Bulk Logistics: Hefty Freight, Hefty Issues

Over-the-road shippers increasingly find themselves between a rock and a hard place: the rock—transportation costs; the hard place—a market severely strapped for labor and capacity. For bulk carriers, the predicament is more divisive given the type of cargo they move, and the added difficulty of hiring qualified drivers.

“Hiring drivers is probably the biggest challenge we face,” says George Grossardt, vice president and general manager, bulk, for Green Bay, Wisc.-based Schneider National. “On top of the difficulties facing the motor freight industry at large, our drivers need additional training and certification because most of the chemical cargo we move is hazmat.

“The reality we face is a decreasing driver demographic with increasing requirements.”

These two combined elements are squeezing both carriers and shippers alike.

“Finding sufficient capacity when volume spikes is our greatest obstacle,” says George Caine, transportation manager, highway and marine, for bulk shipper Cemex USA.

Similarly, truck and driver availability and service are Bunge North America Inc.’s greatest pain points, says Darrell Wallace, vice president, transportation commodities group, for Bunge.

Unfortunately for companies moving bulk cargo, and shippers in general, these pressures are unlikely to subside anytime soon.

Weighing Options

What are businesses doing to address these challenges? In terms of capacity, some transport buyers are relying on a broader carrier base to handle their freight. Others are looking earnestly at the potential of mixing and matching multimodal options and transloading freight to acquire additional space and reduce costs.

As global outsourcing continues and it becomes increasingly difficult to control transportation spend, shippers and carriers will need to work in concert to streamline processes, and cut both cost and time when unloading and loading cargo at plants.

They may also need to rethink how they set up and operate stateside distribution networks. For bulk shippers, the challenge is clear: find alternate ways to add capacity, and operate plants more efficiently to offset carriers’ fuel surcharges.

Cemex USA, a Houston, Texas-based cement and ready-mix manufacturer, for example, has expanded its stable of carriers to access more capacity.

“We use approximately 21 carriers at our 12 plants throughout the United States. We are fighting a rear-guard action to hold steady at this number, but lack of capacity has caused us to use additional carriers,” says Caine.

Because its product does not lend itself well to intermodal, Cemex uses trucks almost exclusively, which poses even greater concerns about congestion, capacity, and cost. While it has followed the path of most other businesses, passing along fuel surcharges where possible, Cemex is also looking to collaborate with its carriers to rationalize the loading/unloading process and expedite turn cycles.

Collaboration is Key

“We work diligently with our partner carriers to identify and remove bottlenecks at loading and internal unloading locations. We track loading times, and evaluate procedures to ensure that we attain benchmarks,” says Caine.

Bunge North America, a St. Louis-based food-grade vegetable oil manufacturer that ships product all over the United States, faces similar issues. Using both rail and truck to move product across its distribution matrix, Bunge collaborates with carriers and consignees to both improve processes and reduce dwell time at plants and terminals.

“We are working to optimize not only our plants and facilities, but also the trucks and drivers that deliver products to our customers,” says Wallace. “We also have to work closely with customers to reduce wait time and improve product movement to maximize plant, truck, and personnel utilization.”

Transportation companies are pulling their weight as well. Des Moines, Iowa-based Ruan, a carrier partner for both Cemex and Bunge, is investing in equipment and technology to help its customers transport bulk shipments efficiently and cost effectively.

“Payload is one of the best things we can offer,” says Mike Mefford, vice president of sales, Ruan.

The carrier has engineered its tractors and tanks to be as light as possible, using aluminum components to reduce weight.

“Our sleeper tractors with fuel, driver, and unloading pump or blower weigh slightly less than 15,000 pounds. If we can reduce tank weight to less than 10,000 pounds, we can increase payload up to 55,000 pounds,” Mefford explains. “Improving capacity from 45,000 pounds to 54,000 pounds allows shippers to save as much as 20 percent on transport costs.”

Ruan is also looking at ways it can help facilitate the loading/unloading process and reduce dwell time at plants and terminals. One solution is increasing the diameter of hosing and piping on the trailers it uses to transfer product.

