AJOT: How did the supply chain disruptions, particularly with the terminals and ports, impact the chassis business?
Mike Wilson: A chassis is made to roll. If the chassis is not moving with a box on it, it’s interrupting the fluidity of the supply chain. With the problems, we had essentially with cargo being either out of sequence or out of season and filling up the warehouses, containers full of cargo had been sitting on chassis in storage yards all over the country. And as a result, the chassis is being absorbed. The normal chassis that would be rolling is now sitting. And we’ve gone from a metrics base of about seven or eight days per chassis turn on the street to chassis turns in some locations over 30 days. But on average, we’re doing about 18 days. It’s nearly three times as long as the normal chassis turn would normally be.
AJOT: Has there been any improvement with the supply chain returning to a new version of “normal.”
Mike Wilson: Recently, we’ve seen an uptick in the turns. We have seen some breaks in cargo blockages and some in the DCs and warehouses. And we are starting to see improved turn times with more chassis coming back into the terminals. I think this is the beginning of an improvement that we’ll see over the next several quarters.
AJOT: This was a very different “Peak Season” then we’ve experienced pre-pandemic. I think many thought it would be far more robust coming out of COVID. What happened?
Mike Wilson: I think Peak Season was a non-issue, a non-factor this year.
The system was front-loaded with cargo from orders made ahead of anticipated inflation. So, you have a lot of cargo in the pipeline now, and it flattened the traditional peak season. So, if the cargo in the warehouses can move now, then that will certainly make a difference. There’s probably a lot of cargo blocking the warehouses. It’s going to be a challenge to get that out of the way so that the holiday freight can move, and we can unload the containers that are sitting at warehouses waiting to be unloaded.
AJOT: How did the concept of the chassis pool evolve?
Mike Wilson: I think the underlying principle of chassis fleet operations as far as running an efficient, fluid operation is interoperability. If a chassis is going to operate with high velocity, you have to be able to use any chassis under any box coming in and out of the terminals. You have to be able to pick it up and drop it off at any node in the network. And that’s where the great value of an interoperable pool comes into play.
Any chassis can go under any box, and it can be used at any node in the network, whether it’s in Savannah, or Charleston or wherever. That creates more fluidity for the motor carriers. They’re not having to pick up and drop off chassis in between load moves.
Because in a non-interoperable pool ... let’s say you have four, five, or six independent chassis providers ... a motor carrier would pick up a chassis and put it under a specific box and you would deliver that box. And then for his next move with a different line he has to get a chassis associated with that line’s provider. In that scenario, the trucker has to drop the chassis, go pick up another one, and then put it under the box. This exchange takes time. The whole concept of interoperability is critical for chassis fluidity.
AJOT: How different are chassis operations from one section of the country to another?
Mike Wilson: Every market is different. If you look at the different regions of the country: You have all of the West Coast, with the P&W, the Bay area, and Southern California. Then on the East Coast, you have the Northeast, the Mid-Atlantic, and the South Atlantic. And then you have the Gulf and then the interior Midwest. So, wherever there are wheeled operations, you typically have a need for interoperability because the railroads and the motor carriers need to be able to put any chassis under any box. In a lot of cases, that’s not happening now. The interior markets, the Gulf ... Actually, the center of the country, the Gulf straight up has fragmented into proprietary models where you have three, four, five chassis providers having chassis in the market, segmenting the market, and the customer base across those five fleets, which interrupts the concept of interoperability.
I think a fully interoperable pool drives a much higher level of efficiency where you have faster truck turns, you have faster train turns, and you have a higher level of reliability for available assets. And I think when you have that environment under one manager as we do in the interoperable CCM pools, the single point of contact, the standardized maintenance approach, I think that adds value.
AJOT: What is happening with the transition from SACP 2.0 pool to SACP 3.0?
Mike Wilson: Until now, we’re under what we call SACP 2.0 model rules, which is essentially CCM manages the fleet, but the actual number of chassis that are contributed to the pool and the quality of the chassis is under the control of the equipment providers. In the past, we’ve had issues with not having enough chassis in the pool, and we would have to go to the other providers and ask them to put more in. That was always a debate, and they would say, “We don’t need more. We think we’re fine.” And then when we tried to convince the providers to upgrade the chassis and put radial tires and anti-lock brakes, LED lights, and things of that nature, they were reluctant to do so. In conjunction with the ocean carriers and the ports, CCM was brought into the discussion. We tried to come up with a model that addressed the evolving needs. And this new model, SACP 3.0, coming out is essentially where CCM not only manages the fleet from a maintenance and repositioning and facilities network standpoint. But we also now will be the equipment provider.
So, the big difference here is that instead of the leasing companies, three or four of them or five of them, are providing the chassis to the user, CCM will now have a holistic approach where we’ll control the fleet as well as the operational support. We’ll control the number of chassis in the fleet. We’ll control the quality of the chassis in the fleet. We’ll control where the chassis are dispersed. So, it’s a holistic approach that addresses the concerns that took place in the prior model, which were there weren’t enough chassis in the fleet and the chassis were not the quality that was needed to assure a high level of reliability. That’s going to change under SACP 3.0. Now that doesn’t come into play until October of 2023 based on the agreement we have with the ports and with the lines.
Essentially, we’re going to continue under the current rules until October of next year. But during this period between now and October, we’re going to be rolling out our new technology and our new processes and signing new agreements with the user community, largely made up of truckers, ocean carriers, and BCOs. And then once we have that all in place, we’ll have our organization augmented. CCM is currently in the process of negotiating with the major equipment providers. Eventually, we will have close to 60,000 chassis under the lease on a long-term basis in the SACP.
So, we’re probably 90% through all these negotiations. We think by mid-year, we should have it ready to go. We’ll go through some real-life testing probably in June, July, and August. We’ll be ready to start in October of 2023 under this new holistic model.