Evolution of Chassis Provisioning

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Second quarter 2022

Evolution of Chassis Provisioning

How the humble chassis and chassis providers evolved as mission-critical entities amid the far-ranging expansion of global and domestic trade, and where the intermodal industry goes from here, warrants a closer examination.

Much has been written about how the shipping container changed the world of commerce, but any intermodalist will be quick to point out it that over the past generation, it is the development of the chassis, and its broad availability, which helped containerization connect the first and last mile across the vast spectrum of global and domestic trade.

Since the 40-foot container became the standard of the International Standards Organization and the International Maritime Organization, the chassis has evolved to safely and securely accommodate 20- and 40-foot ocean-going containers, as well as 45- and 53-foot domestic boxes and high-cube models. Chassis types range from extendable, sliding tandem, spread axle, and tri-axle as well as specialty chassis with generators to power refrigerated containers, or to haul tank containers.

"The key development over the past 20 years has been the focus and attention on providing the drayage community a safe and reliable chassis," says Val Noel, executive vice president and chief operations officer of TRAC Intermodal. "The drayage community challenged our industry to improve the quality of the equipment we provide. The Intermodal Equipment Providers have stepped up and done this."

The emergence of the chassis pool, where chassis are stored near or on intermodal facilities was the latest step in an evolutionary change ensuring daily availability of intermodal equipment for motor carriers.

TRAC manages 11 chassis pools across the U.S. and owns a total of 180,000 chassis which operate at more than 600 ports and transportation hubs. Noel says the company has invested more than $1 billion over the past 10 years to improve equipment via new builds, refurbishment and upgrades, with the goal of putting a safer, more reliable chassis on the road.

But there are different methodologies at work among the pools. "The other major change is how chassis pools are operated across the intermodal network," Noel says. "The establishment of neutral/competitive pools have allowed the owner of the equipment to manage capacity to meet customer needs, manage the repair process and invest capital to improve the quality of equipment while giving the drayman the opportunity to select an IEP of choice and use that IEP's chassis on an interoperable basis."

The neutral/competitive pool network showed its value during supply-chain stresses during the pandemic.

"Via the neutral/competitive pool an IEP can effectively work with all of the stakeholders in the supply chain to gain better visibility into each market's characteristics and the market demand," says Noel. "We have a service scorecard of facts and data that measures our performance. We are at 96%; our goal is 99%. At TRAC Intermodal we score ourselves on our ability to provide a chassis to drayage carriers without having to go to a flip line or waiting for a repair in roadability. We believe that the driver needs to turn within the terminal quickly given the Hours-of-Service concern and the scarcity of drivers. We have a responsibility to make sure the driver is as productive and efficient as possible."

At the same time, development of the cooperative open or "gray" chassis pool offered a low-cost model and was first established by ocean container lines and later, by motor carriers.

"As the industry morphed from private pools to gray pools or interoperable pools, it allowed for better utilization of the assets and reduced quantities needed at terminals," says Jeffrey Dudenhefer, Chief Operations Officer at the North American Chassis Pool Cooperative, LLC, formed in 2012 by 12 U.S. motor carriers. "As the ports and then slowly some inland terminals converted from wheeled operations to grounded operations, it opened the door for additional models including fleets operated by truckers or Beneficial Cargo Owners. Gray pool or interoperable with choice is still the better option for most shippers, however, IEPs lost control over cost when pool managers didn't focus on the asset owners thus negating the desire of IEPs to invest in improving quality. This led to start-up private pools which eliminated synergies gained in gray pool operations for wheeled facilities."

Providing a quality chassis at a reasonable cost with adequate quantity is key, Dudenhefer says.

Consolidated Chassis Management manages NACPC's open pools, where users can draw any chassis from the pool regardless of ownership. The open model aims to eliminate duplicative costs across fleets, maximize space at ports and terminals, and ensure an adequate supply of chassis. It also fosters competition by allowing users to select from more than one chassis provider. CCM manages logistics, billing, supply, maintenance and repair, as well as repositioning.

Says CCM Chief Executive Mike Wilson, "Today, chassis provisioning is a fragmented model made up of proprietary pools, cooperative pools, and trucker and/or BCO-owned/operated chassis directly leased from leasing companies.

"Although a more unified model allows for more synergies to develop across all stakeholders, the free enterprise approach does assure more open competition. Additionally, chassis provisioning models are designed to serve the market in which they operate. In most markets the terminals and rail ramps that are being serviced work either a wheeled terminal, a grounded terminal or in some cases, a hybrid of both. The operational design must be considered when designing a chassis provision model for a specific market."

