23 February 2023
The COVID-19 pandemic made celebrities out of physicians such as Anthony Fauci, Scott Gottlieb and Rochelle Walensky. More surprising was the sudden ubiquity of Gene Seroka, Executive Director of the Port of Los Angeles, America’s busiest port.
Ports usually operate in obscurity, despite functioning at the heart of the economy: In the US, 90% of all purchased goods have been stowed in a shipping container and passed through a port.
When a pandemic-induced domino effect created supply chain disruptions, Americans wanted to know why shelves were empty, and when they might be restocked. Just like that, a media star was born. Authoritative, articulate and reassuring, Seroka explained the logjam in terms everyone could understand, believing it his obligation as a public official to make himself available daily. His team created a newsroom and studio at the port. “Gene did hundreds of media interviews and stakeholder updates via Zoom throughout the pandemic,” says Phillip Sanfield, the Port’s Communications Chief.
A decades-long leader in shipping, global logistics and executive management, Seroka performed so well during the pandemic that his boss—then LA Mayor Eric Garcetti—gave him the additional job of Chief Logistics Officer for the city.
Seroka spoke with Brunswick Director Stephanie Heise, a member of the firm’s global industrials and infrastructure sector.
What makes your port, and ports in general, so critical?
Here in Los Angeles, we’re the largest port for containerized cargo in the Western Hemisphere. The business that moves through this port reaches each of our 435 congressional districts, and the sheer expanse of this infrastructure is 7,500 acres, 43 miles of waterway, 27 terminals, 270 berths for ships.
Across the country, ports account for about 31 million jobs in the nation and roughly 17% of our GDP, or a little more than $5 trillion. US Ports are very important to our economy from Main Street to Wall Street, state capitals, and just about everywhere in-between.
How did you alleviate the strain last year when there was record congestion and supply-chain challenges, both on land and sea?
This was a series of episodes we had not witnessed before, so first we had to get a good understanding of what was transpiring in our trade corridors globally, nationally and regionally. We started off, in the United States, with a change in trade policy back in the spring of 2018 that re-introduced the concept of tariffs, retaliatory tariffs, and shifts away from primary trade partners.
When COVID-19 hit in January of 2020, we saw business just plummet with safer-at-home orders, and directions for governments around the world to try to protect the citizenry. At that juncture many of us business observers and folks in-between didn’t know what was going to happen next to the health and safety of our families, to the US and global economy.
In the summer of 2020, the American consumer’s buying power took off like no one had ever witnessed. With the inability to get on airplanes to go see grandparents or go to ballgames or movies, we began to spend on retail goods, and we just kept spending.
The outcome of that [for the Port of Los Angeles] was 25 consecutive months of peak-season volumes. Longshore members were working an average of six days a week. The cargo was so voluminous that it was like taking 10 lanes of LA freeway traffic and squeezing them into five.
We were setting records every month, but there was still so much more cargo behind it to manage. While ships backed up in the Pacific, importers came unglued because they couldn’t get their products quick enough, store shelves sat empty, and companies started ordering no longer just-in-time but now just-in-case. There were so many mismatches, so much timing dislocation.
All of this was just epic, history-in-the-making right before our eyes. This wasn’t 10% growth, but 25%, 30%, 35% growth. How do you grapple with that?
At the Port of Los Angeles there are some 200,000 companies that use our facilities to import and export every year. And no one company, even the largest American importer, has greater than a 5% market share. There are 20,000 truckers registered to do business at this port. There are nine or 10 traditional-liner shipping companies that bring our cargo across the Pacific every week, and during the pandemic we had no fewer than 15 new entrants that had turned their ships away from traditional markets in Asia and the Middle East. There are probably 400 to 500 intermediaries—forwarders, brokers, third-party logistics companies that play a big role in the process. From an order being put into a factory in Asia to it getting on your shelf in the Midwest, there are probably no fewer than a dozen handoffs. It’s very nuanced, very detailed, and in some cases very confusing as to who the go-to people are and what levers you can really pull.