“For many years, the standard hose and line size for dry bulk was four inches. New tanks are being built with five-inch lines,” Mefford says. “Some aggressive shippers have changed their receiving piping to five inches as well. This shortens unloading time by as much as 15 minutes, greatly reducing costs.”

Ruan has also implemented GPS technology in its trucks to enhance in-transit shipment visibility, offering shippers better control over shipment location and transit times.

“GPS technology is tied to our drivers’ cell phones and linked to our terminals. Customers can access shipment status reports every 15 minutes. If drivers get a status inquiry from a customer, they can track that movement within minutes,” Mefford says.

This functionality enables Ruan and its customers to manage exceptions when they occur. If Ruan needs to reroute a shipment, for example, it can communicate changes immediately to the driver. Cemex is also investing in and developing software tools to facilitate load tendering and management, with the goal of not only improving its operations but its partners’ as well.

“We expect to improve efficiency for carriers and service to customers by providing better load visibility,” says Caine.

Both Cemex and Bunge use Ruan as a dedicated carrier in select regions. The same value Ruan brings to Cemex and Bunge trickles down to their customers as well, creating a value chain that is especially vital in today’s competitive marketplace.

Shifting Markets Lead to Port Migration

With manufacturing increasingly pushed offshore, domestic supply chains must adapt to efficiently accommodate increasing import volume. Akin to other industries, the bulk industry has seen a growth in capital investment occurring overseas.

“For every plant in the United States, there are 50 in Asia. As a result of these shifting dynamics, U.S. distribution networks are migrating to the ports,” says Grossardt.

He sees the bulk chemical trade trending along a similar path as the U.S. steel industry. As major steel manufacturing locations drifted overseas, smaller shops producing high-quality product began popping up in locations closer to the point of consumption.

Because of this shift, steel companies realigned their distribution networks around ports of entry, shrinking the distances they had to ship product. It is only a matter of time before bulk shippers and consignees take a similar approach to better match supply networks to demand, suggests Grossardt.

“This change is already occurring on the bulk chemical side, as bigger and more expansive tank farms evolve at major ports,” he says.

As this trend continues, businesses will have to focus on shifting to intermodal transportation to facilitate transshipment from the ports and drive down costs. While this strategy has already proven its value with containers, bulk shippers have been less successful. The lack of intermodal equipment for bulk shippers is one obstacle to growth.

“Intermodal use is limited for bulk chemical shippers,” Grossardt says. “Shippers and carriers need to develop innovative equipment to handle these types of moves. Ideally, we’d like to be able to stack ISO containers to increase payload capacity, which container shippers have successfully accomplished.”

The railroads’ selectiveness about the type of business they pursue is another challenge for bulk shippers. The inability to increase capacity per movement using rail poses a problem for bulk shippers, and is one reason the industry has not trended quickly toward intermodal. For the railroads, double-stack container business is top priority, followed by trailers, then ISO containers, explains Grossardt.

New Trends

But this paradigm will change as tank truck capacity tightens and fuel costs stabilize. Businesses will also find it more advantageous to transload freight to aggregate rail and road efficiencies—a trend that will likely mirror intermodal growth.

Ruan, for example, currently performs transloading activities at two sites, moving dry bulk soda ash and sand products. Shippers can use rail for long haul, then use trucks for legs less than 300 miles to significantly reduce total freight spend, suggests Mefford.

“By combining rail and truck, shippers can reduce freight costs while still providing door-to-door service,” he says.

While transloading lends itself well to dry bulk products such as sand and cement, shippers of liquid products such as sweeteners and vegetable oils are also starting to embrace transloading. Businesses that become comfortable mixing modes, and develop more collaborative partnerships with their carriers—especially the railroads—can use transloading more readily.

As global outsourcing grows and shippers begin looking at intermodal and transloading opportunities to access capacity and reduce costs, ports will become a focal point of U.S. distribution networks.

Rhode Island’s ProvPort is among a number of U.S. port facilities primed to help shippers and consignees better align their domestic distribution with shifting demand. With available land for expansion and ample intermodal transportation connections, the Providence port offers the requisite infrastructure to help businesses move bulk shipments efficiently and economically.