The surge in chassis utilization-days has created numerous shortages across the country. Says Dudenhefer, "Truckers and shippers are taking control by securing their own dedicated fleets to manage their business. We see customers wanting more data and integrating data into their own platforms. Each solution is tailored to each customer's needs or desires."

Because "you can't build a church for Easter Sunday," Wilson says chassis providers must balance user needs with fleets that can absorb normal volume fluctuations.

"The key is to have accurate and timely forecasts of expected cargo volumes," he says. "Given the cost of a chassis, it is not financially viable to add and/or remove chassis as volumes fluctuate.

Stakeholders need to work closely together to not only forecast volumes, but to also work out contingency plans for times when cargo volumes and chassis demand exceed normal fluctuations. From a quality perspective, chassis need to be maintained to a high standard via a well-organized inspection, maintenance, and repair program. Having key components at the time of manufacturing or refurbishment including radial tires, anti-lock brakes, hub piloted wheels and LED lights provide for a high-quality asset that is more reliable."

Other executives note that the sale of marine chassis from ocean carriers to intermodal equipment providers began the transition to more efficient competitive chassis pool operations and prompted billions of dollars in new investment into the nation's fleet over the last decade.

"The underlying motivation for our investment are the motor carriers, the largest and most direct stakeholders in our fleet," says Mike O'Malley, senior vice president of Government and Public Relations and Human Resources, DCLI, a chassis lessor which operates DCLP proprietary pools and participates in other pool models. "They have a choice when they select a chassis, including getting their own fleets, a growing trend over the past five years. Serving them and being part of the solution when it comes to driver retention drives our commitment to customer service and investment."

The provider's strategic connection to ocean carriers gives it a forecast visibility to help position assets where and when they are needed – a benefit to all stakeholders.

"The biggest challenge during COVID has been a significant increase in chassis street dwell – 30% on average and almost double in some major markets – due to broader inefficiencies in the supply chain," says O'Malley. "The increased dwell has had the effect of significantly constraining equipment availability across our network. To combat this, we have worked overtime with our vendors to reduce out-of-service to record lows of less than 3% and ensure that every available chassis is ready to carry a container."

DCLI participates in White House and Federal Maritime Commission data-sharing initiatives designed to leverage supply chain stakeholders' technology capabilities in ways that will improve the flow of cargo. Says O'Malley, "We appreciate the opportunity to share our perspective in ways that can help drive progress in this critical area."

In the near-term and into the future, providers are equipping chassis with Global Positioning Satellite and telematics which can monitor and remotely report location and component performance for brakes and tires. "We anticipate that the data supplied by GPS will assist in "last mile" data accumulation which will enhance the overall operational efficiency of the fleet," says Wilson.

"Although the benefits of telematics are well understood, it will take some time before this type of technology becomes standard in chassis."

Phil Shook, executive vice president of chassis lessor Milestone Equipment Holdings, which operates at 42 chassis and container depots, agrees that there is a vital business case for the industry in enhanced safety and technology features.

"Driver productivity is at a premium, so carriers are more focused than ever on high quality chassis that keep the driver moving," says Shook. "The length of haul has increased in many key markets such as Chicago, Memphis, and Dallas and in order to complete these moves without delay, the chassis need to have radial tires and other enhancements. This has driven the cost of the chassis up which leads to higher lease or rental rates, but the total operating expense to the trucker has decreased due to lower maintenance costs and higher driver satisfaction/retention."

Milestone is also installing GPS tracking devices on its new chassis, Shook says, for a nominal fee as a value-added service to customers. "This creates higher customer satisfaction as you always know where the shipment is, helps the trucking company better manage their assets and improves collectability of daily chassis rental or demurrage charges. We are also enhancing our customer-facing portal where customers can view their statement, make new bookings, and view available inventory."

While chassis provisioning continues to evolve away from the legacy model of steamship lines-owned and operated proprietary fleets to the current pool-focused, third-party ownership model, "as with any logistics and transportation operation, the key to success is to have the right amount of capacity in place to meet demand on the most economical and efficient basis," says Than Seeds, chief operating officer of FlexiVan.

Seeds cautions that as the cost and lead time to acquire new-build chassis have worsened, it's still not clear whether this will be the new normal. "There is a lot of work being done on predictive analytics to drive more effective maintenance programs, as well as gate technologies to improve the accuracy and reliability of recording chassis arriving and departing intermodal facilities."

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