Getting Cargo from the Long Beach/Los Angeles Ports to the Southern California Logistics Airport in Victorville
710 North, 710 Tunnel, 210 North, State Route 14, the High Desert Corridor, to SR-18
http://www.dot.ca.gov/dist07/travel/projects/details.php?id=11
What is the Southern California Logistics Airport (SCLA)?
Going Modal
http://www.inboundlogistics.com/cms/article/going-modal/
By Joseph O'Reilly, July 2003
How is a logistics airport alleviating congestion at Los Angeles ports?
By operating as a multi-modal 3PL. Facing the unenviable task of cutting
time and costs during transshipment at ports, forwarders, 3PLs, and
shippers are looking to inland multi-modal facilities such as Southern
California Logistics Airport to circumvent congestion and ensure quicker
turnaround times for their customers' shipments.
Seaports are arguably the most critical links in global supply chains
because they serve as the primary interface between waterborne cargo
traffic and land-linked rail, road, and air distribution networks. In
the United States alone, 95 percent of import and export trade moves
through coastal gateways and inland waterways. Anticipated growth in
Asian markets will feed more demand for efficient intermodal services.
But where the maritime shipping industry has virtually limitless
flexibility in accommodating growing cargo capacity with larger ships
and expanded schedules, West Coast ports such as Los Angeles and Long
Beach are considerably less elastic, given geographic constraints,
limited real estate availability, and urban congestion.
As a result, shippers and forwarders face the unenviable task of cutting out time and costs during transshipment.
One way they are bypassing these congestion problems and speeding
product to market is by
rerouting shipments from the docks to Southern
California Logistics Airport (SCLA), a multi-modal facility located less
than 100 miles inland from the ports in the Northern Inland Empire
region. A growing number of forwarders, retailers, and manufacturers are
outsourcing their distribution and warehousing operations to SCLA and
leveraging the airport's access to road, rail, and ocean transportation
networks to ensure quicker turn-around times and drive more cost savings
in their supply chain operations.
The Port Problem
"As international trade continues its expected growth, the demand for
improved intermodal access to U.S. ports will rise, particularly at
containerized ports in urban areas," notes the 2003 U.S. International
Trade and Freight Transportation Trends report by the U.S. Bureau of
Transportation Statistics (BTS).
"Issues and concerns include the condition of local roads for
accessing ports, at-grade rail crossings, rail drayage time and costs,
dredging and channel depths, and availability of truck-only lanes for
access to ports."
The questions raised in the BTS report reflect a growing concern in urban areas, especially around Los Angeles (
see sidebar, below),
where congestion is bottlenecking port access points. Limited or
overpriced real estate has impeded expansion efforts that might
otherwise alleviate overcrowding, and increased cargo volume has only
fractured existing intermodal cracks.
Other issues including labor availability, environmental
restrictions, and security compliance have similarly prompted logistics
service providers and transporters to find ways to fill in or bypass
these gaps.
Ports are also encountering pressure to adapt their operations, not
only to accommodate customer needs and marginalize their physical
limitations, but to increase the velocity of throughput at their dock
facilities.
For these reasons, ports in urban areas will revert to their
traditional function as staging facilities, predicts Don McKnight,
president, The Pasha Group, a Corte Madera, Calif.-based 3PL that
specializes in marine terminal operations. "I see port property more
exclusively being used to offload and load ships, rather than doing a
lot of storage and breakbulk work."
In fact, it would be a natural adaptation for ports, says Dougall
Agan, principal, Southern California Logistics Airport, because "they
really aren't intended to be breakbulk facilities, but rather
pass-through facilities to gain access to the United States."
Considering that most of the inbound volume into the United States
along the West Coast—as much as 60 percent according to some sources—is
destined for eastern markets, both McKnight and Agan's assessments are
telling. This pragmatism is also the driving element behind SCLA's rapid
growth as a multi-modal distribution and warehousing hub.
A Port Apart
Located in Victorville, Calif., SCLA is a former U.S. Airforce
military base that has been redeveloped into a 5,000-acre multi-modal
business and designated foreign trade zone (FTZ).
The airport itself boasts two landing areas—a soon-to-be-expanded
15,000-foot strip and another 10,000-foot runway—capable of servicing
international airfreight shipping needs. SCLA also integrates
manufacturing, industrial, and office facilities with core business
units including air cargo, aviation maintenance, rail, and real estate
programs.
