Port of LA - The DLS3E06
In this episode of The DL, Diesel Laptops’ Founder and CEO, Tyler Robertson, is joined by Gene Seroka, the Executive Director at Port of Los Angeles, and Chief Tom Gazsi, the Chief of Police & Deputy Director of Public Safety, Information Technology and Port Pilots at Port of LA. Gene Seroka and Chief Gazsi discuss the challenges faced at the Port of LA, from supply and demand, shipping containers, the logistics of how to quickly and efficiently move products, the need for more drivers, and more. At Port of LA they have implemented new practices to be most efficient in order to keep up with demand.
As always thank you for watching and listening!
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Website – https://www.portoflosangeles.org
Transcript for Port of LA - The DL S3E06:
Tyler Robertson (00:06):
Welcome to the DL. I am your host, Tyler Robertson, the CEO and founder of Diesel Laptops. And today we're going to talk about what every single podcast seems to come back to, and that's supply chain, supply chain, supply chain. You hear the CEOs on the show talk about it. You hear the executives talk about it. You hear the manufacturers talk about it. It seems everywhere you go. I had my 10 year old come home the other day from school asking me questions about supply chain. I know I hear President Biden talk about supply chain and it's everywhere in between.
Tyler Robertson (00:35):
And today we have some gentlemen on here that are actively involved in this. So we thought, hey, let's go ask specific questions and really cut to it. So I'm very fortunate to have two gentlemen from the Port of Los Angeles on here. So I have Gene Seroka, who's the executive director of the Port of LA. And I have Chief Gazsi, who is the chief of public safety and emergency management of the Port of LA.
Tyler Robertson (00:59):
So let's just start here first. I think we throw it first over to Gene. I hear Port of LA all the time. How big of a deal is Port of LA? How big is this facility? If people are watching the video portion, I mean, that's a massive thing being shown behind you there on the overview, the aerial. Can you give a little color on how big this is?
Gene Seroka (01:19):
Good afternoon, Tyler. And thanks for the invitation. This Port of Los Angeles is the largest container port in the Western hemisphere, 7,500 acres of land, 43 miles of waterway. The cargo that traverses our facility moves to each and every one of our nation's 435 congressional districts. Closer to home, we account for one in nine jobs in Southern California. That's a million paychecks that coordinate directly with this port, dock workers, truckers, manufacturers, logisticians, and so many people in between.
Tyler Robertson (01:55):
Yeah, it's just an amazingly sized operation. And I think people realize too, it's not just unloading them. There's warehouses all over this property to house all these things coming off. Does the Port of LA go beyond the port? Do you have warehousing in other parts of the country as well? Or is this just kind of a California thing right now?
Gene Seroka (02:13):
We're at the confluence of so many activities within this global supply chain. Sourcing for manufacturers overseas in the Pacific Rim to working with liner shipping companies, bringing that cargo across the Pacific, our own marine terminals here in LA, and from the shores of the Pacific Ocean out to the desert region of Southern California, more than 2 billion square feet of warehousing under roof for fulfillment and distribution centers, cross-dock, and transload facilities. This truly is an interconnected supply chain that we are at the middle of, right here in Southern California.
Tyler Robertson (02:51):
How many ships a year come through this port? I mean, we see the pictures on TV and all these things, but how many are coming through or is there a percentage of nation's goods? Can you give a little color behind that?
Gene Seroka (03:03):
Combined with our neighboring Port of Long Beach, 40% of our nation's imports come through this gateway. We account for 30% of the country's exports. And on average here at the Port of Los Angeles, about 1800 container ships call on our port annually.
Tyler Robertson (03:21):
Yeah. That's just, again, unbelievable numbers. And can you describe to people that don't see it or haven't looked really tight, how big are these ships coming in? Because I see some of the pictures and they just look massive.
Gene Seroka (03:34):
Oh, the modern ships are as long as the Empire State Building is tall. They're as wide as a football field. These are 400 meters in length, carrying anywhere up to 23,000 container units, simply miraculous looks at engineering marvels that bring our cargo in and out of the country.
Tyler Robertson (03:54):
Yeah. They're just amazing pieces of machinery. And I got some questions for Chief Gazsi here, because I've traveled international. I've gone through customs. I know what that's like for a human, but how does it work for cargo? I mean, there's got to be just concerns all the time about everything coming through. So how is that dealt with when you have that much volume coming through?
