Port of Long Beach (POLB) Deputy Executive Director Dr. Noel Hacegaba and Union Pacific Executive Vice President of Marketing and Sales Kenny Rocker cover how the port and Class I are addressing supply chain congestion and partnering to help relieve it as well as information sharing and offering customers “optionality” in the June 15 installment of POLB’s “Supply Chain Insight” video series.
Railway Age provides the Q&A below, edited for length and clarity. (Scroll down to watch the video.)
Hacegaba, POLB: Today’s episode highlights the critical role that railroads play in moving cargo from the ports to key markets across the country. To illustrate this, nearly 40% of all U.S. import loads are right through the San Pedro Bay Ports Complex and eventually reach all 435 congressional districts in the U.S. Much of that cargo gets there by rail. As Chairman of the Board of the Intermodal Association of North America, I can tell you that intermodal keeps cargo moving and the economy going. And to tell us more about intermodal and the state of the U.S. rail system in general, our special guest today is Kenny Rocker. … Like ports, rail movements have long been viewed as a reliable barometer of the overall health of the economy. What is the state of the U.S. rail system from your vantage point and what do you think this tells us about the economy and where it may be headed?
Rocker, UP: Let’s open up and talk about international intermodal and where it stands. I’ll tell you, we see e-commerce still very strong right now; retail sales appear to be strong. And so we’re watching that closely. And as you look across the supply chain, there’s still tight truck capacity and so that’s encouraging. We’ve been fortunate enough to have a few business development wins, too. I think the real question is international intermodal traffic in the future is still a little uncertain, but you asked me how it’s looking today, and I’ll tell you that it looks pretty strong and on solid footing. On domestic intermodal, I’ll tell you the same thing. Tight truck capacity. The demand is there. We’re seeing a lot of customers asking to move more products on us; we’re filling our capacity in many places, so that’s encouraging. Now, outside of the intermodal market, we think about our Bulk business and I’ll tell you our Bulk business has been driven by coal, so believe it or not, coal is not dead. High natural gas prices have really spurred a strong demand in our coal markets. Our grain business has been really strong the last couple of years, and this year is no different, which we’re encouraged by, both domestically and also for export. When grain is as strong as it is, so is fertilizer. So our export potash has been strong. And then into our industrial markets, boy, we’re really seeing a solid market in terms of metals. A lot of these metals are going into construction, cars also. Lumber has been strong, rock, aggregates, cement. Aside from what I call crude oil, some of the petrol markets, those businesses have been pretty strong, so we’ll see where it goes, but I’m pretty bullish on the overall market.
Hacegaba, POLB: Well it sounds like all things are headed in the right direction. That’s very encouraging to hear, and I can tell you that here at the ports, we’re busier than ever, so it corresponds with what you’re telling us. Speaking of that, we’re seeing here at the ports, elevated IPI [Interior Point Intermodal] volumes. And dwell times in the port, average dwell time in the San Pedro Bay Ports Complex, for example, is at around nine days. What is Union Pacific doing to help move these boxes to inland destinations?
Rocker, UP: I do want to humbly acknowledge, our service is not where we want it to be. The encouraging thing is that from the lows of earlier this year, we’ve seen our velocity increase, car velocity increase 6%. We’ve seen our train speed increase 4%, so we feel really good about the direction we’re going. Some of the things we’re specifically doing that you want to know about is that we’re going out and hiring, and I want to give you an update on where we are with that. Right now we have a little bit over 500 of what we call trainmen in training right now, and so that’s encouraging. We have graduated over 300 of these individuals who will be actually running our trains, so we’re seeing them coming on to our property, and that will also help. We’ve done things like adjusted our transportation plans so that we can have more consistent, reliable service for you all and for our customers out there. We’ve inserted more locomotives into the network. So we’re really seeing those metrics improve like I mentioned earlier. Behind the scenes what we’re doing, really the nuts and bolts around making sure we have the crews and the locomotives to get in and give our mutual customers the service that they expect.
Hacegaba, POLB: Well, Kenny, we appreciate everything that UP is doing. You guys are really stepping up to help us move these intermodal boxes out of our port terminals as quickly as possible. It’s interesting, during this time of the supply chain disruption, you look at a port, you look at the ships at anchor and you look at containers piling up and it’s easy to look from the outside in and say, “Hey, that’s a port issue.” Just like it’s easy to look at an inland rail yard and say, “It’s a rail issue.” But as you described, there are a number of factors that are at play, and certainly having an adequate labor force is critical as well as having equipment, right? Not just on the rail side, but having access to trucks, access to chassis, and with that in mind, what else can the customer, and/or the ports, do help alleviate the IPI backlog in the inland rail yards, and consequently, at the ports?