Perhaps the more compelling aspect of SCLA's recent expansion efforts
has been its focus on providing customers with a total logistics
solution.
"We control the infrastructure—the airport and rail—and we can
integrate a lot of solutions that some 3PLs cannot because they don't
control and own those assets," says Agan. "This gives customers a
greater level of confidence because now they can find long-term
contracts with a flat profile vs. a volatile rental structure that can
go up significantly during peaks. Our goal is to come up with a very
long-term static approach of operational cost that customers can
afford."
Instead of having to ramp up labor, equipment, and facilities to meet
seasonal fluctuations, customers can counter excessive overhead by
outsourcing to SCLA on a per-unit basis. "We gear the economics and
operational costs to the flow of their demand, so there is never a time
when costs are way ahead of revenues," notes Agan.
This flexibility poses an attractive alternative not only to freight
forwarders and 3PLs wary about investing capital in port facilities or
looking to circumvent congested areas, but also to manufacturers and
retailers seeking strategic site locations to accommodate future growth.
That major players such as ConAgra Foods, Goodyear, Mars/M&M,
Boeing, and GE Aircraft Engines have chosen to locate in Victorville is
further testament to the area's growth potential as a major
transshipment hub.
Planes, Trains and Intermobility
In 2000, SCLA began looking at how it could enhance airfreight
movement through its facility and develop capabilities beyond
traditional cargo airports.
"We got together with all the carriers and forwarders and listened to
the services they typically had to outsource," recalls Agan. "Then we
said, 'what if we became a full-service environment where you could look
at us as a third-party logistics provider and you wouldn't have to go
out and hire new people to manage your operations.'"
With positive feedback from its customers, SCLA partnered with The
Pasha Group to come under its umbrella and help create a global access
logistics service where it could provide warehouse management, import
and export administration functions, and other accessorization and
palletization services.
Leveraging Pasha's expertise in ocean terminal and drayage
operations, and rail yard management, SCLA augmented its role as a
multi-modal facility, while similarly enhancing its value proposition to
prospective customers. Rather than being viewed as simply an access
point to land a plane, the airport became an integral part of SCLA's
supply chain management service.
"The advantage we have now is that if there is an accelerated move
that needs to come in via air, or if there is a bulkfreight shipment for
seasonal delivery that we are picking up via sea connection, it comes
in to the same consolidation point," says Agan.
Shippers and forwarders then have the luxury of being able to
breakbulk and/or consolidate shipments and tender them via their mode of
preference.
A Modal Approach
For The Pasha Group, the opportunity to locate at SCLA had strategic
advantages for meeting its own long-term growth expectations.
"As an operator at the Port of Los Angeles, we recognized the
problems associated with congestion at ports, on the freeways in and
around Los Angeles, and with trains and trucks in the Inland Empire
area," says McKnight.
"We had a few customers that were interested in expanding and we
didn't see adequate facilities to support that there. We were looking
for a safety valve to set up an operation that could contribute to
relieving some of that congestion while at the same time consolidating
some of the operations we had in mind for future growth and
development," he says.
The airport component, coupled with SCLA's access to two Class I
railroads and two major thoroughfares going north/south and east/west
(U.S. Highway 395 and Interstate 15) gave Pasha the modal flexibility it
required.
"There is also an excellent labor pool in the high desert; it is
well-educated and the community in and around that area is very
business- friendly," adds McKnight. "Property is very much available,
and compared to Inland Empire and the L.A. Basin, it's very
inexpensive."
All these factors contributed to Pasha's decision to begin developing
a 700-acre multi-modal logistics and distribution complex at the
Victorville site. When completed, the facility will provide
multi-functional services for container loading and unloading. Pasha
also plans to operate warehousing, distribution, and processing
facilities that will specifically serve auto manufacturer needs for
vehicle consolidation and parts distribution.
As part of its development project, Pasha is working with SCLA to
build a rail complex with leads to the Transcontinental Main Line,
served by both the Union Pacific and Burlington Northern and Santa Fe
railroads. A rail easement, leading directly into the airport, will be
spur-connected to manufacturing and distribution companies, further
enhancing the efficiency of moving freight in and out of SCLA.
