Face Masks, Zero Emission Trucks, Taking Back Market Share, Mega Container Ships and Emergency Services
In an interview, Port of Los Angeles Executive Director Gene Seroka told AJOT that the decision by Los Angeles Mayor Eric Garcetti to appoint him as the City’s chief logistics officer has opened up possibilities of public private partnerships that could be changers for Covid-19 and beyond.
This has inspired additional initiatives to support U.S. manufacture of zero emission trucks that will lower operating costs for truckers.
Another initiative is to bring lost cargo markets back to the West Coast that have been lost to East and Gulf Coast ports. Coincidentally, the April visit of the 19,200 TEU MSC Anna demonstrates that California ports have the container terminal capacities to handle the larger ships at a time when most East and Gulf Coast ports are restricted to handling vessels of around 14,000 TEUS.
The deployment of the U.S. Navy hospital ship Mercy to the Port of Los Angeles during the Covid-19 crisis demonstrates the need to have berth space in reserve for emergencies.
Mobilizing Production of N95 Face Masks
Seroka ascribes the decision by Los Angeles Mayor Eric Garcetti to appoint him as the City’s chief logistics officer as an opportunity to not only accelerate production of face masks but to also look at other possibilities.
Seroka assembled the Logistics Victory Los Angeles (LoVLA) response effort, which is matching medical and non-medical suppliers of Personal Protective Equipment (PPE) with L.A. area health care providers that need PPE and other supplies to treat Covid-19 patients.
By ordinance passed by LA City Council, the Council created a revolving fund to support LovLA’s efforts. The procurement of the actual PPE and the management of the funds is by the General Services Department. LovLA will sell to health care providers the PPE it acquires at the cost it paid plus tax.
LoVLA’s mission is achieved by helping hospital procurement teams track and expedite these supplies across the medical supply chain that flow from overseas through the Port of Los Angeles and the Los Angeles International Airport. In addition, LoVLA connects hospitals directly to suppliers and procures essential medical supplies by leveraging the purchasing capability of the City of Los Angeles:
“When the mayor asked me to be the city’s chief logistics officer, it was to be concurrent with my role as director of the port and we assembled a group of about 20 volunteers, mostly here at the Los Angeles Harbor department to help me with Logistics Victory Los Angeles.”
The team at LoVLA was soon “chasing leads down around the world. We had quickly gotten thrown into the deep end of the pool. … We started to study the market, do research, talk to medical experts and we found that there were a lot of opportunists out there just trying to make a buck. We could not wait any longer and we decided that of all of these channels of distribution, the best fit for us in the city of Los Angeles was to go directly to the manufacturer and we found a great partner in Honeywell.”
The result was that, “We hammered out a deal within about seven days… and put a deal together for 2.4 million N95 NIOSH (National Institute for Occupational Safety and Health) certified masks and over a 24-month period. The delivery of the first 100,000 masks is scheduled for the end of May.”
This is important on four levels:
- Proximity: “While others were looking overseas and trying to find partners in far reaching locations, we found an iconic American company, Honeywell, who retooled a manufacturing facility just six hours down the 10 freeway in Phoenix, Arizona.”
- Certainty: “Because we’ve got a schedule for monthly production all the way out … 24 months. We’re expecting to receive our first hundred thousand units by the end of this month and we’ll ramp up quickly to 1.2 million units a month beginning in November. We’ll be passing on these masks to the hospitals in need. Those that are treating our Covid patients… those that are out of stock as quickly as we can.
- Providing masks at cost without mark-ups: “And we’ll be passing these products out at cost. There will be no markup, there will be no margin. All of us are working as volunteers here in the City of Los Angeles to help out our frontline hospitals. And that cost is something that no one has ever seen: 79 cents a unit plus applicable sales tax. On the gray market right now … opportunists are selling these masks at $5 and $6 a unit.”
- Data driven process: “So we have a data driven approach as to how we procure the goods, how we get them delivered… to the right hospitals in the most need, regardless of … their purchasing power or lack thereof.”