Rocker, UP: Well that’s a multi-faceted question. So I’ll take it from a different perspective. First thing, everything that you all are doing around the Supply Chain Information Highway [—allowing authorized port partners to gain secure access to data to increase cargo visibility—] is spot on. You talk about supply chain visibility. That’s so critical. At some parts of the supply chain, we have visibility and what you all are doing at the Port of Long Beach will really put it all together, so we can see it inside the terminals and see it on an end-to-end basis, so just, great job there. I’ll tell you on the rail end when we think about our rail network, it’s just one part; it’s just one component of the overall supply chain. And so as we look at the BCOs [Beneficial Cargo Owners] that are inland, we would really be encouraged if we could see the turn times improve at our inland terminals. I’d actually, as you think about visibility, I’d actually be encouraged if we could also see visibility to the actual BCOs that are going into the inland terminals. We’ve seen on the container side, the dwell there really increase significantly, almost double, and even on the chassis side, we’ve seen that increase by a couple days, so any improvements there would be much appreciated. So you heard about what the rail is doing and all the resources that we’re inserting. Those are are some other things that we could do from a supply chain perspective to make sure on the back end, that the inland ports, that the warehouses and distribution centers are able to take in the product.
Hacegaba, POLB: You’re spot on, Kenny. There’s this old adage that “It take a village.” In this case, it takes the entire supply chain—everyone doing their part to get those containers moving and get that constant motion that we all need to keep our economy moving forward. You hit on something really critical: One of the glaring gaps that has emerged throughout the disruption is the lack of information sharing. We appreciate Union Pacific’s partnership as we continue to move forward our digital initiative, our Supply Chain Information Highway, which aligns very well with everything that UP is doing to address that issue. … Kenny, rail is a core value of the Port of Long Beach. And a centerpiece of our … capex program is our Pier B on-dock rail support yard, which will dramatically increase our IPI on-dock capacity over the years; this will enable us to continue to handle record volumes in the years ahead. Tell us why rail is a key solution to moving consumer goods today and in the years ahead.
Rocker, UP: You hit it on the head, I mean, we’re excited that Union Pacific is one of the only near-dock rail providers in that area, and we’re talking about over 600,000 lifts between the ports that are there. Set all of that aside from a service perspective, look, rail is, in terms of we want, an environmentally friendly way to get from Point A to Point B; we can reduce greenhouse gases by up to 75%. And so we look at that and you look at it in terms of the rail network, the consistency, the environmental impact—that’s just a lot of value that we can bring to the supply chain and we’re talking about a global supply chain that we’re looking at.
Hacegaba, POLB: That’s fantastic, and the figures you cited about the sustainability advantages of rail. … We’re the very first “green” port, and we’re certainly proud of that. San Pedro Bay is a cornerstone of UP’s network. What can you tell us about the projects that UP has lined up to support growth and network fluidity for the international market, and the role technology will play in that?
Rocker, UP: First of all, when you think about it, we are looking at the IPI shipments and it’s encouraging that we are seeing those gradually increase and then, in the areas where they aren’t, what we are doing is, we’re creating products to where we can capture those containers. So our Inland Empire [Intermodal Terminal] product, for example. We’ve spent quite a bit of capital there, and we’re seeing containers move out of there today so as you think about your business, what’s coming on to your port, clearly, we want it to go on-dock, and if it doesn’t, we have a solution for customers to move out of the Inland Empire [in Fontana, Calif.]. The other part of that is, we’ve inserted ourselves into the St. Paul/Minneapolis area [in 2021]. [The Twin Cities Intermodal Terminal is] … a new service product that we like to offer customers in the marketplace, so we’re excited to do that. We have product going in there today. We’re expanding that. It will be up to 100,000 lifts. And so if you think about that, that just gives customers coming through the Port of Long Beach optionality. One of the other things we want to do to make IPI shipments more attractive is the investment that we’ve made at our Global 4, we call it G4 Terminal, where were have an ag export terminal there so that our customers can move loaded into Chicago and then put grain on there and move back to the port loaded. We think that gives a lot of options to our customers, so really just investing heavily for that. Now, you talked about technology, and I talked about what we want to do with the Supply Chain Information Highway, and I’ll tell you that we’ve just been over-zealous about our APIs [Application Programming Interface] with our customers. We have a number of international intermodal customers that are hooked up with our IPI capabilities, and that just gives all of us, the port, the rail, the customer real-time feedback and it allows us to have a conversation about what’s going on, so we’re really excited about that.
Hacegaba, POLB: What I’d like to say about technology that in and of itself it’s simply a tool, but it becomes a solution when you integrate it into the operations, and that’s precisely what our respective organizations are working toward. So we appreciate what you guys are doing in that regard. Kenny, at the Port of Long Beach, we recognize the value of thinking outside the docks and looking at the container movement system across the supply chain, and this includes land outside of the port to improve velocity and enhance efficiency. As we look to build out our Pier B dock facility, we’re looking at strategic points across the rail system to maximize our investments in on-dock, here at the port. And we recently entered into a partnership with Union Pacific and the Utah Inland Port Authority to move more containers to the Intermountain Region via rail. How do partnerships like these help shippers, and like you pointed out earlier, exporters and the broader supply chain?
Rocker, UP: It just gives more optionality, and that’s what a lot of our mutual customers want is optionality, and it gives them efficiency. It gives them a loaded ride back, which is, again, makes us all competitive from a cost structure. It’s in place; we’re excited about it, Noel. We have other products, I talked about, G4, and I haven’t talked about, Calipatria, where we’ve moved hay back. Everyone knows about plastic pellets moved back from Dallas, back into your ports, and so we just have to come up with solutions, and we’ve been excited we’ve been able to give those solutions to our customers.
Hacegaba, POLB: We look forward to continuing to work with you and the Utah Inland Port Authority to really max out what we can do by really leveraging that hub there in Salt Lake City.