DC Velocity - April 2016

Holifield, executive vice president, product development & supply chain for The Home Depot Inc., the Atlanta-based home improvement giant, and a big user of Savannah. Under Foltz’s leadership, Georgia’s ports established a level of “operating excellence that stands as a model” for how all ports should do business, Holifield said.

Foltz leaves the Georgia Ports Authority (GPA), which owns and operates both ports, on June 30 after 12 years, six as executive director and six as chief operating officer (COO). In mid-February, Foltz spoke with Mark B. Solomon, executive editor–news, about the changes in his industry, the need for the ports to get to 47-foot drafts as soon as possible, and what lies in store for the supply chain after he leaves the scene, albeit temporarily. (Note: The interview has been edited for brevity.)

QWas there ever a point in your tenure that you thought he shallow draft was a liability for you? AI never saw it as a liability. Unfortunately, it’s the one thing we don’t control, and it’s not a strength of ours. We have so many other strengths that we’ve been able to overcome that shortfall. But it’s clear that it’s something that needs to be addressed.

Whether it translates into a carrier that has to wait for high tide to enter our facility, or a vessel being unable to load as many containers because the vessel has already reached maximum depth, the shallow depth raises our costs and lessens our competitiveness in export markets. Once the deepening is completed [it is expected in 2017], it will take away the one box that, if you had a list of boxes, would have a red “X” in it.

QWhat is your view of the impact of the scheduled July 1 implementation of an amendment in the Safety of Lives at Sea (SOLAS) treaty that requires shippers to certify the total mass of a container before it is loaded aboard a vessel?

AI discount any regional competitive consequences from the SOLAS provision. It will hopefully not be selective in its administration, so I don’t think any region will benefit at the expense of another. From where we sit, however, it is crystal clear who has the sole responsibility for declaring the weight, and that’s the shipper. They know the weight of the cargo, they know the dimensions of the cargo, they are responsible for accurately reporting that information to the authorities, and they are responsible for any liability that may occur.

QEven if they do not own or control the equipment?

AIt doesn’t matter. You find me a shipper that doesn’t know what they’re putting into the container, and what the density and weight of the shipment is, and that person shouldn’t be shipping goods.

QHow do container lines go about getting their financial houses in order? AI was in the liner business for Sea-Land and its affiliates for 20 years. It’s been a challenge for the past 30 years.

What I do know is that there is not, and has not been, a reasonable rate of return for liner companies. It is not sustainable, and it is not good for anyone. Whether you blame the oversupply, the tepid demand, or unprofitable pricing, the entire system will break down in the not-too-distant future if the issue is not addressed.

There is no silver bullet that will work here. It’s all about finding a way to get rate stability. First and foremost, liners need to stop ordering tonnage for a while. They also need to lay up tonnage on the lanes where they are not getting at least 90 percent utilization. Carriers also need to be more disciplined in working with their conference affiliations and should insist on long-term contracts that lend themselves to more rational pricing. Today, the average contract duration is one year, and sometimes it’s less than that.

QYou took over the executive director’s position after serving as COO. Your successor, Griff Lynch, is the current COO. Can someone run a port without deep operational experience in the industry?

AYou have to distinguish between oper- ating ports and “landlord” ports [where the port owns the infrastructure but rents out its facilities to terminal operators]. At operating ports, of which there are four—ourselves, Charleston, Virginia, and Houston—you need the skill sets of people who’ve been in the business for a considerable period of time. You need people with extensive liner shipping experience, and who understand and have run container facilities. The four ports I mentioned are all run by executives who have that depth and scope of expertise. At the landlord ports, that level of expertise is not as critical.