By: Nora Johnson, Commodities Manager at Massimo Zanetti Beverage USA and NCA Next Gen Communications Committee Chair
News from ports around the world has taken the globe by storm over the past 18 months – from record-breaking cargo volumes to record-breaking counts of ships at berth, everywhere you turn you hear shipping-related news. Despite these headlines, how familiar are you with port operations and the many roles and responsibilities that come with it?
Nora Johnson, Next Gen Council Member and Commodities Manager at Massimo Zanetti Beverage USA, had the opportunity to speak with Joe Harris, Vice President and Spokesman for The Port of Virginia®. Read on to learn about how the Port of Virginia, along with so many other ports around the world, has adapted and leaned into this new phase of logistics and shipping.
The interview below has been condensed and edited for clarity with approval from the interviewee.
Nora Johnson, NCA Next Gen: Can you share some history on the Port of Virginia? How did the Port get to where it is today?
Joe: Back in the ‘60s, all of the individual terminals in our harbor at that time – Portsmouth Marine Terminal, Newport News Marine Terminal, and Norfolk International Terminals – were owned and operated by their respective cities; they were competitors to each other. In addition to competing for business, they would go up to Richmond (Virginia) and compete for money.
In the mid-to-late ‘70s, the Governor of Virginia suggested that we look to unify the ports under a common flag in order to leverage them as a whole as opposed to utilizing them as individual pieces. He was successful in getting that done – the state bought the respective terminals from the different cities and unified them under the Virginia Port Authority flag with Virginia International Terminals (VIT) acting as the operator for all the terminals. Then, in 2010, we leased the Richmond Marine Terminal, and 2 years later we leased the Virginia International Gateway (VIG).
We, Virginia International Terminals, now own and operate Norfolk International Terminals, Newport News Marine Terminal, Portsmouth Marine Terminal, Virginia Inland Port, and Hampton Roads Chassis Pool, and we lease Virginia International Gateway and Richmond Marine Terminal.
This really creates a collaborative atmosphere. By owning and operating all the terminals, we can share information and solve problems quickly and with ease, as we do not have any other competing economic interests that we have to satisfy. We call it the “Virginia Model,” and right now, it is yielding significant positive results for us.
Nora: I had never really considered the competing ownership interests and how that could impact port operations.
Joe: The twin ports of Los Angeles and Long Beach are the biggest ports in our nation. In that harbor, there are 13 or 14 terminals that are each owned and operated by different entities. While they are neighbors, they are competitors too. Contractually, there are obligations with different shippers, motor carriers, and railroads. At LA/Long Beach, to bring cargo that was contracted by and intended for one terminal into a neighboring terminal and to sort out all those pieces quickly and economically could be nearly impossible.
The LA/Long Beach situation is no single entity’s fault; LA/Long Beach handles around 10 million units in one year. All of the East Coast ports combined can only handle about 8.5 million units. That’s how big and significant LA/Long Beach is.
Nora: The Port of Virginia has been an active and dedicated supporter of Virginia’s efforts to become the “Caffeine Capital.” Can you elaborate on the Port’s role in this endeavor and its overall involvement within the coffee industry?
Joe: Coffee had been coming into Virginia for years, when suddenly, we saw this cluster growing. We got behind it as best that we could bringing in the warehouses, getting the ICE (Intercontinental Exchange) designation, and really nurturing the growth of the coffee industry.
What happened was rather organic and outside of our control. One roaster saw another roaster doing well and saw available land and labor and said, “Oh, wow! You all are only 20 miles from a port? This must be a good place.” This reaction started the “it must be good over there effect” and it has by and large stuck, even with movement within the industry. It has been a good piece of business for us, and it had led to good relationships that we are always happy to support however we can.
From a larger perspective, much of the cargo that comes into New York stays in the New York area to serve that population. Aside from the coffee business here in Suffolk, Virginia, so much of our cargo goes outside of Virginia so it is a different dynamic in terms of the market. We say that we serve the nation’s heartland: Chicago, Detroit, Cleveland, Dayton, Louisville, Cincinnati, Kansas City, and St. Louis, among other cities.
Nora: How has COVID impacted the Port of Virginia? Would you walk us through the different “phases” of COVID since March 2020 through today and how each phase impacted the Port differently?
Joe: When COVID was at its peak, we saw cargo volumes fall off like we could never have forecasted; manufacturing and shipping dried up. It’s important to note that the Port of Virginia never shut down, never laid off a person, and never cut any benefits. We kept working, but we just weren’t moving as much cargo.
