Guidebook for Assessing Evolving International Container Chassis Supply Models (2012)

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Guidebook for Assessing Evolving International Container Chassis Supply Models | NCFRP Report 20 | 67 Conclusions The U.S. chassis market is unique compared to the rest of the wo rld and is the product of historic and structural differences i n the organization and operation of U.S. container supply chains. Lower gross vehicle road weight restrictions than in other countries (which lead to differences in chassis specifications), histor ic ocean carrier chassis ownership and supply, the use o f ch assis in operations at wheeled terminals, the practice of chassis drop and hook and free time for loading/unloading operations at BCO fa cilities, variances in regional drayage distances, increased regulatory scrutiny, and the relative lack of developed off-terminal chassis storage are some of the differences that have shaped the U.S. chassis supply landscape and its evolution. Wi thin this unique U.S. context, alternative chassis supply models (to the traditional U.S. model of chassis supply by individu al ocean carriers) have emerged over the past decade to improve chassis utilization, to minimize related operating costs , to respond to terminal capacity constraints, and to improve efficiency of operations, among other reasons. This transition to new models has happened in different ways, to different degrees, and heterogeneously across the country, and has been driven by different regional issues, constraints and players, resulting in a patchwork of different models and regional disparities. Heterogeneity is expected to continue to be a characteristic of the U.S. chassis supply environment as no single chassis suppl y model is emerging as universally preferable by all stakeholders or across all regions, certainly in the short to medium term. The trend in the evolution of U.S. chassis supply over the past decade has been toward various forms of chassis pools, which are also unique to the U.S. Chassis pool models include regional ocean carrier cooperative (co-op) chassis pools, ne utral (third - party owned—usually leasing companies) chassis pools, and ter minal-controlled chassis pools. Today, approximately 75% of marine chassis are supplied through these chassis pool models. Individual ocean carrier container chassis supply models still exist, although most are taking active steps, in varying degrees of effect, to discontinue providing chassis. One notable recen t example is the divestiture of the Maersk Line chassis business , one of the largest ocean carrier chassis fleets, to a private equity company. Motor carriers in the U.S. own and control a very small proportion of standard ocean container chassis, unlike elsewhere in the world where the motor carrier and logistics company chassis supply model is predominant. At present, the U.S. ocean container chassis supply market is in a state of flux. As more ocean carriers seek to exit the chass is supply business and the U.S. chassis environment continues to evolve, the emerging questions are: What will be the future form(s) of chassis supply in the U.S., and what are the implications for chassis supply stakeholders? Wh o will own, manage, and supply chassis, how will chassis charges work, and where will chassis be domiciled are some of the unanswered questions of particular relevance to U.S. ocean container supply chains and stakeholders. The answers to these questions remain un clear, but the future of chassis supply in the U.S. is likely to be guided in large par t by the same factors that shaped its re cent evolution, as follows: The structural chassis supply context: Established BCO logistics practices, including the drop and hook chassis operations, chassis pool arrangements, and wheeled terminal operations are some of the factors that preclude a rapid and wholesale change to chassis supply and management practices. The heterogeneous nature of the chassis supply landscape: Chassis supply options are best viewed not monolithically, but regionally, as ch assis pools in general ar e organized and operated by city, port complex, or linked by multiple terminals and ports within a geographic region based on container flow. Terminal operators, motor carriers, and other stakeholder groups such as unions also have a geographic construct, and as such, chassis model

68 NCFRP Report 20 | Guidebook for Assessing Evolving International Container Chassis Supply Model s | 68 transitions will likely be forged region by region, in a manner that ac commodates the comme rc ial and operating practices of the stakeholders in that region. Multiple and often unaligned interests of chassis supply stakeholders: Ocean carriers, motor carriers, BCOs, terminal operators, chassis leasing companies, unions, and public policy organizations, among others are all key stakeholders in chassis supply. Their respective perspectives, interests, and performance goals related to chassis supply differ as do their perceived advantages and disadvantages of alternative chassis supply models. There is no single chassis supply model that is universally preferred by all stakeholders. Because each stakeholder group is significantly invested in the current chassis supply models—either financially or operationally—no one faction will likely control or singlehandedly influence the direction of the chassis supply transition in the U.S. Rather, the future ev olution of chassis supply in the U.S. will be the result of the interplay of various stakeholder interests, influences, and regional differences within the stru ctural chassis supply context that shaped the U.S. chassis suppl y landscape. Ne vertheless, on the basis of consultations with stakeholders across the ocean container supply chains, chassis models in the U.S. will likely continue to evolve toward pooling in the short to medium term as there is general stakeholder consensus that there are efficiency benefits to the supply of chassis from pools in one form or another. The perceived benefits of pooling include increased chassis management efficiencies, utilization and adequacy/balance of supply, decreased risks of chassis - caused service failures and related delays to BCO cargo transp ortation plans, and a reduced on-terminal chassis storage footprint relative to the traditional individual ocean container chassis supply model. In the longer term, there are simply too many factors at play to definitively predict the ultimate outcome of the evolving ch assis supply environment in the U.S. Most ocean ca rriers will likely continue to want to divest their role in chassis supply and eventually exit the ch assis bu si ne ss altogether. BCOs will continue to want adequate ch assis supply and terms that are in line with their logistics operations. Terminals may prefer to minimize on-terminal chassis storage to what is necessary for efficiency in order to maximize their terminal capacity for container storage and op eratio ns . On the basis of consultations, it appears th at motor carriers may continue to resist a move to the motor carrier chassis supply model, as is standard elsewhere in the world. These are trends identified in the course of the research effort for this Guidebook, but the end result, and the role of each stakeholder in that end result, remains speculative. Wh atever the outcome and the pace of the transition, public policy and planning organizations will need to be aware of the evolving chassis supply models in the U.S. given potential implications for the public. In particular, increased truck moves/miles and land-use initiatives could result by moving chassis storage away from marine and rail terminals, where the majority of the ocean container chassis are staged today. This in turn could lead to a host of externalities including increase d air emissions, noise, congestion, wear and tear on roads and intermodal connectors, among others. Chassis supply transitions could also have implications for broader regional competitiveness and economic development related to transportation sectors and containerized trade. In any case, time will tell what the longer-term implications of the evolving U.S. chassis supply environment will be. In the meantime, it would be in the interest of all chassis supply stakeholders to understand the broad implications of the evolving chassis supply environment —b oth from the perspectives of their own stakeholder group as well as that of others—and the implications for broader U.S. ocean container supply chains. This Guidebook is intended to go some way in doing this, although it is recognized that more research will be required, at the regional level, as chassis models evolve to promote a fuller understanding of the resulting implications for U.S. ocean container supply chains and public interest.