Shippers and Carriers Commit to Best Practices

As a case study, Dow Chemical is an able proxy for the bulk of the process industries.

The Midland, Mich.-based firm transports 125 billion pounds per year of raw materials, intermediates, and finished products around the globe. Half of its outbound shipments are transported by truck, one quarter by rail, and one quarter by bulk marine.

That excludes Dow’s inbound pipeline deliveries, and a fragment of small-volume specialty chemicals it ships by air. Dow’s annual freight bill alone equals $2 billion.

Further down the supply chain, Dow maintains 45 different businesses, called "value centers," that ship products to 140 countries— about three-quarters of all countries in the world. In developing countries, Dow uses a mix of local distributors and logistics providers, as well as international firms with a strong presence in a given country, to handle its shipments.

"One challenge for Dow is to find international service providers that can meet our minimum supply chain requirements," says Dana Mathes, the firm’s director of global logistics. "In China, for example, we use a mix of local over-the-road carriers, global terminal companies, and marine pre-pack firms."

Domestically, Dow completed outsourcing most of its transportation—including its truck fleet, and one of the largest tank-barge fleets on the inland waterways—four years ago. It began leasing its huge railcar fleet some time ago.

"We have experienced both efficiency gains and cost reductions as a result of outsourcing," says Mathes. "We had to tweak certain processes, but in general, we are pleased with the results. We work with some 3PLs on site, but our partners vary based on local markets, union rules, and work councils."

With such wide range and scope, it is not surprising that Dow constantly identifies, implements, and disseminates its best practices. At the strategic level, for instance, Dow plans to reduce shipments of toxic inhalation hazards (TIH) 50 percent by 2015. After all, the safest possible hazmat shipment is no hazmat shipment.

The plan might sound more like a health, safety, and environment initiative, but, according to Mathes, "it requires strategic thinking about our supply chain, geography, and infrastructure." To emphasize the logistical nature of the TIH reduction push, Dow will measure progress by the number of shipments as represented by ton-miles.

Dow’s carriers and 3PLs need not worry about the business impact of reducing overall volumes through these efforts. Reducing or eliminating hazmat shipments is likely to lead to a concentration of manufacturing for certain products—with the probable result of a greater volume of safer finished-goods shipments.

Dow’s desire to reduce TIH shipments isn’t simply strategic, however. The company suffered a rail-switching accident at one site a few years ago. "We worked with our railroads in Europe and North America and revised our procedures based on that incident," Mathes says.

Best practices flow both ways, he adds, noting that highway carriers in Brazil are using Dow protocols to improve their driving under a program called "Sharp Eyes on the Road."

Worldwide, Dow has at least one dozen GPS/RFID pilot projects underway covering TIH railcars, containerized freight, tank truck hauls, and cylinder gas shipments.

Getting Connected

Another group focused on industry best practices is the chemical consortium Elemica. The organization, which includes 22 major producers and distributors such as BASF, Rohm & Haas, and Shell Chemical, has been developing a standard electronic order tendering and status check system.

"This kind of electronic tendering is common in the van world, but does not yet exist in the chemical world," explains George Grossardt, vice president and general manager for Schneider National Bulk Carriers, based in Green Bay, Wisc. "This kind of digital connection is difficult because chemical loads have their own idiosyncrasies."

Schneider, however, is currently developing standards, and hopes to have a pilot operating by the end of the year. "Then we can plug into Elemica and have access to all 20 shippers. Because we predict cost savings as high as 18 percent, we are committed to the program," Grossardt explains.

Committing to logistics best practices was a mission Ashland Inc., based in Columbus, Ohio, began roughly one year ago. The parent company comprises a range of process industries including one of the largest chemical distribution firms in the country, and also consumer goods such as Valvoline motor oils. It recently consolidated all its operations into a single logistics group.

"We now have one supply chain inbound and outbound, across all business divisions," says Brian Brockson, Ashland’s director of global logistics. "We are an asset to the entire corporation."

Gaining Global Visibility

As part of that consolidation, the company is implementing a single system based on SAP.

"We will soon possess global visibility into all volumes and sales information," says Brockson. "That visibility will allow us to implement modern technology, such as GPS in all our fleets, electronic driver logs, and mileage tracking for highway use taxes."

Ashland is one of the few large chemical producers that has retained its proprietary truck fleet: 450 power units and 900 trailers—about 60 percent van and 40 percent bulk liquid. The company primarily uses its proprietary fleet for outbound shipments, while common carriers deliver inbound loads.

"We have also improved our capacity planning," adds Ed Kelly, Ashland’s director of global logistics central support. "Some carriers are still struggling to implement homogeneous systems or deliver the information we need. But within the next two to three years, we will get down to one standard. Electronic load tendering is the real prize; some carriers can do it today."

On the rails, a classic case of shared best practices is the awards railroads now give to recognize producers that have achieved zero shipper-caused non-accident releases.

All of the Class 1 railroads now bestow such awards, and the number of recipients each year grows as the number of shipper-caused releases decreases.

BNSF Railway, one of the largest chemical-carrying railroads in North America, celebrated the 10th anniversary of its Product Stewardship Award by recognizing 60 shippers—one more than it recognized last year, and 16 more than in the program’s first year.

"In the stewardship meetings we often review basic functionality," says Mark Stehly, assistant vice president for environment and research and development for BNSF. As in sports and business, the fundamentals are often where problems arise first, he notes.

"Preparing the car for shipment, making sure no damage occurs, ensuring bolts are tight—these are the basics," says Stehly. "We have found that checklists and examples of damage are helpful. Often, entry-level employees go first to the loading rack. They do receive some training, but don’t have the experience to know what to look for.

"Schedules are also very effective," he continues. "Changing gaskets regularly, for example, rather than after someone notices damage or wear, is a best practice."

"Companies are getting the message that safety is a collaborative effort," adds Katie Farmer, vice president of industrial products sales for BNSF. "In our last stewardship meeting we discussed new Department of Homeland Security and Federal Railroad Administration rules. We emphasized continuous improvement through best practices.

"BNSF has transported nearly one million hazmat shipments without incident. But we know it is that one-in-a-million case that will cause problems for everyone."

BNSF’s Emerging Growth Team is another example of doing well by doing good. The team’s primary mission is to find new customers for the railroad, but by extension, it also brings new shippers into the fold for the Stewardship Award and Responsible Care initiative.

"We have an opportunity to build relationships with shippers," says Farmer. "We are looking for the most efficient and effective way to transport chemicals. When shippers choose to do business with us, they recognize our safety record."

This new BNSF business initiative is also involved with the Assess-Improve-Maximize (AIM) initiative, which is allied with the National Industrial Transportation League’s "First Mile Last Mile" program.