The cargo was so voluminous that it was like taking 10 lanes of LA freeway traffic and squeezing them into five.
What we did was, we collaborated. We were working very closely with the incoming administration; in fact, just after inauguration, President Biden issued an executive order on supply chain, and a specific review of commodities in particular.
He then formulated a Supply Chain Disruption Task Force that was tri-chaired by the secretaries of Commerce, Transportation, and Agriculture. Following that, he named the first-ever port envoy, John Porcari, who was in charge of bringing all of these port entities and their stakeholders together.
There was probably not a day, including weekends, when we weren’t on the phone with folks in Washington, Sacramento, industry people, trying to coalesce around all that we were witnessing, and determine what we could do to create solutions.
For a long time, there had been areas of fragility in the supply chain that the pandemic and this buying surge illuminated. If I had to capsulize it, what we found was that the industry needed an IV. It needed more information, and it needed greater velocity of the cargo that was moving.
In our case, what we found was that there were very rich contract agreements for storage with some of our nation’s largest importers, where in a particular instance that large importer could store their cargo at the Port of LA for 40 days without charge. And that agreement was made without consulting me or anyone else with the Port Authority.
People were using the port as a warehouse, not a transit facility. Now, we pride ourselves on decades-long relationships up and down the supply chain. And having worked overseas for more than a decade in the private sector, I’ve gotten to know people across this supply chain. We tried diplomacy, collaboration, we tried meetings with the White House and private sector partners. But we couldn’t move the needle.
So we decided with the White House that we were going to implement a fine for anyone whose cargo was sitting nine days or longer. And it was gut-wrenching because these are people I’ve known for a really long time, I count on their business and their partnerships. We announced this on Monday, the 25th of October, 2021. And it was met with a thud. I got letters from legal departments and lawyers, I got left off of holiday card lists. But within about two weeks, we started to see a drop in those aging containers at the port. Within a month I think we were down by about 25%.
And that number kept declining, which meant we got a lot of cargo out into the marketplace. What we saw was all this cargo that was ordered “just in case” was sitting on top of cargo that was really needed.
Think of parts and components going to manufacturers, toys that are very seasonal for the year-end holidays, even hospital apparatus that needed to get to our health care workers, as we were grappling with, then, the Delta variant, whether it be the IV setups, ventilators, or other machines that come in from overseas. Those categories had been buried beneath cargo that wasn’t as urgent, but now it was moving.
As it turned out, we had the best retail sales year in our nation’s history in 2021. We had the best holiday sales in our country’s history, with about 8.5% growth. And we made it through a cycle of about 13 months after that without charging one dollar in penalties. We never charged, never collected. It was simply the threat of this fine after all the data mining we did, after all the work we did with the stakeholders, that loosened-up this bottleneck, and allowed cargo to flow more freely.
Our industry rallied around the thought that we feed, house, clothe, and care for America, so we’re just going to keep moving cargo.
Did these unprecedented circumstances create an unprecedented demand for communication?
Our industry usually works under the radar. But suddenly we had non-stop news coverage: helicopters flying over the port counting ships, “60 Minutes,” Lester Holt’s “NBC Nightly News,” and a variety of other media outlets descending on the port. The pandemic raised the awareness of those who observe us, those who finance us, those who govern us, and the public at large.
We converted our main conference room into a television studio. I did Zooms every day in 2020, and much of 2021, with not only the media, but also manufacturers, businesses, financial companies. Anyone who wanted information, the Port of LA became the place to go.
We began holding monthly press conferences in early 2020, and we continue to do those. We get 30, 40, sometimes 60 media outlets from around the globe. And I basically give an update, not only on the Port of LA, but the state of whatever’s going on, whether it’s labor negotiations or whatever.
Is the raised visibility a good development for the Port, or a distraction?
