Backlogs in the supply chain make Chicago a new choke point


Chicago is emerging as a new bottleneck in the global supply chain as rail, trucking and logistics companies grapple with a spate of imports from Asia reaching the Midwestern freight hub.

Union Pacific Corp.

and BNSF Railway Co. have limited container shipments to their overcrowded cargo handling terminals in the Chicago area, and some freight owners and logistics companies have tried trucking or railing shipments to other transfer points in the Midwest, adding to costs and already-confusing Distribution networks.

The congestion is caused by the rush by U.S. retailers and manufacturers to replenish stocks as the economy reopens after the Covid-19 lockdowns and consumers return to stores and restaurants in greater numbers.

Container imports to Southern California’s neighboring ports of Los Angeles and Long Beach have soared at record speeds this year, and delays have spread through logistics operations, from the seaports to nearby warehouses and deeper inland to Chicago, where many thousands of containers are reloaded each month become .

“The pandemic and its recovery are like a boulder in a pond,” said Anthony Hatch, a rail transport analyst and director at ABH Consulting.

The two Californian ports handle around a third of US container imports, mostly from Asia. According to trade analyst Panjiva, sea imports into ports for onward transport to Chicago and the surrounding area increased 32% year over year in the second quarter and 18% over the same period in 2019.

The congestion is the latest bottleneck in supply chains this year due to container shortages, tight capacities and events such as the priming of the Ever Given container ship in the Suez Canal in March, backups at Yantian Port in Shenzhen, China and other incidents that resulted in persistent delivery delays.

In Chicago, the freight railways are trying to catch up, as containers arrive faster than they can be repositioned for onward transport, which is leading to ever higher crate stacks at the shipyards in the region. The pressures are exacerbated by the shortage of manpower and equipment in the shipping, trucking and rail industries.

Union Pacific, which works with BNSF to transport containers to and from Southern California ports, announced earlier this month that it would suspend service from the west coast to Chicago for up to seven days from the night of July 18 to reduce container congestion.

Union Pacific freight trains in Dupo, Illinois. The railroad recently announced it would suspend service for up to seven days to ease congestion from the west coast to Chicago.


Photo:

Luke Sharrett / Bloomberg News

In a conference call Thursday, Union Pacific officials said a former intermodal facility in the Chicago area was also temporarily reopening to ease congestion. Chief Executive Lance Fritz said shippers are struggling to get the boxes off the railroad ramps to warehouses and distribution centers fast enough.

This week, the BNSF announced that it had started measuring container flows from the ports for two weeks. Typically, the railroad measures freight after disruptions caused by events such as extreme weather, said a spokeswoman for BNSF, a unit of Berkshire Hathaway Inc.

“This particular situation is unprecedented in that the volume we receive has exceeded what customers are picking up from our gates for deliveries for a long period of time,” she said in a statement.

Norfolk South Corp.

, which transports shipments between Chicago and points in the eastern United States, announced this week that it is expanding the capacity of its Chicago intermodal terminal by rearranging various yard operations to keep boxes moving.

Chicago is tense with all seven major North American rail freight companies converging, creating an intricate network of operations in which inbound and outbound shipments are exchanged between trains and trucks. It’s also within a 500-mile truck ride of roughly a third of the U.S. population, making it a major distribution hub, shipping experts say.

“If you take something coast to coast by rail, it is almost guaranteed to come through Chicago,” says Maciek Nowak, professor of supply chain management at the Quinlan School of Business at Loyola University Chicago.

Chicago is always a bottleneck, noted Mr. Nowak. Freight trains that take several days to reach the city from thousands of kilometers away may spend a day or two crossing it because they have to cross busy roads, he added.

“There is not much room for error,” said Mr. Nowak. “When you have something like a pandemic, this mistake very quickly leads to significant problems.”

In it Cooprider, senior vice president of supply chain solutions at Ryder System Inc., said the current exposure and metering are the toughest eastbound restrictions he has seen in some time and shippers have few alternatives to To be available.

Air freight is prohibitively expensive, while trucking goods from the west coast is more expensive than rail and drivers and equipment are currently in short supply.

“If you switch everything from rail to truck, things will only get worse, not better, and the truck will be tied for several days, which further offends the injury,” he said.

Some outside logistics companies say customers are rerouting rail orders to St. Louis and Kansas City, Missouri, or Memphis, Tennessee. Mark Ori, senior vice president of corporate development at Redwood Multimodal, said demand is rising at last minute rates from these cities.

Andrew Lynch, president of Zipline Logistics, said his company’s cost to pay a carrier to deliver a truckload from Los Angeles to Columbus, Ohio increased by about $ 300 to about $ 6,000 in the past week.

Craig Grossgart, senior vice president of global ocean at Seko Logistics, a freight forwarder based in Itasca, Illinois, said that moving goods could be more expensive. “But these days you can probably save almost a week in transit time,” he said.

An average of 30 container ships a day get stuck in the ports of Los Angeles and Long Beach, just waiting to deliver their goods. The backlog is part of a global supply chain mess sparked by the pandemic, which means consumers could experience delivery delays for weeks. Photo compilation: Adam Falk / The Wall Street Journal

Write to Paul Berger at [email protected]

More from the logistics report

Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

About Christine Geisler

Check Also

Wärtsilä supplies hybrid propulsion technology for Stena RoRo ships

Stena RoRo and Brittany Ferries have designed and developed the new RoPax ships. Photo credit: …

Leave a Reply

Your email address will not be published.