Omicron, we're looking at exactly what we can do,
Speaker 1: what our backup plans are going to be across the
Speaker 1: ocean as well as right here at home. At this point,
Speaker 1: we don't see anything that's really debilitating in the industry.
Speaker 1: We've shown we can pivot to the second and third
Speaker 1: waves of COVID nineteen that hit South and Central China
Speaker 1: earlier this year. We've been extremely resilient on the docks
Speaker 1: here in Los Angeles as well as our trucking firms
Speaker 1: and our warehouses. We just need to keep our eye
Speaker 1: on the prize every day and keep those contingency plans
Speaker 1: at the forefront should something happen that requires us to
Speaker 1: pivot very quickly. Well. Jean Jean Taroca, Executive director of
Speaker 1: the Port of Los Angeles, thank you so much for
Speaker 1: coming out online. Joe Tracy, always good speaking with you.
Speaker 1: Thank you again. Well, we'll talk to you next summer. Thanks,
Speaker 1: look forward to it. Hey available for you anytime, No
Speaker 1: problem at all, all right, take care. So I think
Speaker 1: just in that conversation it's pretty clear how you there's
Speaker 1: it's sort of hopeless, the idea of like, oh, we're
Speaker 1: gonna get one measure that tells us whether the supply
Speaker 1: chain is getting better. Yeah, I think that's right. Although
Speaker 1: I was thinking maybe we should start a supply chain index.
Speaker 1: We should and honestly, if we could, we could probably
Speaker 1: make a lot of money. Like if we were like, oh,
Speaker 1: this is the one and it became the reference, we
Speaker 1: probably start doing options or derivatives tied to the futures futures,
Speaker 1: supply chain futures. We we helped the industry by allowing
Speaker 1: them to hedge, you know. But your question it's like,
Speaker 1: you know, he mentioned the whack them and then your
Speaker 1: question at the end, it's like, Okay, what are you, like,
Speaker 1: what are you going after right now? Like what's popping up?
Speaker 1: Sort of like got at it? Like it really does
Speaker 1: seem like it's still you know, there are some areas
Speaker 1: where they're getting better. It sounds like legitimately there are
Speaker 1: fewer containers on the ground on dry land there, but
Speaker 1: still the number of issues that continue to arise seems
Speaker 1: pretty extraordinary. Yeah. And I mean the other thing that's
Speaker 1: coming through pretty clearly is this idea of the first
Speaker 1: quarter of two after lunar New Year, which I think
Speaker 1: this year is um I think it's the first week
Speaker 1: of February. Everyone again seems to be coalescing around that
Speaker 1: moment as the sort of inflection point where we should
Speaker 1: actually start to see some measurable improvement I guess in
Speaker 1: controvertible improvement in supply chain issues. So again, like I
Speaker 1: feel like that's going to be an interesting moment to watch.
Speaker 1: And then we're going to have this booming demand because
Speaker 1: of the inventory were stocking, which should keep like GDP
Speaker 1: generally pretty strong in the US because we're running pretty
Speaker 1: lean as he mentioned, So there is this there's this
Speaker 1: big like sort of well of demand waiting out there
Speaker 1: for retailers to catch their breath and actually uh get
Speaker 1: up to inventory levels that they're comfortable with. Yeah, that's true,
Speaker 1: although I feel like you could also argue it the
Speaker 1: other way, which is, you know, like maybe people have
Speaker 1: been over ordering already in response to very strong consumer demand,
Speaker 1: and you know, if the economy starts to slow, which
Speaker 1: it potentially could do in two then suddenly they're not
Speaker 1: going to need as many goods as they thought they were.
Speaker 1: So I guess again, like the big theme that kind
Speaker 1: of comes through all of this is just how difficult
Speaker 1: all these supply chain issues and ordering an inventory actually
Speaker 1: are to predict, like how hard it is and how
Speaker 1: often we seem to get it wrong, and how that
Speaker 1: tends to lead to uh problems that become very very
Speaker 1: difficult to solve. I've been thinking about this because, like,
Speaker 1: look like it's December, so we're basically like two years
Speaker 1: solidly into I mean, you know, you could say March
Speaker 1: twenty when it really started, but I've we first heard
Speaker 1: about it in December. It's really two years into this,
Speaker 1: and no one or let's say not nobody, but not
Speaker 1: many people would have guessed in December nineteen that we'd
Speaker 1: still be talking about this pandemic so much two years later.
Speaker 1: It really seems like it makes it hard to plan anything.
Speaker 1: And so you think about investment, you think about oh,
Speaker 1: you know, sort of permanent changes or what are appropriate
Speaker 1: levels of ordering or inventory levels. It's pretty hard to predict,
Speaker 1: and so you know, you think about like supply chain persistence,
Speaker 1: inflation persistence, and so forth. Like it seems like probably
Speaker 1: a lot of that is simply because the last two
Speaker 1: years have simply been so unpredictable. Yeah, I think that's right.
Speaker 1: I mean, just think back to March if you told
Speaker 1: someone then that we were going to have a big
Speaker 1: boom in consumer spending within the next year, I think
Speaker 1: everyone would have thought you were crazy. And that's exactly
Speaker 1: what we had, and partly because we didn't expect it
Speaker 1: is the reason that we are now encountering so much
Speaker 1: trouble because people cut back on their inventories and didn't
Speaker 1: make the appropriate amount of investment, and so we're suffering,
Speaker 1: you know, still almost a year and a half on
Speaker 1: and the pandemic is still going on, and we really, like,
Speaker 1: you know, in some sense, life is normalizing, but it's
Speaker 1: not normal, and we really do not know when we'll
Speaker 1: be at some sort of like okay, this is this
Speaker 1: is stability, Like we really have no idea and so,
Speaker 1: you know, any anything here in terms of ordering or
Speaker 1: good the good services mix, it's still pretty much guesswork. Yeah, Well,
Speaker 1: on that happy note, shall we leave it there? Let's
Speaker 1: leave it there, all right? This has been another episode
Speaker 1: of the Odd Lots Podcast. I'm Tracy Alloway. You can
Speaker 1: follow me on Twitter at Tracy Alloway and I'm Joe
Speaker 1: Why isn't though you can follow me on Twitter at
Speaker 1: the Stalwart and you should follow uh the Port of
Speaker 1: Los Angeles on Twitter, headed by Jeane Siroca. Their handles
Speaker 1: at Ports of l A, follow our producer Laura Carlson's
Speaker 1: at Laura and Carlton. Followed the bloomberghead of podcast Francesco
Speaker 1: Leavi at Francesco Today, and check out all of our
Speaker 1: podcasts at Bloomberg under the handle at podcasts. Thanks for listening.