I had a boss in Los Angeles, Mayor Eric Garcetti, who just left office after completing his two terms, who wanted us to be more visible on issues of trade, labor, environmental sustainability. The spotlight is never too bright for us. We’re in Los Angeles, entertainment capital of the world, the largest container port in the Western Hemisphere: Eyes on you all the time.
That said, this sudden and intense media interest wasn’t planned or choreographed. When the safer-at-home orders came down, and our world shut on March the 8th, 2020, the question was, “How are you going to get the truth out there?” People were wondering, “What’s really happening at the port?” “Where are my goods?”
We felt we had an outsized responsibility and, more than anything, the willingness to get out there and make sure people had information they need. A couple of snippets of videos then became live shots that became regular participation in media conferences.
I feel a deep debt of gratitude to my colleagues for pushing me to that position, giving me the confidence. We have folks in our organization who went to journalism school, who ran newspapers, who majored in film in college. They brought all of their knowledge to our effort to be informative and transparent. I also feel a sense of pride that we did it the right way and people counted on the information we were sharing.
Our industry rallied around the thought that we feed, house, clothe, and care for America, so we’re just going to keep moving cargo.
Does the Port, as a department of the City of LA, have an obligation toward transparency?
Absolutely. Across the board. Coming from the private sector into the government sector, I was encouraged by the mayor to run this like a business, but with the caveat that we had to strive every day for transparency, accountability, visibility, et cetera.
Coming from the industry, I can talk in very clear and distinct language. Combine that with the high expectations that this municipal government has on transparency and accountability, and I believe we handled it well. We gave people the facts, even when the facts weren’t pretty.
Is port activity typically a good economic indicator?
Yes. How much cargo’s coming in? What about exports? What does the crop look like? Agriculture’s a really big segment for us.
There’s a lot of handwringing right now about an “imminent recession.” You’ve got rising prices, the highest in four decades (although inflation seems to be cooling), and the Fed is still talking about higher interest rates to cool the economy.
But on the other side of the ledger, the American consumer continues to be resilient: Holiday sales were up 7.6% unadjusted for inflation. Once they’re adjusted by the economists, that will beat or rival the all-time record set just last year, even in the face of inflation. We still have 11 million jobs open in the country, lowest unemployment since late 1960s.
Our inventory sales ratio, and the inventory volume that we still have here in the United States, is relatively elevated compared to historical numbers and what many retailers tell me they should have right now. A lot of that is just-in-case, not just-in-time orders. It seems pretty evident to me right now, based on all of my contacts, we’re going to see a pretty soft first quarter of US imports. But much of that seems to be retailers still holding high inventories that they’re trying to get out of those warehouses.
We talk a lot about retail—the finished goods, shirts, shoes and toys, that come in. But the container volume in manufacturing parts and components that come in from Asia are equal if not greater than the container volume of retail goods.
I was with the Illinois Manufacturing Association for their annual luncheon in December back in Chicago: Most of those folks were upbeat. Same with the National Manufacturing Association. Producer and wholesale prices remain fairly elevated. We need those to come down over time, but they’re elevated now because the consumer is still putting in those orders, the business orders are still going in.
Auto parts represent somewhere in the neighborhood of about $20 billion. And now it appears, from our direct sources in Detroit and other places, that the chip panels are starting to catch up with the vehicles ready to be sold. December saw a 13% jump in automotive sales. GM is saying they’ve got a chance of a record year.
Is sustainability a goal for the port?
Compared to 25 years ago, the advances that we’ve made in sustainability are unrivaled worldwide. We have a commitment to be a zero-emissions cargo-handling port by the year 2030, and a zero-emission heavy-duty truck port by the year 2035. No other port in the world is even close to uttering those kinds of statements.
Now, we’ve got a long way to go. The technology has got to push harder and faster, and we’ve got to have great investment and funding streams. But this is an area that I think we’ve got a real chance to get companies, global brands, well-capitalized firms, on board and interested in what we’re doing.