Business Summit to Accelerate Deployment of Zero and Near Zero Emission Trucks
A second logistics initiative is that the Port of Los Angeles is planning a business summit this summer to bring truck builders and harbor and long-haul truckers together to look at ways to fast-track deployment of zero emission and near zero emission trucks:
“And because of the unfortunate times we live in, we’re going to do this by a video meeting. We’ll separate out into private chat rooms so there’s no concern about proprietary information. And we’re going to try to get these guys and ladies to understand what the marketplace looks like and see what type of commitments we can get to get products on the ground at an affordable cost and accelerate the technology here at the Port of Los Angeles.
And I think this blueprint … to translate from the medical products …. I think this (can) … translate into the greening … of our supply chain economy and where we have an opportunity. This is the second largest city in the nation (with) … a strong procurement desk and great people. We have coattails.”
However, there are a number of challenges as the Port represents only a small share of the trucking market: “Please keep in mind for heavy duty trucks, we represent only two weeks’ worth of North American annual production…. We’re not a big customer for these trucking companies. And today the low NOx (nitrogen oxides emissions) engine is only manufactured by one company and they laid off 2200 people the week of Thanksgiving. So, we’ve got our work cut out for us and not a lot of folks see that right now, but we are going to host a manufacturing summit this summer to bring all the top suite executives, not the sales people, but the top suite executives, the decision makers to see what type of a market this could be, how we could partner with other municipalities, counties, and even states to become a market maker because we in Los Angeles can’t do it on our own.”
The objective is to bring a number of key truck builders together: “We’re looking at both the near zero and zero emissions engines directly from the manufacturers. Big people like Peterbilt, Mack, Freightliner, Kenworth, all of those folks, including upstarts like Tesla.”
Seroka said that hydrogen fuel cell trucks might provide the answer for heavy trucks moving to zero emission without both the diesel fuel and diesel engine maintenance costs. He cited the example of Toyota: “Toyota Motor … has designed the hydrogen fuel cell, which takes less infrastructure and can fuel almost as quickly as a diesel engine today to keep our truckers on the road. It also has the duty cycle that approaches that of a diesel truck. … I think Toyota has about 12 (trucks) that are in pilot testing right now.”
Financing will be a major challenge: “I’ve had conversations with State Treasurer Fiona Ma to see what we can do because the near zero truck right now has a sticker price of about $225,000 and you may remember that here in Los Angeles, about 40% of our truck companies are small business people that have five rigs or less. And they typically pay $50,000 for a previously used vehicle of the diesel variety. So, they can’t afford this, this kind of truck. And we’re in the business of jobs creation. We’re not trying to eliminate any jobs through technology … So, we’re going to need legislation in the State of California to give some release to the relief, to these hardworking truck drivers to make sure that they can afford the technology and … make this technology happen sooner and at a more affordable price, that’s going to be the goal of the summit.”
The goals will include:
- Legislation
- Production technology
- Commitment of delivery
The Port will “act as facilitator, but realistically speaking, I think the best way to go is to have a direct relationship between the trucking companies and the manufacturers as best they can through their trusted retail distributors, et cetera. But these guys have got to get to know the market and the market has got to be familiar with the manufacturers as well. So, we’re trying to bring people together.”
Accommodating 18,000 TEU Ships
Seroka believes the mega container ships of 18,000 TEU or more “may very well be on the way and if that is the case, we have to get better. The Trans-Pacific trade has always been a fixed weekly service, but the larger the ships get, the longer they take to work … and we must improve …
We can handle them at all terminals and if you have to go the backside of the (Vincent Thomas) bridge to bring them in to say TraPac and or Yusen Terminal, you can do that too. But all terminals … have 50-foot draft. The crane height will be important. So today the APM Terminal guys have the tallest cranes here in Los Angeles and others will be following suit.
The larger vessels could provide an opportunity for the Port of Los Angeles and other West Coast ports to re-establish competitiveness, because few East Coast and Gulf Coast ports have the ability to handle ships larger than 14,000 TEU ships, which is also the limit of the Panama Canal.
The key element is to leverage increased productivity to reduce the cargo-handling cost per 18,000 TEU-24,000 TEU ship versus a 14,000 TEU ship.