Chief Tom Gazsi (04:16):
We have an aggregate, a variety of agencies, not only the Port Police here in the Port of Los Angeles, but Customs Border Protection, CBP, US Coast Guard, FBI, TSA, Los Angeles Police Department, and the LA County Sheriff's Department. So the containerized cargo is inspected regularly by CBP and then an adaptation in terms of some of our technology is the GE Port Optimizer that tracks and allows our customers to identify cargo, anticipate cargo, prepare not only for delivery, but also labor staging here in the Port of Los Angeles. So all of this is done collaboratively.
Chief Tom Gazsi (04:57):
You can see the GE Port Optimizer on our website, on a dashboard. Our customers are able to see this so that they can track a container in a granular level and anticipate its arrival here in Los Angeles. And that's been particularly important during the supply chain challenges we've experienced over the last 24 months.
Tyler Robertson (05:16):
Yeah, I can just imagine people trying to smuggle everything and anything through these channels, which are obviously different than people getting through on airplanes and whatnot.
Tyler Robertson (05:25):
But what about the other side? Yeah, stuff's coming in, but you have drivers, you got railroad operations, you got people coming to grab cargo. How does that side of it work as well to ensure security?
Chief Tom Gazsi (05:37):
I will say, it's actually a very well choreographed synchronization of not only the drivers, the chassis supplies, the terminal operators, the operations on our terminals, which are handled by ILWU labor, the longshore workers and so forth. And it is a very efficient optimized system at a variety of levels. It's thousands of personnel, hundreds of pieces of equipment working simultaneously in concert with a variety of shipping companies, at seven of our major terminals that handle cargo.
Tyler Robertson (06:15):
So we're talking about the physical side of security, but there's that bigger one, I think, that people get really scared about is the cyber security side of it. I know in 2017 there was a big episode that happened with one of the big maritime carriers. I mean, it was literally... When I read the stats, it was unbelievable. It was like 49,000 of their laptops rendered useless, 90% of their software applications destroyed. I mean, they got hit hard. And basically all four of these ocean freighter companies have been hit. And I know you're stepping up at the Port of LA to help with this situation. Can you talk a little bit about that?
Chief Tom Gazsi (06:47):
Yeah. It's actually timely that you're referring to the NonPetya event of June, 2017, that affected Maersk shipping lines significantly globally. It did not have an effect on us here locally. Before that in 2014 we had developed, what's referred to as the cybersecurity operation center, it's called the CSOC, which protects the Los Angeles Harbor Department and our entities, everything from our internal IT systems, navigation, radio, telecom, billing systems, a host of other things.
Chief Tom Gazsi (07:19):
In January of this year, we went live with the nation's first cyber security operation center in a, what's referred to as a cyber resilience center. At this point, we have 45 of our terminal partners, everything from steamship lines, trucking companies, rail, a host of others that are working collaboratively with us in that cyber resilience center, that gives us early warning of a cyber intrusion or a potential attack that may affect one of our operators or one of our customers, but then we're able to assist in mitigation recovery, and also early warning for the rest of our stakeholders here in the Port of Los Angeles.
Chief Tom Gazsi (07:57):
So we have two, really two systems that we developed here at the Port of Los Angeles, starting in 2014. And both of those systems were the first of their kind in a port setting in the United States, so we take that very seriously. And back to the NonPetya event, as you know, that was an effort to affect banking systems and a variety of others in Ukraine, inadvertently hit a shipping line in Maersk in Copenhagen.
Tyler Robertson (08:23):
Yeah, it's a big part of my, as a business owner, I can tell you I'm deathly afraid of malware attacks and all these things. And it's great to hear that you're stepping up at the port side and trying to help companies as well. It's a thing everyone needs to be aware of to the ninth degree.
Tyler Robertson (08:39):
I'd love to go it back to Gene here and just talk about now, the bottlenecks. I mean, that's the big news, right? I can imagine before this you weren't thrust in the media spotlight and having the Port of LA on the front page of the Wall Street Journal showing pictures of ships in the ports. Can you give a little background on how did we get here? What's the bottleneck and what situation are we currently in?
