When Malcom McLean introduced the world to container shipping in 1956, it not only touched off a seismic shift in the way cargo was handled but also the equipment and infrastructure needed to support containerized operations.
Loading and unloading cargo from ships piece by piece in breakbulk operations, a process that could take days and even weeks, became mostly obsolete. Containerization allowed whole containers full of goods to be lifted or driven on and off ships securely, safely and quickly. Ports had to adapt, jettisoning old wooden finger piers and dockside warehouses and building marginal wharves with gantry cranes and container storage areas near the stringpiece. Ocean carriers bought containers and built cellular container ships. And chassis became a critical component in the supply chain, as they were needed for all first- and last-mile container truck moves.
In the 66 years that followed the advent of containerization, chassis have been viewed in different ways depending on who was providing and paying for them. To some, chassis might be viewed as a competitive advantage; to others, they might be seen as an unavoidable cost to doing business and a maintenance and administrative headache. Today, chassis provisioning is evolving into a more interoperable, homogenized, streamlined and cost effective system.
To understand where the industry is going, here’s how chassis have been provisioned in the past, how ownership has transitioned, and how new provisioning models have and continue to evolve.
Chassis deployment and ownership through the years
In the early days of containerization, particularly outside the United States, motor carriers owned and operated the chassis.
In the United States, shipping lines developed a different approach. They provided their customers with chassis along with containers for all moves as part of their service offerings. Given dockside land was readily available most terminals operated as “wheeled” facilities allowing for less on terminal handling and a more expedited pick up and drop off of cargo. The chassis was owned and/or leased and maintained by the ocean carriers. Motor carriers were allowed free access to chassis through interchange agreements.
This meant that chassis provisioning for the first 40-plus years of containerization up until the early 2000s was ocean-carrier centric. To some carriers, providing chassis to customers was viewed as a competitive advantage, while others wanted to exit the chassis business because it was not a core part of their expertise. Moreover, given the line had minimal physical control over the use of their chassis, they believed it would be more efficient for others to operate them.
In the early 1990s ocean carriers looked for a more efficient provisioning model and began contributing their chassis to “pools.” This allowed the lines to share their chassis, resulting in greater efficiencies, as well as operational and administrative cost savings driven by the synergies created where any chassis could be used to move any container of the participating ocean carriers.
The trend toward pooling arrangements was driven by the desire to improve equipment utilization, reduce inventory, increase velocity and reduce costs. Pooling also provided for centralized inventory control via forecasting and repositioning, standardized maintenance and repair for safety and reliability, reduced congestion at ports with faster truck turn times, positive environmental benefits and regional efficiencies resulting from less equipment repositioning.
Over the next 15 years, those pooling arrangements began to take off in several different forms including port terminal pools, carrier alliance pools and cooperative gray pools.
In 2005, many of the world’s largest ocean carriers under the Ocean Carrier Equipment Management Association (OCEMA) took a more holistic approach to chassis pooling and created Consolidated Chassis Management (CCM) to manage their cooperative gray pools.
By 2008, some say driven by the economic crisis, shipping lines began to divest themselves of their chassis, selling them to leasing companies and shifting away from providing chassis for all of their shipments. This opened the door for new provisioning models.
As ocean carriers sold chassis, shippers and motor carriers became increasingly responsible for providing chassis. Chassis leasing companies, which were becoming the primary contributors to the pooling model, were also leasing chassis directly to motor carriers, shippers and beneficial cargo owners (BCOs).
How the different chassis provisioning models have evolved
Ocean carrier ownership pre-2005. In this straightforward model, ocean carriers owned and/or leased their chassis. A motor carrier would pick up ocean carrier “A’s” box and would use ocean carrier “A’s” corresponding chassis which was provided free of charge for the container move as part of the line’s service offering.
Ocean carrier chassis pools mid 1990s to early 2000s. Chassis pools comprised of chassis contributed by ocean carriers were introduced sporadically and in different forms throughout the 1990s and early 2000s. In some regions of the country, lines still owned and operated their own chassis, but also contributed them to gray pools, which allowed truckers to enter a terminal and take any chassis from the pool to move any box for a participating ocean carrier.
Sea Land Service was the first to implement a limited scope chassis sharing arrangement within its vessel sharing agreement (VSA) with OOCL and P&O Nedlloyd, which was formed in the 1990s. About the same time, the Maher Terminal Chassis pool was formed as the first terminal sponsored cooperative chassis pool.
In 2004, OCEMA in conjunction with Virginia International Terminals (VIT) established the Hampton Roads Chassis Pool as the first port-wide gray chassis pool in the United States.
In 2005, OCEMA created CCM to manage chassis on behalf of the ocean carriers in interoperable chassis pools across regions in the United States.
