Supply Chains

Supply chains are the end-to-end process of producing and distributing a  product or commodity from raw materials to the final customer. The goals of this policy  include increasing the economic competitiveness of the United States,  reducing freight congestion, and improving the safety, reliability, and  efficiency of the freight network, among other goals. In response to global shipping changes, infrastructure projects have been  completed or are planned at all major West Coast ports, though some  projects have been deferred indefinitely. Port Stakeholders’ Efforts to Address Infrastructure and Operational Constraints Are Hampered by Competing Priorities and Limited Data

Port stakeholders interviewed as part of our case studies highlighted  some key challenges to mitigating infrastructure and operational  constraints stemming from global shipping changes. Some state and local government officials from our case studies of port  complexes said that information on port performance and supply chains  would be helpful to help target operational and infrastructure efforts. However, about one-third, or 6 industry groups, said some  shippers had difficulty making such modifications due to specific firm or  commodity attributes or prohibitively high costs. Impacts on Selected Shippers from Port Disruptions and Shippers’ Responses Varied

Almost all of our 21 selected industry groups said that shippers in their  respective industries using major West Coast ports were affected by  recent port disruptions. DOT Has Made Progress Including Ports in Freight Efforts, but DOT’s Data Strategy Could Be Improved by Including Supply- Chain Information

DOT’s freight-related activities have grown increasingly multi-modal and  inclusive of ports since 2012. However, there are substantive gaps in the supply chain  information DOT (and state and local governments) have available to  them to support freight efforts. Disruptions at ports can have ramifications  throughout industry supply chains. Based on leading practices in capital  decision making, we previously recommended that DOT develop a  freight-data improvement strategy to address gaps related to, among  other things, local impacts of freight congestion. The report also notes  that while the movement of goods between ports and foreign countries is  tracked continuously, the movement of international trade between ports  and domestic origin for exports and domestic destinations for imports is  not measured. Federal guidance and practices highlight the need for quality information  for planning and effective decision making and achieving agency  objectives. DOT has also taken steps to gather supply chain information from other  federal agencies, but it is unclear how the department will use this  information to inform its freight efforts. Including information on supply chains as part of DOT’s existing effort to  develop a written freight data strategy provides an opportunity for the  agency to think more comprehensively about the information needed to  support its freight efforts including further refining the objectives and goals  in its National Freight Strategic Plan. Recommendation

To inform DOT’s development of its national freight strategy and  associated freight efforts, such as states’ development of freight plans,  newly established freight funding programs, and advancing DOT’s efforts  to implement national freight policies, we recommend that in the  development of the freight data strategy the Secretary of Transportation  include a specific plan to identify: appropriate freight data sources, information, and analytic tools for  transportation modes involved in the freight network and supply  chains; data gaps that could help both the agency and states and local  governments in the development of their freight plans, and an  approach for addressing obstacles to developing high-quality, reliable  supply chain information;  current and planned efforts that can provide insights into supply  chains and their impacts on freight networks; and how DOT plans to use the supply chain information and analytical  tools to inform freight planning and programming. Appendix I: Objectives, Scope, and Methodology

This report addresses the following objectives: (1) how recent changes in  global shipping have impacted the movement of cargo at major U.S. West  Coast ports and how these ports and their stakeholders have responded;  (2) how selected shippers have been impacted by and responded to  disruptions at West Coast ports during 2014-2015 as well as other recent  or potential disruptions; and (3) how the Department of Transportation’s  (DOT) current freight-related efforts support cargo movement through  ports and whether these effort can be improved. To assess how shippers have been impacted by and responded to port  disruptions, we conducted semi-structured interviews with one or more  representatives of 21 industry trade groups representing shippers. We did not evaluate activities outside of DOT. West Coast ports account for  a large share of U.S. trade. i denotes port,  p denotes product category at the two-digit Harmonized System (HS)  code level,  t denotes quarter  c denotes country of origin or destination  ln (y+1)iptc, the dependent variable, is the natural log of the dollar  value of either exports or imports plus one, in order to account for  zeroes in the data, passing through port i (which will be identified as  being on one of the three coasts), for product category p, during  quarter t, and coming from or destined for country c port disruption is a dummy variable designed to capture whether there  was any shift in the volume of trade during the entire time frame of the  port disruption—2014q3-2015q1—or, alternatively, for each of those  three quarters separately as well as the quarters following the port  disruption, up to and including 2016q1   trendt is a linear time trend that controls for trends in trade overtime,   Recessiont is an indicator equal to one during the quarters that the pattern of which is likely related to trends in overall economic ∝q, are quarter of the year indicators to control for seasonality correspond to the great recession, 2007q4-2009q2, to account for any activity and other factors that may influence the underlying pattern of   ERct is the exchange rate for country c in time t (included in only changes in trade during that period related to the economic downturn trade growth. GAO-13-80. Freight Transportation: Strategies Needed to Address Planning and  Financing Limitations.
Why GAO Did This Study