Gene Seroka (09:01):
Well, Tyler, while the spotlight has been on us, it can never be too bright here in Los Angeles. What we saw was a real whipsaw effect, but this goes back to 2018, with the ill advised trade policies of the last administration, we saw importers rushing cargo into the United States to get ahead of tariffs and taxes on American import companies. So much so, that by the end of 2019 our business fell off a cliff by about 16%.
Gene Seroka (09:33):
Then COVID 19 hit China. The central government shut down its economy and manufacturing sector. Our business fell another 19% in the first five months of 2020. So effectively, our American imports were very low for about eight consecutive months. Then, the strength of the American consumer began to show and we were buying more than ever. We could no longer go to restaurants and ballgames. We weren't flying home to see grandma. We were spending money on retail goods. Some of us working from home decided to remodel our kitchen, buy a new refrigerator, washer, dryer. All of those imports began to really skyrocket. In fact, since our low in March of 2020, where we looked into the abyss at only 450,000 container units crossing our docks, we doubled that volume by the time we got to July. And it was almost like taking 10 lanes of freeway traffic and squeezing them into five. The cargo was still moving, but if your lane was closing down and the driver next to you didn't let you in, you fell behind. And that's exactly what happened.
Gene Seroka (10:46):
By the time October came around of 2021, we had so much cargo on our docks it impeded us loading onto rail or trucks to get the cargo moved out to the domestic supply chain. Our two Western railroads had 50 trains backed up outside of Joliet, Illinois, near Chicago. They had to pause service for a week. Cargo was not being absorbed into the American supply chain as quickly as it was coming here from overseas.
Gene Seroka (11:15):
So with the help of the port optimizer and our data mining capabilities, we were able to better segment cargo that was on the ground, prepare for the next round of imports. There were products here that were not needed in market, think of patio furniture and lounge chairs for the springtime, think of flat screen TVs well ahead of Super Bowl. That cargo just needed to be moved off to the side if it wasn't needed right away. That allowed us to feed the parts and components to American factories, get holiday goods to market and all important machinery to our hospitals nationwide.
Gene Seroka (11:53):
Since we simply announced the threat of a penalty on aging containers at the Port of Los Angeles, we've seen those boxes decline by 70% as of this morning. And we have not collected a nickel off of any fines. So it was a matter of using diplomacy and collaboration, lifetimes of relationships, but also a little bit of a stick to tell people we were serious about making sure that this Port of LA was a transit facility and not a warehouse.
Gene Seroka (12:25):
Today, the amount of time cargo is sitting on our docks before moving out is improving almost at pre COVID levels. We've still got a lot of work to do in the supply chain. No one is taking a victory lap, but I like where we're at right now. An early lunar new year, we're pushing that cargo through. Over the last 30 days, Tyler, we've moved more cargo out of the Port of Los Angeles into the US supply chain than ever in recorded history.
Tyler Robertson (12:53):
Well, as a business owner, when lead time started getting long for us, we said, "Oh, we're not ordering 90 day supplies. We're ordering 180 day supply, a 270 day supply." And then I started talking to other business owners that import, they're doing the same thing. Is that part of it as well, all of us businesses being part of the problem here, just over ordering just trying to hedge our bets? Is that part of it as well? I understand people are buying more online. Trust me, me and my wife are doing the same thing. Is there demand? Is it easing? Is it getting better, the demand? Obviously your efficiency operations sound like they are improving.
Gene Seroka (13:30):
Yeah. I will tell you this as a long time business person, myself, Tyler, the customer is never the problem. It's the circumstances we found ourselves in with 100 year pandemic, a demand cycle that spiked almost immediately off an uncertain time where cargo and the economies around the world were really at a standstill. We began to need all types of different products in business, personal, home and office. I picked up golf for the first time in 15 years because the gyms were closed. I bought new clubs, clothes, and shoes, hasn't helped my game at all. But every one of us was in this purchasing mode to help support our own networks.
Gene Seroka (14:11):
We in the supply chain simply have to keep on this to find better ways to improve and scale to these enormous volumes that we're being asked to handle. But I report to you today, Tyler, that everyone is chipping in and trying to be part of the solution.