"Our expectation is that product will not stay at ports for long
periods of time as it does now. Cargo will come in and quickly move off
port to inland facilities. I think you'll see much better utilization of
on-dock rail—more direct rail loading on dock as opposed to draying
freight inland," says McKnight.
Go-Video Goes SCLA
Direct rail access to the ports was an important consideration when
DHL Danzas Air & Ocean and The Pasha Group jointly selected SCLA as
the new North American distribution hub for Go-Video in June.
For the past three years the Scottsdale, Ariz.-based consumer
electronics manufacturer has been working with DHL Danzas to streamline
its inbound sourcing operation and increase throughput to its customers
in North America. Go-Video currently uses several contract manufacturers
in Asia to build its turnkey products, which are then placed into ocean
containers for shipment to the United States.
Annually importing more than 2,000 TEUs of consumer electronic
products through the ports at Long Beach and Los Angeles, nearly 60
percent of Go-Video shipments are bound for destinations east of the
Rocky Mountains.
The justification for locating at SCLA was twofold: First, DHL Danzas
was looking for a way to better serve its customers by avoiding the
congestion in and around Los Angeles. After conducting a feasibility
survey, it concluded that SCLA's location, facilities, and cost matrix
were the right fit.
"SCLA's location allows us to operate in a more cost-efficient
manner. We are avoiding space and congestion issues that confront us in
the L.A. Basin and we are closer to our customers nationwide through
reduced transit times," says Delano Melikian, district manager, DHL
Danzas Air & Ocean.
Second, Go-Video was looking to DHL Danzas to find a better way to perform its domestic warehousing and distribution.
"Our volumes were increasing but our turnaround times were
decreasing," says Gregg Todd, vice president of operations, Go-Video.
"For example, if we get 10 or 12 containers on Wednesday, we want them
turned around virtually instantaneously. But if you are limited by the
number of square feet you have in your warehouse, you can only turn so
many shipments."
Seamless in SCLA
Under the current arrangement, Pasha is the lead 3PL, operating on
behalf of both SCLA and DHL Danzas to manage customs clearance of
inbound containers, coordinate freight movement from the ports to SCLA,
and break down pallets for distribution to Go-Video's North American
channels.
"As it now works with DHL Danzas, we take the product off the port
and truck it out to SCLA under our supervision so that it is basically a
seamless move once it is off the ship," says McKnight.
"Then we break out the containers, prepare the shipments, and tender
to the trucking companies that will make deliveries all over the
country. The idea is to make this as seamless and tightly controlled as
we can with limited responsibilities."
Having available warehousing and operating space to actually execute
these responsibilities is another advantage of using SCLA, notes Todd,
"because Pasha can work multiple containers at the same time and spot
more opportunities to consolidate outbound domestic shipments. As it
builds our orders, rather than have shipments sitting on the dock or in a
warehouse, Pasha can load them out immediately on trucks for domestic
distribution."
This flexibility lets Go-Video consolidate shipments and conceivably
cut costs—which it can pass along to its customers—while also
accommodating spot business as it comes along. Moving forward, SCLA and
The Pasha Group are currently in the process of working with an on-site
U.S. Customs Office to develop a system where Go-Video's shipments would
be cleared directly at the airport. This capability, coupled with the
rail access, will create a seamless and secure link from the ports to
SCLA.
The Ports of the Future
While ports have successfully adapted from staging facilities into
full-fledged logistics and warehousing hubs, the realization that
valued-added services do not resolve core intermodal weaknesses is
increasingly apparent.
As a result, McKnight anticipates there will be "more direct rail
involvement at ports, and greater use of centrally located off-dock
warehousing and distribution complexes that provide a variety of
services and activities."
This adaptation will clearly alleviate some of the capacity
constraints currently handcuffing ports. But shippers and consignees
will still continue to be aggressive about seeking service providers
that can add tangible value to their business over time. The onus, then,
will fall on forwarders and 3PLs.
To this end, logistics facilities such as SCLA offer a value
proposition that is appropriate for both the present and the
future—enabling shippers and forwarders to eliminate redundancies, avoid
congestion, and deliver short-term ROI while also helping customers
stay ahead of the supply chain growth curve.
Expanding its onsite multimodal capabilities as well as its time
and cost advantages for goods movement, the Southern California Rail
Complex (SCRC) is a planned 3,500-acre intermodal and multimodal rail
and container storage complex with 60 million square feet of planned
commercial development.