Then, vaccines began to roll out and some confidence returned. Last September, we saw volumes go from a little bit of upwards growth to shooting steeply up and they have not since come back down. The record volumes continue. Some of this volume is “catch-up cargo” that was ordered during the COVID slump and never made it ashore originally, and another portion of the volume is related to cargo that was ordered by many of the companies and retailers who did not want to get caught short again. In turn, they bought high volumes and stuck it in their warehouses. As we speak today, we are in the thick of moving retail cargo for the holiday season. You have a lot of different needs piling on top of each other which is creating a lot of cargo that is moving towards the United States.
Nora: What did the Port of Virginia do to accommodate these record volumes? Staffing and operations all had to change, right?
It did not – and it’s really a matter of timing! The first summer after COVID hit, we had just finished up an $800 million expansion, renovation, and modernization of our two primary container terminals – Virginia International Gateway and Norfolk International Terminals. The initial slow down at the start of COVID allowed us to get our hands on this new “animal” that we had; then, when the volume spiked up, all of that infrastructure, investment, and training really paid off. The modernization, bringing in 21st century technology, and having a truly talented and seasoned operations team made a meaningful difference. The terminal is only as good as the people running it. In addition to that, we have great labor relations with our union. The union never took a day off, and to this day they are out there hustling. The men and women show up night and day, rain or shine, hot or cold, and they go to work and make it happen. That is critical! All of these factors are really working in our favor right now. Every day we are looking at our operation, trying to tweak it and figure out where we can be a little more efficient, a little more productive, and always be safe. We look at what we can do tomorrow, next week, and even next month. Since we own our terminals, we can really look at things holistically – we can say, “We are doing really well over there, so how can we translate that effort and make it happen over here?”
Nora: Would you say that being agile is critical for the Port right now?
Joe: Yes – and “agile” is a word that we are using often right now. We can see a challenge or a problem, gather around the table, and truly have an answer within a couple of hours and then begin implementing the solution that afternoon or the next morning. Not all ports can do that.
Nora: Do you talk and communicate with other ports regularly?
Joe: Everyone is willing to put in a collaborative effort, but it is less about what a different port is doing to solve a specific problem, but more so about understanding volumes and planning. For For instance, if we know that a ship is going to be arriving in Georgia and that it is already off schedule, we will call Georgia and see how long it’s going to be in port there so that we can get all of that data into our system and be better prepared.
Nora: Wow. It’s hard to imagine how this will all come to an end!
Joe: It’s going to take patience and a lot of hard work, but it will end. It takes time for any amount of capital to translate into productivity. That’s nobody’s fault – that’s just how it is – building, marketing, integration; it is a conundrum, but there is an end.
Nora: How do these record volume levels and the experiences of the past year impact future plans for the Port of Virginia?
The plans that we have are not in response to what we are seeing today, but the timing is good, and it will benefit us if we ever go through another period like this. Right now, we are investing $350 million in deepening the channels that support the Port of Virginia. Once that is completed in 2024, our channels in the harbor will be 55 feet deep, the ocean approaches will be 56 and 59 feet deep, and the channels will be wider. These wider, deeper channels will allow the big ships to pass – we will have two-way traffic of the biggest ships that are currently afloat. We will be able to hang the flag of the deepest port on the US East Coast!
Our future plans don’t stop there… This winter, we will begin to redevelop the railroad operation at Norfolk International Terminals; we are going to double the rail capacity there. We will also be renovating the North Side of Norfolk International Terminals. We intend to make improvements to expand our capacity up at Virginia Inland Port while also looking to add in more barge service at Richmond Marine Terminal. We are marketing Portsmouth Marine Terminal as a multi-use facility, bringing in tenants that are going to serve the offshore wind industry – we are going to help to grow an entirely new industry.
We are continually spending and renovating – it is a never-ending cycle of investment and reinvestment, and you must do that to stay competitive and relevant.
Nora: With bottlenecks and shipping delays now making news headlines and increasing consumer awareness, are there any other challenges that aren’t being seen by the “common eye” or that aren’t being widely discussed that the Port has had to overcome?
Joe: What many don’t understand is that there are so many pieces involved within the shipping and logistics supply chain that all must work well together in order to prevent any backup.
