Why There is a Container Chassis Shortage and How Does that Drive up Logistics Costs?

Posted by Port City Logistics on Jul 29, 2022 4:28:05 AM

Every day countless industries and individuals depend on 18-wheelers to provide for almost every need. Yet, it took a pandemic for the supply chain to finally get its five minutes of fame. Although many articles and news segments discussed the pandemic’s effect on the supply chain, transportation and logistics experts have watched the industry’s weak spots, such as the container chassis shortage, develop over the last few decades. The chassis is the wheeled trailer component that connects to the truck and carries the container itself. 

While a chassis may seem to be a small piece in the grand scheme of transportation, getting freight on the road is critical. Peter Appel wrote for Mondaq that “A new chassis costs in the range of $15-25K, yet the economic loss of not having the chassis available — goods not getting to market, extreme inefficiency in the capital-intensive port operations, idle time for valuable truckers, etc., can easily dwarf that cost over time.” However, understanding the value of this trailer component does not change the current container chassis shortage marking the industry. Shippers who leverage supply chain visibility and market insight to educate themselves are empowered to respond appropriately to the chassis shortage. 

Demurrage and Accessorial Fees Go Up With Chassis Delays

First-mile drayage depends on 18-wheelers and smaller semi-truck trailers to get containers off the dock as soon as it hits the ground. But waiting loads can slow port operations to a standstill in a container chassis shortage. Delayed unloading can cause demurrage fees and excessive dwell charges that rocket a shipper’s operational costs. 

Why do ports charge these fees to carriers and shippers? Ultimately, port operation flow requires that every leg of the operation does its part. Cargo ships should arrive on time, and dock workers should be ready and available for each arrival, with drayage drivers coming at just the right time to get their containers off the dock and on the road. Once the freight has arrived at a local warehouse or been cross-docked to an OTR truck, the original container should be returned immediately to the port, whether empty or full. 

However, port delays occur at every leg of the operation. Combined with the warehouse capacity and driver availability that has plagued shippers since pre-COVID, it’s easy to understand how container delays have contributed to the chassis shortage. In addition, to delay-based demurrage and accessorial fees, shippers even run into an increase in per diem rates with drivers on the road longer and later than expected. 

Why is There a Container Chassis Shortage

When people are discussing shortages, often there can be the visualization of empty shelves with only beaten-down replacements to limp by on. And while that is not always the case, it is not far off from the state of the container chassis shortage. Pandemic and war-induced disruptions have created an automotive market marked by backordered parts in every facet. According to The Wall Street Journal, “Doug Hoehn, executive vice president of Milestone Chassis Co., a leasing firm based in Lombard, Ill., said domestic manufacturers are thousands of units short of his company’s orders for new equipment. [...] “If you came to lease a chassis today, my response to you would be, ‘Here’s a piece of paper, sign it and I can get you a chassis in the third quarter of next year,’” Mr. Hoehn said.” While this may seem extreme to some, shippers across the nation have experienced the effects of the chassis shortage. 

But what about the usable chassis still on the road today? Why is it so hard for shippers to find capacity if every major port has approximately 100,000 chassis tied to their operations? Let’s consider six factors that add to the container chassis shortage situation.

Implementation of the ELD Mandate

On February 16, 2016, the final ELD Mandate completely changed the game for most truckers. Instead of being able to write (and rewrite) hours and weights, truckers have to electronically log all time in the driver’s seat against their daily and weekly hourly maximums. This change prevents truckers from carrying extra loads or moving to the next shipment immediately, regardless of the time wasted unloading at the dock.

Higher Freight Volume and Less Capacity

While the standard semi-truck chassis has not grown exponentially bigger over the last century, cargo ships have. As surges in freight volume get imported on these incredible vessels, spikes in demand have quickly eaten up available chassis capacity. Limited port chassis capacity amidst these freight surges has caused many to seek alternative drayage fulfillment strategies to gain traction. 

Inaccessibility of Chassis When Needed

Because sea routes are planned in advance, shippers often utilize stricter pickup schedules so that a carrier is ready as soon as the dockworkers begin to unload a container ship. Yet these precise schedules at docks or end-customers still create “peak” windows where chassis get claimed. Shippers and carriers add to the inaccessibility shortage of chassis by utilizing them as temporary storage and thus leaving fewer at the marine terminals. 

Lack of Chassis Subcomponents

While a chassis is just one component to get a container on the road, multiple critical subcomponents build a chassis. At different points in the past two years, nearly every chassis element was backordered or low in stock. For many shippers, freight container turnaround issues hinder them in two ways: getting available containers back to port and getting new chassis on the road to retrieve forgotten containers.

U.S. Tariffs, Taxes, and Expenses

As manufacturers attempt to resolve the container chassis shortage, the cost of newly available chassis is an additional cause for concern. Increased tariffs on completed chassis and the metals and materials required to build them rapidly add to the expenses of a new chassis. This is, of course, in addition to the taxes needed per purchase, which can feel unfeasible for small to midsize carriers and shippers.

Poor Coordination of Carrier and Loads

Import freight management is complicated, and without technology-rich 3PL partners, it is easy to struggle with appropriate carrier coordination. When shippers contract with carriers working outside their typical lane, it may be even more challenging to get return trips to the port for more drayage. In addition, individual ports and port networks have begun to place requirements on the engines and chassis entering their ports that embody their sustainability initiatives. 

What Impact Does Chassis Shortages Have on Shipping and Logistics Today?

Without available chassis, terminals get stuck with long lines of truckers getting paid to wait. While some drivers might appreciate this momentary change of pace, it is not without a cost. These lines add to port truck turn times and decrease drayage efficiency when import cargo volumes remain incredibly high. At frequently utilized ports such as the Port of Los Angeles and Port of Long Beach, the container chassis shortage and high volume has even developed into the need to store cargo directly on the ground.

Likewise, as chassis availability decreases, the value of available chassis rises. As the base fees rise for transport on top of increased diesel rates, shippers are left to search how to cut drayage container costs frantically. Although a sudden inflow of available chassis would aid the situation, grounded containers would simply get raised off the ground without an influx of available drivers. Both scenarios predate the pandemic yet continue to be a crisis in the present and a structural problem long-term. 

Furthermore, the container chassis shortage has demanded that transporters and shippers utilize technology to gain better visibility of each container and available carrier networks. While many shippers could do things independently for many years, the added complications of the container chassis shortage have required many to call in 3PLs or an expert drayage provider to solve daily problems that used to occur much less frequently. 

Overcome The Challenges of Chassis Shortages With Insight and Guidance From Port City

In the future, today’s container chassis shortage may seem small in the grand scheme. Yet today, it stands out as a source for bottlenecked docks and rail yards. While the United States has prioritized the renovation and innovation of the national supply chain through things such as the Port of Savannah expansion, it will still take time to see the time and monetary ROI. For the time being, shippers must find a solution that gets their imported freight moving as quickly as possible. Port City stands out as the perfect logistics fit for all goods that can move through the Savannah port. Port City expects to see double-digit growth in 2022 as they manage their own local warehousing and drayage network on top of their 3PL license and expertise. To gain insight and find solutions for your container chassis shortage struggles, contact Port City today!

Topics: Logistics Technologies