Street Turns Part Deux: The Benefits

Welcome to a special midweek edition of The LogTech Letter. Last week, guest poster Brendan Tompkins, chief technology officer of Port Technology Services, laid a historical map of where and why technology to enable street turns have failed to achieve scale. As promised, here’s the bookend to that post, where Brendan lays out the potential benefits to stakeholders involved in a street turn. The last part of the series will explore solutions to the issues he raised in the newsletter Friday (will post that when it’s ready).

As a reminder, this is the place to turn on Fridays for quick reflection on a dynamic, software category, or specific company that’s on my mind. You’ll also find a collection of links to stories, videos and podcasts from me, my colleagues at the Journal of Commerce, and other analysis I find interesting.

For those that don’t know me, I’m Eric Johnson, senior technology editor at the Journal of Commerce and JOC.com. I can be reached at eric.johnson@spglobal.com or on Twitter at @LogTechEric.

Street turns are beneficial for the entire intermodal industry, but I'd like to dive a little deeper into how specific stakeholders benefit and what the financial advantage is to each. It's essential to consider these perspectives since any scalable solution will involve buy-in from all parties. Many models that have been tried and those that have failed tend to ignore this fact. Solutions that provide most of the financial advantage to big box importers, for example, end up giving this advantage to these customers and their motor carriers, to the exclusion of others in the supply chain. These types of solutions may, if not carefully considered, work to the detriment of other stakeholders in the system, create a disincentive to participate, and can hurt the entire effort to scale the practice as a whole.

This is the tragedy of the commons. Individuals with access to a shareable resource (empty containers) act in their own interest and, in doing so, ultimately deplete the resource (available empty containers). 

Before we can understand and construct a model that can work at scale, with the full participation of all parties involved, we need to know how each stakeholder benefits and consider how to mitigate any downside to that stakeholder. When viewed this way, a clearer picture emerges of how a solution may work at scale.

Motor Carriers 

It's hard to talk about motor carriers without breaking this category down by import, export, balanced, owner-operators, etc. - it's really not just one stakeholder, but for simplicity's sake, let's consider the benefits to carriers in general:

Motor carriers enjoy a much-needed win across the board when street turns are scaled. Gas prices, driver shortages, adherence to hours of service regulations, and limited port gate availability because of congestion and other factors have been hurting motor carriers. Street turns could mean the difference between staying in business and hanging up the towel for some. The industry cannot afford to lose our trucking power.

But, there’s a risk that motor carriers may see dray rates driven down by customers when two moves turn into one. This is something we heard over and over at Quick180 (editor’s note: this was a company Brendan founded to tackle the street turn issue). The big fear is that BCOs will demand lower rates for one-way moves. Whether or not this will actually happen, the perception is there and has to be addressed, or motor carriers may choose not to participate. Any scalable solution must address this concern.

Terminal Operators 

Perhaps standing the most to gain are the terminal operators. With the arrival of large vessels dumping enormous amounts of containers on the ports in shorter time spans, pressure on the gates and stacks has decreased operational efficiency. Ports are running out of ways to optimize operations, as gate reservation systems and stack automation have mostly optimized gates and stacks. Removing empty gate moves and empty volume from the stacks can be hugely impactful. This increase in efficiency can drive down the cost per lift metric, and gate turn times, allowing for more volume and revenue, and ultimately creating a more attractive port for customers.

But, there are fears that port-supported street turn programs will harm relations with ILA/ILWU contracts, and lead to labor issues.  When this threatens other operations initiatives, terminal operators may shy away from supporting street turn programs. Any scalable street turn model must also address this concern.

Steamship Lines

Lines are scrambling to get better equipment utilization. Each street turn represents a possible condition where two boxes were needed to fill one export move.  Eventually, shipping lines will evacuate empties at a great cost if they are not export-loaded.  Simply put, shipping lines have to hire less equipment, and gain huge efficiencies because of that. There are other upsides too, including better visibility of their equipment and more accurate billing.

Some lines have experimented with charging a fee for the privilege of turning a container. This has been viewed by stakeholders as a predatory practice whereby the lines are profiting from something where they add little value. It's likely that a scalable street turn solution would be welcomed by the lines, as they simply don’t have the time nor does it make sense to turn street turns into a revenue stream.

BCOs 

BCOs have been eager to participate since better equipment access and shorter dray cycles allow them to enjoy reduced per diem and demurrage fees. Export BCOs are increasingly incented naturally through the need for better access to empty equipment, as inventory becomes scares and empty equipment is evacuated overseas.

The Public, Government and The Environment

When discussing street turns with the general public the overall benefits of traffic congestion, road wear and tear, and massively reduced carbon emissions are not often discussed. But as the pandemic squeezed and disrupted supply chains globally, the public has increasingly become more literate in the area of intermodal logistics - tell anyone outside of the industry about this issue, and they immediately get how impactful this can be. I mention this because a truly scalable solution may benefit from local, state, and federal legislative support.

Your Thoughts?

I have always approached this problem from a different perspective - as a solution provider experimenting with models and software that will solve the problem at scale. I'm not directly involved in the handling of containers on the ground. I'm probably missing some points here in this analysis, so I'm asking for your input here. Let's assume that there's a functioning street turn program in your market that is up and running at scale. How would you benefit from this in your business? Is there anything that would hurt your business? Please comment with your thoughts!

Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or S&P Global, and any opinions are mine only.