Tyler Robertson (14:28):
So do you think that companies now, American companies, are looking more to turn their manufacturing inside into the US versus what they've always done? Did this cause a lot of companies to reassess how they do business from what you've seen on your angle?
Gene Seroka (14:41):
Oh, there's plenty of study on reshoring and near-shoring manufacturing and opportunities. That's been discussed for some time, but it's still a very small percentage of our nation's GDP. Yet, trying to pull the supply chain tighter. Having operations, tiered suppliers and supply chains, closer to where our customers are, is opportunity that is right in front of us.
Tyler Robertson (15:06):
So as this story's been unfolding for the last several months, and I'm a trucking industry guy, right? I mean, at first I heard it was, oh, it's the hours of service. And then it was, well, you can't have older trucks with the old diesel engines. Then it was, there's not enough chassis. And then it was, there's too much empty containers sitting around or people weren't picking them up quickly. I know a lot of this getting resolved. Is there a couple big... if you had a name a couple big bottlenecks right now that you could wave a magic wand with, what would those be today?
Gene Seroka (15:34):
Yeah, there are a couple things that I really believe we need to address. And I've stated this, that when we come up for air, because everyone was in a triage situation, trying to get product to market, feed our customers and make sure that we had holiday sales in line. There are two specific areas that I really want to get after.
Gene Seroka (15:52):
Number one is in the warehousing and trucking sector, we need to go back and create professions for both of these segments. We need to find ways to attract, recruit, and retain talent in these areas. Right now, hourly wages are skyrocketing for that marginal or that last employee we need to fill. We've got 10.7 million jobs open in the country in a variety of business segments and areas. But in ours, let's look at those, too.
Gene Seroka (16:22):
The other point here is that we've got to use existing capacity of our port complex better. As we talk today, Tyler, 55% of our truck gates go unused every day at the Port of Los Angeles. And we have a 30% overhang in rail capacity. There is still room to grow, room to move more cargo. We've just got to sync it up. And that's exactly what the president of the United States asked to do back on October 13th when I had the privilege of meeting with him. He asked for the port to go to a 24/7 operation, up from 19 hours of work every day. But we want to get this largely private sector supply chain to work expanded hours as well.
Gene Seroka (17:04):
If that means bringing more drivers in and paying them well, that's an opportunity we have to look at. Same on the warehousing side. But here in California, one interesting stat. We've issued more than 661,000 commercial trucking licenses here throughout the Golden State. Yet, we have a shortage of drivers, in certain times, certain locations, every day. Again, we've got to find a way to create good jobs that bring people with those great skills back into this port drayage business.
Tyler Robertson (17:35):
So what I'm hearing from you here is, yeah, we have an employment thing. We need more trucks. We need more drivers. We need these things. The other side of the coin I heard you say, is really technology. We need to line up when trucks are here and what freight moves and get this moving more efficiently off the boats and into the American economy, essentially.
Tyler Robertson (17:52):
I mean, I just saw Project 44 got their billion dollar valuation. They're doing their thing over there. But I see venture capitalists, I see private equity funds, I see a lot of companies spending billions of dollars to help solve this problem. I'm assuming a lot of that conversation ends up back at the Port of LA with these types of companies.
Gene Seroka (18:10):
Oh, absolutely. Whether it's visionaries like Jet McCandless at Project 44 or others, we're right in the middle of this conversation. And we believe we have an outsized responsibility to help create solutions and move forward technologically from an information sharing perspective. Here at the port of Angeles, as chief Gazsi said, we co-created the nation's first port community system with the Wabtec Company. It aggregates data from a variety of sources, including US Customs Border Protection and the private sector shipping lines with their vessel manifests. We can now see upstream 21 days in advance so we can prepare our skilled labor and machinery for the next round of cargo that's coming in. We need more participants.
Gene Seroka (18:57):
In Germany, Belgium, Singapore, and China, port community systems have been in place for decades. We need to catch up and leapfrog that. But it will be the interoperability of these great private sector companies like Project 44 and others, along with our proprietary system here in Los Angeles, that really gets us to that next level. It's exciting work, but it has to happen. We need to put it into overdrive.
Tyler Robertson (19:23):
So very similar problem in our industry. I'm in the truck repair side. We have 100,000 open jobs in the US and our tech schools produce 10,000. And that number gets worse and worse every year. And we keep saying the same thing. We got to get more people in, but we need to get technology to make them more efficient at their jobs as well. And we can attack it from both sides.