ProvPort has one of the deepest harbors on the East Coast—at 40 feet, it can accommodate Panamax vessels. And its partnership with the Providence and Worcester Railroad enables it to offer intermodal on-dock rail service, with connections to all major national lines providing rail service anywhere in the contiguous United States and Canada.

Aside from rail and truck, shippers can also take advantage of the Port’s barge service to access capacity, drive down costs, and avoid road congestion. ProvPort has partnered with the Port of New York and New Jersey to create the Port Inland Distribution Network, a system designed to distribute containers moving through New York to its facility for final destination in the greater New England area.

Port Importance

This enables shippers to cut inland distribution costs, reduce truck traffic, improve air quality, and increase economic development by providing value-added warehousing and distribution opportunities.

“Having multimodal access is important because shippers want to immediately move product off ships to rail via hopper or tank car,” says Jay Baird, director of marketing, ProvPort. “There is also growing consideration—given fuel costs, capacity issues, and emissions concerns—for offloading product to barge for all-water movement elsewhere.”

Shippers are noticing the increasing opportunities ports offer. Bunge, for example, owns its own barge and tug fleet and has ample storage on the southern Mississippi coast. “We use barge frequently and will continue to do so,” says Wallace.

Cemex USA also uses barge transport to move materials from two of its plants that have river access.

“Shippers can reduce transportation costs, especially for bulk commodities, by moving product through a port—particularly one that has multimodal opportunities such as barge, rail, and truck,” says Baird.

“Bulk shippers are diversifying their ports to target specific regional markets,” he adds.

A business might, for instance, reconsider its network of inland DCs and instead identify specific locations near ports on the East, West, and Gulf coasts, where it can set up facilities to better support customer demand.

This year will prove to be a critical period for many shippers to sustain growth and invest for the future. If businesses aren’t looking at their logistics and transportation strategies carefully now, they will when the Environmental Protection Agency forces the issue with its guidelines requiring all trucks built after Jan. 1, 2007, to have environmentally compliant diesel engines.

Many in the trucking industry expect the cleaner-burning engines to reduce fuel efficiency and ultimately create more challenges if fuel prices remains high.

“The 2007 fuel emissions standards will compromise fuel economy by 15 percent, in addition to the extra $6,000 investment per engine,” says Ruan’s Mefford.

In addition to reduced fuel economy, some companies have found greater occurrences of peripheral component failure with the newer engines. Parts may wear out more easily, increasing total cost of ownership significantly.

Capitalizing on Intermodal

For bulk chemical shippers, intermodal will become a big driver in 2006, predicts Grossardt. But shippers will need to invest in new equipment and improve relationships with railroads to capitalize on intermodal opportunities.

Reducing dwell time at plants and terminals is also ripe for improvement. Currently, standards don’t exist for unloading and loading cargo, which places a greater onus on truck drivers—something that shippers and carriers would prefer not to do, given the challenge of finding qualified truckers.

“Bulk chemicals require specific handling procedures. Carriers want to differentiate the responsibilities of loading and unloading cars to be more efficient,” says Grossardt.

“Sometimes they make unattended deliveries where drivers are responsible for discharging shipments. Carriers want to stop this because it places more liability on the driver, and requires additional training,” he adds.

All these considerations will ultimately compel bulk shippers and their logistics partners to refocus attention on balancing transportation and logistics demands to create a more reliable supply chain.

“As businesses import more product into the United States, they will have to reevaluate their transportation options. The cost of fuel will certainly add to this,” says Baird.

Shippers may be more likely to look at alternatives such as barging cargo from one port to another, or transloading freight via truck and rail, as over-the-road transportation obstacles become more prevalent.

Shippers continue to rely on collaborative partnerships with carriers and customers to add value to their supply chains. Improved networking fosters a more intuitive and innovative environment for evolving best practices that ultimately boost the bottom line.

For the bulk freight industry specifically, this collaboration will help create a higher level of service and reliability.