U.S. West Coast ports are critical to the national transportation freight network and global supply chains. Changes in global shipping and disruptions at ports can create congestion and economic hardship for shippers with resulting effects throughout supply chains. The 2015 Fixing America's Surface Transportation Act provides freight policy goals, including increasing U.S. economic competitiveness; reducing freight congestion; and improving the safety, reliability, and efficiency of the freight network. The act also established new DOT freight funding programs.
This report addresses: (1) how major U.S. West Coast ports have responded to recent changes in global shipping; (2) how selected shippers have been impacted by and responded to a recent port disruption, and (3) how DOT's efforts support port cargo movement and whether they can be improved. GAO conducted case studies of the three major port regions on the West Coast; interviewed key stakeholders—such as port authorities and state and local transportation agencies—for each region and 21 industry representatives, and evaluated DOT's freight efforts relative to criteria on using quality information to support decision-making.

What GAO Found

Some infrastructure and operations at major West Coast ports are strained in the face of recent changes in global shipping, but port stakeholders are attempting to address these constraints. For example, as the shipping industry deploys larger vessels capable of delivering more cargo, some port terminals lack big enough cranes, or other infrastructure, needed to handle these vessels. All major West Coast ports have planned or completed port-related infrastructure projects and implemented operational changes. For example, in Long Beach, California, the Gerald Desmond Bridge is being heightened to enable larger vessels to pass underneath. Port stakeholders also noted that efforts to address constraints at ports can be hampered by competing priorities and limited data. For example, most state and local government officials said that having information on ports' performance and industry supply chains—the end-to-end process of producing and distributing a product or commodity from raw materials to the final customer—would be helpful to target efforts to address constraints at ports.
Selected shippers were impacted by and responded to one recent port disruption in various ways. In July 2014, the labor agreement that covers most West Coast port workers expired and was not renewed until February 2015. During this period, as widely reported, ports remained open, but vessels backed up in harbors, and loading and unloading of cargo were delayed. In response to this disruption, 13 of 21 selected industry groups representing shippers of some of the top commodities moving through West Coast ports said at least some of their members modified their supply chains by, for example, diverting shipments to ports outside the West Coast or to alternate modes of transportation. All 13 said shippers' costs increased or revenues declined. Six industry groups said some members had difficulty altering shipping plans because of commodity attributes, such as perishability or prohibitive costs.
The Department of Transportation's (DOT) freight-related activities are increasingly multi-modal and inclusive of ports, but gaps exist in the information available to DOT and state and local governments about important aspects of supply chains. For example, a 2015 DOT report notes that movements of international trade between ports and domestic origin for exports and domestic destinations for imports are not measured. This report further states that this information could help DOT to assess international trade flows within the United States and strengthen the role of freight transportation in U.S. economic competitiveness. Federal guidance and leading practices in capital planning emphasize that good information is essential to sound decision making and achieving agency objectives. A few current DOT initiatives may help address some information gaps, but they are in the early stages. DOT has also articulated the need for supply chain information in its draft National Freight Strategic Plan , but does not outline how DOT will obtain this information or how it will be used. Based on a 2014 GAO recommendation, DOT is in the early stages of developing a written freight data strategy to improve the availability of national data on freight trends, among other things. Broadening its freight data strategy to include supply chain information could help DOT to think more strategically about the specific supply chain information needed to support its freight efforts and advance national freight policy goals.

What GAO Recommends

In developing a freight data strategy, DOT should identify: what supply chain information is needed, potential sources of that information, data gaps, and how it intends to use this information to inform freight efforts. DOT concurred with the recommendation.