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Unpacking supply chain congestion

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Ian Jefferies, CEO of the Association of American Railroads, sounds off on the current blockages facing U.S. supply chains in the wake of President Biden's announcement the Port of Los Angeles will run 24/7.

Video Transcript

SEANA SMITH: President Biden, he met with port leaders and industry executives on the supply chain crisis earlier this afternoon on really about what needs to be done in order to alleviate some of the bottlenecks. Now part of his plan is to keep the Port of Los Angeles operating 24 hours a day, seven days a week.

We want to bring in someone who was participating in that meeting with President Biden earlier today. And that's Ian Jefferies. He's the CEO and president of the Association of American Railroads. And Ian, it's good to see you. Thanks so much for taking the time to join us. Let's just start with that part of the announcement from what we heard from President Biden, the fact that the LA port is now going to be operating 24 hours a day, seven days a week. He called it a game changer for the supply chain problems. What do you think about that?

IAN JEFFERIES: Well, first of all, thanks for having me. It's great to be here. It's certainly a step in the right direction and an encouraging development. Railroads have been, are, and will continue to operate on a 24/7 basis around the country. And our main thesis has been that we need the entire supply chain operating at full capacity around the clock in order to really make a dent in addressing the volumes we're seeing.

So, the Port of La, along with the Port of Long Beach, 40% of inbound goods coming through those two ports. So getting LA to 24/7 over the next several months is a great step forward and one that I think will pay real dividends.

ADAM SHAPIRO: Ian, a lot of us don't truly understand all of the different steps in the supply chain because once it's off the ship, then the truck has to get it perhaps to the train that then has to get into the yard somewhere else, where another truck has to deliver it somewhere. Did anyone bring that up with the president that while that might be in play now, the men and women that drive the truck or to offload the train in the Midwest, there's a labor shortage.

IAN JEFFERIES: Well, you're exactly right. One thing that we've been experiencing over the past several months is in our major intermodal yards, which is where the train comes into the yard, unloads its containers to be picked up and taken out by truck to final destination. That's called outgating, when the truck picks up goods out of the yard and takes it out. And our ingates of containers, the volumes coming in on the trains, were far exceeding the outgates, which, again, is the trucks taking them out of the yard.

And that's due to a number of reasons-- a short haul trucker-- excuse me, a short haul trucker shortage, a warehouse space shortage, chassis shortage. And so those challenges still remain. Railroads have worked really hard to open up additional storage capacity and new locations outside of intermodal yards in order to alleviate some of that congestion to allow that backfill to be worked down. And we've done a pretty decent job of keeping things fluid. But at the end of the day, we still have work to do when it comes to some of our partners in the logistics chain getting goods to final destination.

SEANA SMITH: And Ian, when you talk about work that needs to be done in order to get some of those goods to the final destination, I guess what exactly would you like to see rolled out over the next couple of weeks or in the next month or two that would help alleviate some of the bottlenecks that we are seeing?

IAN JEFFERIES: Well, you know, it's important to say we're all in this together. And today's announcement was an important announcement. And as I said, rail is operating 24/7. All of our major facilities around the ports of LA and Long Beach are 24/7. And we have capacity right now. We can take on additional freight to get it to the interior of the country.

But on the other end, we need serious efforts to address those driver shortages. We need serious efforts to keep goods moving through the warehouse spaces in order to free up that capacity because intermodal yards aren't meant to store goods for and store containers for extended periods of time. They're a stopover of changeover. And so, we need to keep our eye on the ball and look for ways to keep everybody moving 24/7.

And a few of the ways that we've tried to do that and some of our beneficial cargo owners, the major shippers who committed to doing some things today, include incentivizing either after hours or weekend pickups. Normally, you have your peak pickups during the workday, Monday through Friday, and pickups drop off, off hours and during the weekend.

And in the meantime, goods keep coming in. So we need to streamline that to normalize a consistent pickup and dropoff of goods in order to keep the system moving overall. So we've got to keep our shoulders into it, all of us in the supply chain. And we'll make it that way.

ADAM SHAPIRO: Ian, you're in the room where it happened virtually with the administration. And on one hand, they're asking for the railroads, help us here, because this is a national issue. We're all in this together. And on the other hand, the regulatory side of the administration-- we've talked about this with Lance Fritz from Union Pacific. We've talked about it with you. They're trying to enact new regulations that would actually impede, we're told by the railroads, the ability to do what they're now asking you to do. Did they address that?

IAN JEFFERIES: That did not come up today. And that is an unfortunate reality of the disconnect maybe from different parts of the administration. Right now, the last thing we want to be doing is inserting regulations or inserting requirements that will decrease or gum up the fluidity of the network. We need to be doing everything we can to maximize fluidity of the network across the board. And any regulatory efforts that would hamstring the ability of freight to flow is simply wrongheaded right now. And so, we're working really hard to educate on that front. And I'm confident we'll be successful in that.

SEANA SMITH: Ian, do you see a chance of this getting worse before it gets better? And I guess, how much worse do you think it could potentially get, heading into the holiday season?

IAN JEFFERIES: Well, fortunately, I'm not in the prediction business. And I'm an optimist, a realistic optimist, I'd say. And I think that steps, such as those that were taken today, and a recognition that we've got to move things around the clock. We've got to keep everybody on board together. We'll be able to manage through this. Like I said, rail's stepping up, ready to do its part. We've been operating 24/7 for some time. We've got capacity. We want to move freight. And so we're prepared to do our part to keep things moving through the peak season.

SEANA SMITH: Well, Ian, we love your optimistic outlook. Thanks so much for taking the time to join us. We hope to have you back. Ian Jefferies, CEO and president of the Association of American Railroad.