All Parties Must Work Together to Keep Supply Chain Fluid

It was six months ago that more than 100 massive cargo ships loaded with shipping containers were floating off the ports of LA and Long Beach, waiting to unload. Imports were surging by more than 30% - an indicator of fundamental strength in U.S. consumer demand. The volume stressed the ports' physical capacity as well as the middle and final miles of the supply chain. Congestion was increased due to several factors, including COVID-19 impacts on the ability to fill jobs at warehouses and to source dray drivers.

Union Pacific played a crucial role helping the ports dig through that massive backlog last year. Among the steps taken was increasing gate access to 24/7 at our ICTF facility, which supported the ports of Los Angeles and Long Beach's move to 24/7 operations. We enhanced our UPGo app, not only significantly decreasing the time it takes truck drivers to pass through the gate, but also streamlining billing and providing detailed terminal information. And we worked with the Port of Long Beach and the Utah Inland Port Authority to ship containers to Salt Lake City to ease congestion at the West Coast ports. We established help desks and improved ramp signage to get drivers to their parking spots more easily, all designed to improve the driver experience and efficiency.

When our network began to show the impacts of inventory congestion earlier this year, we took a number of steps to address the situation, including bringing more than 300 new train employees online so far this year with hundreds more still in training, adding 150 locomotives to our fleet since January and working aggressively to remove UP-controlled rail cars while working with our customers to reduce private car inventory. Those steps taken to reduce congestion and increase rail car velocity will also help us meet expected increased demand at the ports.

In early June, the number of ships waiting to unload containers at the ports of Los Angeles and Long Beach sat at just 20. The amount of international traffic handled by Union Pacific is on the rise. Since a December low, the number of containers hauled over a 7-day period by Union Pacific has more than doubled nearly 30,000, reflecting a return by ocean carriers to move freight eastbound via rail. In addition, the flow of containers back into our ramps for return shipments to the ports is improving, which is important to fill out backhaul car movements and to ensure a steady supply of chassis into our ramps.

So how do we keep the momentum going as the volume of imports continue to rise? And where will the cargo go as warehouse inventory stocks are already near capacity?

The best solution for rail is to continue to work directly with all parties of the supply chain to keep it fluid. As a "middle" segment in that chain, it is important for us to continue to haul import containers from the ports. But just as important - those containers cannot dwell at our inland terminals after they arrive.

The last miles of the supply chain must have the capacity to take the freight once it arrives at our inland facility. That means having the necessary truck drivers to get containers to distribution centers and warehouses, and having the necessary labor and capacity at warehouses to unload those containers as soon as possible and get the empty container with the associated chassis returned to the terminals.

The slowdown in this part of the supply chain is reflected in increased chassis "street time" - the time it takes for a chassis to leave with a load and return empty or with an export. Without a continuous supply of returning chassis, inbound trains cannot be unloaded. We've seen chassis turn times on the street increase significantly. Note: UP does not provide chassis for marine containers.

Technology has and will play an important role in keeping port, ocean carrier, rail and marine terminal operations running smoothly. Shipment visibility is crucial to ensure resources are available at every stage, and properly managed.

UP leverages our cutting-edge microservices architecture to deliver APIs (application programming interface) for seamless customer and supply chain integration. Our daily API volume of 5.7 billion calls (tasks performed) has increased by 233% in the last two years and will grow even more as we connect with more customers and partners across our ecosystem. Also, we leverage a tool called Port Optimizer to give UP better visibility to the containers that are inbound to the port, which helps us better plan our resources.

We know maintaining fluid operations at the ports we serve is important both to our customers and our economy. While Union Pacific is only one part of a supply chain that spans from factories in Asia to store shelves in your community or parcel deliveries to your doorstep, we will do all we can to ensure our part of the chain remains solid, connected, unbroken.

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