One of the issues that the Port of Virginia is keeping a close eye on is the availability of chassis. A chassis is the wheel set that a truck driver uses that the container gets put on top of. We own and operate about 16,000 chassis. Typically, a truck driver comes in and rents a chassis, normally for 2-3 days, and does all the business that they can over that time and then they return it. Currently, we are seeing chassis on the road for 12 days at a time! Warehouses are packed, and with labor shortages at warehouses, the containers don’t get unloaded as quickly and the chassis don’t get returned as quickly. That means that we don’t have as many of those units coming back to the pool so that the next driver can get one. We are trying to add chassis to our fleet, but a lot of the steel for chassis is cut in China and must be shipped to the US, and then they must be assembled, so at times, we are challenged by the supply chain too.
I do always go back to the “Virginia Model” that I mentioned before. Imagine that we say, “We need more chassis, what can we do?” Well, we might open the chassis yard for returns all day on a Saturday. We don’t have to figure out how to do that – we own the chassis yard and the chassis. It is as easy as putting the message out to the trade saying, “Open on Saturday, please bring back available chassis.”
Nora: Earlier in the year, all eyes were on the Suez Canal and the obstruction caused by the Ever Given. Did this have any impact – direct or indirect – on the Port of Virginia?
Joe: We saw a couple of delayed vessels, so yes, it had an impact, but it didn’t really disrupt our way of doing business. We had 6 or 8 ships that were delayed, but they were delayed to the point that at least we knew where they were and that they would be here on this date so we could arrange our schedules to accommodate them.
Nora: It seems like that is a major point that you just made there; you knew what and where the issue was with the Suez Canal, whereas today, all of the delays are interconnected and span across different ports that are having unknown interruptions making schedules unpredictable. Would that be a fair distinction, anticipated versus unanticipated delays and disruptions?
Joe: Yes – I read recently that only 18% of the world’s container fleet is on time. The remaining 82% is off schedule. To every port, that presents a real issue. In the larger sense, trade likes predictability and right now it is very unpredictable. You are constantly tracking vessels and trying to predict ETAs. It is a real challenge for planning. We are very fortunate that we have been able to plan and accommodate both ships that are on and off schedule without having to put ships out to anchor to wait.
Nora: Has the Port of Virginia had any situations like that throughout this time, with ships at anchor waiting for availability to unload?
Joe: No, we have not. We have had instances where we contact ships and ask them to slow their speed a bit. If we have vessels on berth and know that there isn’t going to be a slot for a ship that is steaming down to us, we may ask them to pull their throttle back some so that they do not have to anchor and wait. The captains and ship owners would much rather slow down than anchor and wait as well.
Nora: The ultimate question… and one to which there may not be answer! What do you see in the future for 2022 in terms of the Port of Virginia and global shipping and logistics?
Joe: Cargo owners are realizing that they must be more diverse in their supply chains. So that might mean moving 1/3 of cargo to the West Coast, 1/3 to the Gulf Coast, and 1/3 to the East Coast. Our goal is to keep any new cargo with us – we call it “sticky” cargo. Regardless of any disruption or natural disaster on any one of those coasts, you would then still have cargo coming in. This kind of supply chain diversification would allow the cargo owner to keep that cargo moving.
2022 will probably be as busy as 2021, at least for the first half of the year. As an industry, we are trying to catch up while running full speed ahead. We are not forecasting a slowdown for next year. In the bigger picture, the public will need to be patient and understand that what the supply chain is faced with today is not anyone’s fault nor is it any one industry’s fault. It is not political, there is not one node along the supply chain that is holding something up. It is truly the perfect storm, and there is a whole lot of effort being put into resolving it. It will correct, but it will just take some time.
Nora: What is one thing about the Port of Virginia (or about Ports in general) that you wish more people knew?
Joe: People don’t always recognize the role that ports play in the American economy. 20 years ago, I sat with our then port-director at lunch and he explained that all you really need to know about shipping is that if your house was built after the 1980s, seven eighths of what is in it and seven eights of what it is made of came in on a container ship. The port industry is truly critical to the economy with the amount of goods that come in on container ships.
Addendum: One positive takeaway from the shipping and logistics challenges and opportunities of the past 18 months are the lessons learned. After speaking with Joe Harris and hearing about these times from the eyes of the Port of Virginia, I can personally attest to the value that exists in learning from the experiences of those in different areas of the supply chain.
In sharing these stories and experiences through the Logistically Speaking series, and on behalf of the National Coffee Association Next Gen Council, we hope that you too may benefit from hearing about the different lessons learned and experiences had across the supply chain.
Many thanks to Joe Harris and the Port of Virginia for their participation in Logistically Speaking: Part 2!