The Grand Alliance, which was begun by OOCL, NYK and Hapag Lloyd in 2008, also produced a significant “alliance” shared chassis pool on the West Coast.
Ocean carrier and leasing company mixed ownership pools 2008 and beyond. Ocean carriers began to divest themselves of their chassis, selling them to third party leasing companies, who then became the primary contributors to the pooling model while also leasing chassis directly to motor carriers and BCOs.
The first shipping line sold its chassis fleet in 2009 with the intention of providing chassis only on a limited basis. As that happened, they began to bill certain shipments for chassis usage and would only provide chassis on carrier haulage moves. They also initiated charges on merchant haulage moves. Evergreen was the last major carrier to sell their chassis in 2019. However, even with this shift in the chassis provisioning model, there are still some smaller carriers that maintain their own fleets.
Over time, leasing companies decided to create their own proprietary pools to service their liner customers as opposed to operating in cooperative pools.
One example is the “Pool of Pools” (POP) in the Port of Los Angeles/Long Beach. It was formed in 2015 by combining three major proprietary marine container chassis pools, DLCP (DCLI), TPSP (TRAC) and FLBP (Flexi-van). At the time the pool encompassed a combined fleet of more than 80,000 marine container chassis with mutual start/stop locations covering 11 major marine terminals and four major rail facilities. Within pool operations, any chassis contributed to the three proprietary pols (DCLP, TPSP or FLBP) could be used by authorized parties (users) in all of the participating pools, and wold be interchanged out or returned to any of the 15 start/stop locations.
For cargo shippers in the POP chassis are assigned to the providers carrier regardless of the chassis used. While this creates a degree of interoperability, chassis use is dedicated to the provider that the ocean carrier has nominated regardless of shipment terms.
A further focus on chassis provisioning models in the United States
While there are several provisioning models and variations thereof in the United States, these are the most commonly found.
The daily rental model. In this model, chassis customers pay by the day. A chassis user establishes a bilateral agreement with a provider for use. A customer/user is able to take and use the equipment as long as they want and are charged for the usage accordingly. This arrangement works for motor carriers looking to rent a chassis on a short-term/daily basis. With this model, truckers may use the network of the specific provider only.
Cooperative pools/gray pools. Chassis contributors, the majority of them leasing companies along with other entities (also called EPs), provide equipment into “pool” based on the anticipated volume of their contracted users within a pool to which they contribute their assets. The contributor charges the user which can be an ocean carrier, trucker or BCO. These pools are typically managed by a single entity who is responsible for all M&R, repositioning and general operations. The pool manager charges the contributors on a cost-pass-through basis for these operational costs which are included in the EP’s charges to their eventual end user.
Among contributors to these pools are ocean carriers, motor carriers and shippers. In return, these and other entities are able to access pool units throughout the pools network for their use. Those who do not contribute to the pool, may participate via an existing provider. A cooperative or gray pool means that chassis in the pool, regardless of branding on the side of the chassis, all are “gray” and a motor carrier can use that chassis for any box and return it to any location within that regional network.
Neutral, dedicated or “proprietary” pool. Typically in this model a single equipment provider will operate independently where all aspects including price, network, and operational rules for pool access and usage are controlled by this single EP. The pool can be neutral (meaning open to all users) or dedicated (to a single user). A dedicated pool is usually established by the leasing company for a specific customer’s use and is usually sourced off the ocean or rail terminal.
Direct least operation/purchase/long-term rental without a chassis pool. In this scenario, a user either contracts directly with the leasing company to lease their chassis, or purchases a chassis directly from a chassis manufacturer for private use. This allows motor carriers, BCOs and others to operate independently of pools.
Leases typically track a calendar period with the lessee paying daily for the length of the contract and assuming responsibility for all costs including the maintenance and storage of the units.
The latest developments in chassis provisioning
In an effort to ensure port users, including U.S. exporters and importers, truckers, rail roads, and ocean carriers, as well as the ports themselves, receive access to the most resilient, efficient, and environmentally sound chassis within a large geographic area, public-private partnerships are being established to create single-provider models that combines the best qualities of the current gray pools and proprietary operating arrangements.
With a single provider utility-type pool, the pool manager controls the availability/quantity of chassis as well the overall quality of the chassis. Chassis rates are made available to pool users usually through a publicly available tariff. The single management entity ensures chassis availability that is responsive to swings in chassis demand as well as maintaining the quality/reliability of the chassis.
The most recent example of this development is the announcement this year by major South Atlantic ports, OCEMA and CCM to develop the next generation South Atlantic Chassis Pool (informally know as SACP 3.0) of 60,000 units that will debut in October.