If the Covid-19 crisis results in ocean carriers shedding more smaller ships in favor of the 18,000 TEU ships and larger then Los Angeles, Long Beach and Oakland could benefit as they have demonstrated their terminals can handle the bigger ships. The rail connections via the Union Pacific (UP) and Burlington Northern and Santa Fe (BNSF) would provide faster import and export deliveries to Midwestern destinations.
Bring Cargo Back to the West Coast
In addition, Seroka said that he is working with a coalition to bring cargo back to West Coast ports:
“I’ve put together a coalition of West Coast business interests to bring cargo back to the West Coast and make us the gateway of choice. These include the four major ports (LA, Long Beach, Oakland, Northwest Alliance), the ILWU (International Longshore and Warehouse Union) at both the international and the local level, the PMA (Pacific Maritime Association), the two Western railroads (UP and BNSF) and the PMSA (Pacific Merchant Shipping Association). And our goal here is threefold:
- Attack the operational questions that exist
- The financial questions that persist
- The political regulatory arena that we find ourselves in today. We can’t continue to tax our way out of this.”
Costs of cargo-handling need to be brought down: “We charge twice as much as the ports on the East and Gulf coast charge today to move a container on and off the ship. We have to redirect that. The Port of Los Angeles has a 9-point plan that will include incentive monies on the transactional basis and continued investment through cycle. During this economic downturn, we have to become more competitive. We’ve lost 20% of our market share since the unfortunate labor lockout of 2002 and we have to reverse course. I don’t know that we will ever get it all back. The Eastern, Gulf Coast, Pacific Coast of Mexico and British Columbia have done a great job. They’ve hired superior talent. They’ve invested a lot of money and they’ve aligned their politics in those states. We have a long way to go … We’re going to go out there swinging and we’re going to make sure that we make the investments that are necessary to attract cargo here because if everything else is equal, we’re the fastest gateway between Asia and the middle part of this country ...”
However, he notes “We’ve got to earn that cargo and we’ve got to be responsible in the regulatory arena as well as the financial aspects of what we do.”
Seroka says these changes could be accomplished without rolling back on clean air regulations imposed by the State of California:
“I am not asking to roll anything back. We are the greenest port complex in the world and I’ve worked all over the world. We’re not going backwards. We will move ahead, but it’s just like the example with the trucking. You’ve got some people that believe electric trucks could be out there tomorrow. They can’t. They weigh too much. You can’t load cargo. Either you’re going to haul a battery or going to haul cargo. You can’t do both right now. We need to accelerate the technology, make it affordable and not continue to tax our way out of problems that people create for political reasons … we’re going to bring that to the procurement side on greener and cleaner equipment for the Port of Los Angeles. It’s going to take a lot of work …”
Ports as Emergency Services Centers
On May 11th, Danny Wan, executive director, Port of Oakland told a public hearing that the Covid-19 crisis was changing the role of ports to accommodate emergencies in addition to their cargo-handling operations. Wan cited the Port of Oakland’s role in the mobilization to disembark passengers from the cruise ship Crown Princess last March, when an outbreak of Covid-19 broke out on the vessel. The Port was able to provide its Outer Harbor Terminal to disembark passengers.
The Covid-19 crisis is emphasizing the need for ports to factor having land and waterside berth space available for emergencies.
Seroka agrees with Wan: “So, I really liked Danny’s comments and I believe we’re delivering on that theory right now here at the Port of LA.”
The mobilization of the U.S Navy hospital ship Mercy was an example of having space available for the ship to provide additional hospitals beds at the Port of Los Angeles: “I think we do have a role here … from the Covid-19 area, California Gavin Newsom delivered the USN ship Mercy to the Port of Los Angeles, a floating hospital with 1000 beds, 80 ICU beds, and over 300 staff. And the idea here was that we could treat non-Covid patients and take some pressure off the land-side hospitals so they could attack this terrible virus with more capacity. That’s the idea that we’re talking about.”
Seroka noted: “We have … police and first responder forces here in the Port of Los Angeles, working with our allied agencies, starting with the U.S. Coast Guard in addition to Los Angeles Police Department, the Los Angeles Fire Department.”