Tyler Robertson (19:41):
So last question, I'd love to hear from both of you on this one. My last question here is, is this the new normal? Is this what it is now? Is the volumes going to stay up high like this, or do you think it plateaus? Where do you see this leading down the next couple years with incoming freight?
Gene Seroka (19:57):
I think it plateaus, but it doesn't fall off a cliff. For those of us who remodeled the kitchen, bought appliances, you're not going to do that every year. But with more than $1 trillion in savings accounts for American citizens, we still have strong purchasing power. There's a lot of uncertainty out there with the atrocity that's happening in Ukraine, with oil prices spiking into triple digits now, and wondering how supply chains can accommodate this move, there's a huge opportunity for the American exporter.
Gene Seroka (20:28):
So while we may see a bit of a tapering on the import side, it will still remain very healthy. We'll break records again this year at the Port of Los Angeles in 2022, but to bring on American farmers, agriculture products and manufactured goods into the strong supply chain can only benefit those service providers, by offering round trip economics like we haven't seen in recent times.
Tyler Robertson (20:51):
Well, Chief Gazsi, I'd love to hear from your side as well. You feel the same way? It's going to plateau and this is going to be kind of where it's at now?
Chief Tom Gazsi (20:59):
I thoroughly agree with Gene, and then, I know we're getting close to our closing time, but I'd want to just add this, too. To optimize your rolling stock, optimize your operations, something that's probably dear to all of you is ensuring that your rolling stock is in topnotch mechanical condition, whether it's OEM replacement parts or your aftermarket parts, is incredibly important.
Chief Tom Gazsi (21:23):
But here's the other piece that's really reaching a critical point in our national history, as well as our global status. And that is, making sure that your corporate and your business systems, your IT systems are subjected to regular updates and hygiene that would've avoided the Maersk NonPetya event, but also consider that with your wireless, personal wireless devices, your home desktops, your children's systems at home, along with college and a variety of those things, because that's where these malwares, ransomware, some other cyber event can just be launched from very unknowingly and very easily in some of those settings and then affect our larger, more corporate systems.
Chief Tom Gazsi (22:07):
So optimization of our personnel, taking good care of people is our priority. Our rolling stock, our equipment, and so forth labor on our docks and of critical importance, particularly this year and moving forward, is our IT systems significantly, both at the corporate and personal level.
Tyler Robertson (22:24):
Well, thank you for that. And I will add to that just for a second too, because someone in our space last year had a ransomware attack and I knew the CEO and I was talking to him and I was like, you know what? I don't need it any closer to home than that. I'm getting a full-time staff in here for security, and we are talking security every single month in our management meetings and leadership meetings. Companies need to do that to protect themselves in today's world.
Tyler Robertson (22:47):
Thank you very much to both of you for coming on. It's been, again, a pleasure. It's been an honor. I know our industry desperately is trying to help solve this situation as well from technology side, the advanced maintenance side, all these things that are happening. And I know there's a lot of smart people working at the Port of LA, a lot of hardworking people and a lot of long hours and restless nights I'm sure both of you have had over the last two years during this whole COVID pandemic.
Tyler Robertson (23:13):
Gentlemen, thank you very much for coming on the show. Port of LA, you going to throw out the website there, Gene, if they want to learn more and check out things? I know he's got a live cam and all kinds of great stuff on that website.
Gene Seroka (23:26):
Yes, Tyler, www.portoflosangeles.org on our hero slide are the updated numbers every day from ships to container movement and access points here at the Port of Los Angeles to get expert advice and assistance. Really appreciate the invitation today.
Tyler Robertson (23:44):
Well, thank you very much for both of you coming on the show and I hope the audience took away from this, yeah, anytime business increases a significant amount or drops a significant amount, it takes a while to adjust. And they have 40 plus acres of problems they are working through and obviously making great strides, making great progress. Things are getting better. Everyone's adapting, technologies that are helping. So again, thank you to both gentlemen, we'll call it an episode.
Tyler Robertson (24:08):
As we end every episode, it's not just diagnostics, it's diagnostics done right. And supply chain's a big piece of that. Thank you for watching and listening.