An abridged version of this Op-Ed written by Bill Shea, CEO of DCLI, was published on JOC.com. You can access that piece here. (JOC subscription required)
UPDATE – April 19, 2023:
We are pleased that NACPC has now agreed publicly, in its own JOC op-ed, that chassis pools should be driven by competition and market forces, not government intervention. Despite the suggestion otherwise, NACPC, whose CEO is a member of the IMCC’s Executive Committee, has been part of the push for mandated third party-run gray pools for many years, as evidenced by the IMCC’s original August 2020 filing at the FMC. The following excerpt from that filing calls for the cessation of any other type of chassis pool model:
“Cease and desist from utilizing single-provider chassis pools that are not interoperable with pools operated by other [chassis providers] at all ports and intermodal terminals serving more than one [ocean carrier]”
With this pivot, we welcome the competition and look forward to continuing to deliver for all stakeholders in the U.S. supply chain by providing true chassis choice for truckers across the country.
The last few years were rife with challenges for everyone involved in the global supply chain. The pandemic fueled unprecedented shifts in consumer demand that led to congestion levels, and frustration, that I have never seen in more than forty years in the intermodal transportation business. A minimum of seven companies are involved in a single marine container shipment. This underscores the need for parties to work together and communicate more effectively so we can be better prepared for future supply chain disruptions.
The disruptions we experienced over the last few years not only impacted the flow of goods within global markets but also added a fourth “C” to the list of things shippers want out of their supply chain networks. A list that used to include capacity, control, and cost now has a fourth requirement – consistency. To enable this, different markets and customers will require different chassis models to serve their specific needs. In fact, I see a future where technology platforms enable shippers to integrate their equipment strategies much more effectively with services provided by their ocean carriers, railroads, motor carriers and warehouses while improving order management, shipment visibility, and logistics execution from origin to the last mile.
The federal government can support this integration by developing common data standards and encouraging improved data sharing with initiatives like USDOT’s Freight Logistics Optimization Works (FLOW) and the FMC’s Maritime Transportation Data Initiative (MTDI) already showing some promise in that regard. Any effort by the federal government to dictate chassis pool models or terminal operating practices, however, would reduce overall market competition, product innovation, and capital investment, leading to less efficient intermodal networks for the shippers and American consumers who rely on them.
Unfortunately, a small group of powerful motor carriers who own a chassis company called the North American Chassis Pool Cooperative (NACPC) are trying to use the supply chain crisis to advance their narrow interests through sweeping, government-imposed changes in the chassis industry. If successful, this would severely undermine our ability – and that of our competitors – to meet customer needs and support shippers’ ability to effectively manage their supply chains. NACPC’s “solution” would dictate an outdated, inflexible pool model while killing incentives to invest in chassis and increasing costs for shippers. Despite the fact that Congress chose not to expand federal oversight of chassis during last year’s debate over the Ocean Shipping Reform Act, these truckers are pushing the Federal Maritime Commission (FMC) to ignore that outcome and impose their will on an industry that invested billions of dollars in these privately-owned assets over the last decade. I imagine most Americans would think twice about investing in a business or fleet of assets if the federal government could come along after the fact and dictate how you operate it, particularly if it enriched one of your competitors along the way.
Let me provide some context to help understand how we got here. When we started DCLI just over a decade ago, our company owned 64,000 chassis. At the time, marine chassis were owned by ocean carriers who managed them in regional pools and investment was scarce, so chassis quality and support services associated with fleet management left a lot to be desired. Our goal was to create a company that was much more customer focused while investing heavily in the fleet to improve quality and make the chassis safer and more dependable for the truck drivers who use them. After injecting more than $2 billion of private capital into our fleet, today we own more than 275,000 marine and domestic chassis and have established nationwide logistics capabilities that enabled us to proactively move chassis around the country during the pandemic to match supply with demand.
DCLI spends more than $200M annually maintaining and repairing our existing chassis fleet. The company has also invested over $1 billion in the past two years on purchasing new domestic and marine chassis, refurbishing over 5,000 older chassis to like-new condition, and converting chassis from bias-ply to radial tires while adding LED lights. These investments, coupled with those of competing intermodal equipment providers or IEPs, have fundamentally transformed the nation’s chassis fleet, enhanced quality and safety, and injected fierce competition into the marketplace while creating American jobs.
Along the way DCLI adapted to changing customer needs, shifting from an outdated model dominated by third party-run gray pools to a dynamic mix of competitive chassis pools that operate much like rental cars do at an airport, private pools that provide guaranteed capacity to specific customers, and long-term lease programs that are increasingly popular with motor carriers. Many of the truckers we serve have embraced this new flexibility, leveraging a mix of leased units and competitive pools to optimize their operations and, in turn, better serve their customers. And given that truckers generally charge a mark-up on the use of our chassis without taking any ownership risk, these changes have provided a meaningful new source of revenue for our motor carrier customers. We are delivering real “chassis choice” and in the process have given shippers creative new ways to meet their supply chain needs.
These market changes were also accompanied by a meaningful shift in the way marine and rail terminals operate. Many terminals have transitioned to fully grounded or hybrid operations that make it easier for motor carriers to use their own chassis. At the peak of pandemic congestion about 20% of DCLI’s chassis were moving containers for ocean carriers with whom we do not have a direct, contractual relationship. This statistic clearly demonstrates the growing degree of interoperability and choice that exists in today’s marketplace, particularly when it is needed most.
All this leaves you wondering what “problem” the truckers who own NACPC are looking for the federal government to solve. What they really want is to dictate a one size fits all model that forces IEPs to give up control of our privately owned assets to regional pools run by a third-party manager that controls maintenance and repair of the assets and simply sends us a bill, eliminating any incentive for them to control costs. NACPC’s owners also want the FMC to mandate so-called “open choice” billing because they are both users and providers of chassis and that would enable them to use our assets while paying themselves. Interestingly, we haven’t heard NACPC members urging the federal government to force their trucks or net leased chassis fleets into shared pools managed by someone else.
This is a time when we should be working together, exploring ways to enhance data sharing, better leverage technology, and collaborate in ways that improve utilization of critical assets like chassis. These efforts should be accompanied by broader discussions about how we can extend operating hours at ports, terminals, and warehouses so we can handle larger volumes of freight, along with continued public and private sector investment in ports and other supply chain-related infrastructure and equipment. To be successful, every player in the supply chain will need to step up. Our hope is that the motor carrier and shipper communities will embrace the positive changes that have occurred in the chassis industry over the past decade rather than following NACPC down a path that will only benefit them while reducing competition, increasing costs, reducing chassis fleet quality, and killing investment, thereby jeopardizing a decade’s worth of progress in the process.