Why Memphis’ Supply Chain Doesn’t Need Federal Government Intervention
Originally published in the Commercial Appeal on August 26, 2021, this piece by Mike O’Malley, DCLI’s Senior Vice President of Government and Public Relations, sheds light on what’s truly driving congestion at intermodal hubs in Memphis and details the best approach for supporting intermodal truckers and shippers.
There has been a great deal of discussion of late about global supply chain congestion and the impacts of COVID-19 on our ability to move goods in the United States. The impacts of all-time record high container volumes coming into our nation’s largest ports are felt across the country, including in Memphis where intermodal chassis provided by companies like DCLI facilitate delivery of import containers from local rail yards or help farmers from across the region get their exports to market. In fact, motor carriers and their customers are now holding onto our equipment twice as long as they normally do, a clear sign of how inefficiencies across the supply chain can adversely affect equipment availability. This underscores the critical need for everyone – shippers, carriers, warehouses, and equipment providers – to work together to address our current challenges.
Unfortunately, we continue to see aggressive efforts by a few large motor carriers in Memphis to use congestion in the supply chain as a justification for direct and unprecedented federal government intervention in the way chassis providers serve our customers. This would significantly disrupt the Memphis supply chain at the worst possible time. The federal takeover they are proposing would serve the commercial interests of those same truckers, who have established their own chassis company and stand to profit handsomely off such a change without delivering any meaningful congestion relief.
Nearly a decade ago, American-owned intermodal equipment providers (IEPs) like DCLI started purchasing chassis fleets from the ocean carriers, who had little incentive to invest in land-side equipment moving containers to their destination. Truckers from that time vividly recount how bad the chassis fleet was and the headaches it created for them every day. Since then, IEPs have spent billions of dollars to modernize the more than half-a-million marine chassis operating across the United States. Our company alone has invested $2 billion of private capital to acquire and upgrade our fleet, and this year we plan to invest another $200 million. This continuous infusion of private capital has enabled DCLI to fund chassis upgrades like radial tires and LED lights to improve quality and enhance safety. In just the past three years, our industry has averaged 15 million gate moves annually and experienced fewer than 500 incidents per year, or about .003 percent of all chassis trips.
So what will happen if these truckers are successful and the federal government were to mandate so-called “gray pools”? American chassis owners like DCLI would be forced to either give up control of our privately-owned assets to a third-party manager that has little incentive to control costs or pull them from the market entirely. In our experience, these gray pools turn out like most monopolies, driving higher costs and lower quality while stifling innovation. Competitive pools, meanwhile, drive investment and innovation while delivering near-100% interoperability. Here in Memphis, truckers have multiple options to choose from, including not only competitive pools but also the ability to own or lease a chassis directly. DCLI alone has nearly five thousand chassis serving local customers, having moved units in from other markets and worked 24/7 for the last year to reduce out-of-service levels to all-time lows.
Imagine if the government forced competing rental car companies at an airport to put their cars into a single gray pool run by someone else and customers could choose to rent a car from Avis but pay Dollar. How long do you think Avis would continue to invest in new cars, better service, or innovative technology in that scenario? You would quickly see a race to the bottom, and in our industry that means small and mid-sized truckers would once again be stuck operating low-quality, aging chassis.
At a time when global supply chains are stretched thin and all parties involved are working around the clock to deliver solutions, the answer is not to ask Washington policymakers to dictate a “solution” that will inevitably lead to fewer chassis serving shippers in Memphis. We need to encourage competition and investment in these critical assets so we can continue upgrading the region’s chassis fleet. Memphis truckers, and their customers, should seriously question any suggestion that federal intervention is the answer.