Chemical Producers Put New Emphasis on Logistics Safety and Security
Responsible Care becomes the common ground for shippers and service providers.
Enhancements to chemical producers' self-imposed mandates for product safety and security in commerce are underway across North America. Both the American Chemistry Council (ACC) and the Canadian Chemical Producers' Association (CCPA) are broadening their transportation and distribution requirements under the Responsible Care codes of management practice.
Chemical production responds well to economies of scale, so logistics is an essential part of the industry. In 2004, the latest year for which complete statistics are available, $516.2 billion of chemicals were produced in the United States, and cost $33.2 billion to transport from producers to users.
Chemicals are also among the United States' and Canada's top three goods exports each year. Bilateral chemical trade is considerable, and the United States is also an important worldwide chemical exporter.
"In 2002, chemical companies placed heavier emphasis on managing products outside the fence line," says Debra Phillips, managing director of Responsible Care for Arlington, Va.-based ACC.
Most importantly, the industry put in place a process for qualifying carriers, distributors, and other service providers on Responsible Care standards. The qualifications are scheduled to be completed between 2005 and 2007.
The Responsible Care codes of management for process safety, health, and environmental compliance were first developed by Ottawa-based CCPA in 1978. The ACC quickly adopted them, and both organizations have continued to expand and adapt the codes.
ACC developed Transportation Community Awareness and Emergency Response (TransCAER) in 1985, which was soon adopted by CCPA. The U.S. codes of management practice have an explicit product stewardship code, and CCPA developed specific product stewardship guidelines at the end of 2004.
ACC encourages all chemicals service providers to become full-fledged Responsible Care partners, adopting the complete codes of practice. All Class I railroads in North America are major chemical haulers, and all are partners. More than two dozen tank-truck carriers are also partners.
Carriers and logistics providers that are not Responsible Care partners are usually audited by a third party using criteria established by ACC. The evaluation alone does not qualify a provider as having proper practices; each shipper analyzes the results to decide on its own whether or not to use them. Some large shippers also conduct their own proprietary audits.
"Safety, reliability, and environmentally sound operations are the tenets of our business inside and outside the fence line," says Kelly Elizardo, director of transportation and logistics assets at Sunoco. "Those subjects are the first discussion we have with any carrier or 3PL, and it is an easy step if they are involved in Responsible Care."
Together with a global product strategy announced at an international meeting of national chemical industry associations in Dubai in February, the new Responsible Care codes "redefine the relationship producers have with distribution in all aspects of the value chain," says Brian Wastle, vice president for Responsible Care at CCPA.
"Up to now, product stewardship has been about risk management, not about risk reduction. Now the emphasis is on finding safer alternatives."
This is where distribution and logistics companies play an important role. Reducing the distances shipments travel, the amount of handling that occurs, and the number of people and steps involved in chemical logistics reduces both risks and costs, Wastle says.
"Will a service provider automatically get more business from being a Responsible Care partner or from having comparable, verifiable practices? No. Will it make it a better company? Yes. And better companies get more business," he says.
Nevertheless, carrier acceptance is not universal. "We are a Responsible Care partner carrier because we view the codes as consistent with our core values," says George Grossardt, vice president and general manger of bulk transport at Schneider National, Green Bay, Wisc. "And we plan to remain a partner. But for some carriers it is a business decision.
"In this capacity-constrained market, shipments will move regardless. It's hard to criticize small operators who don't participate in Responsible Care."
Producers and chemical associations have enhanced their service provider audit program, and some shippers have pledged to give most of their business to partner or complying carriers.
Dow Chemical, for example, has said that by 2008, "every raw material supplier and every logistics service provider must be a Responsible Care company or partner, or have implemented an equivalent program as determined through audits," says Henry Ward, Dow's director of transportation safety and security.
These requirements lessen his staff's supervisory burden, and help service providers.
"We have been focused on the Responsible Care security code, and on the partner program. We've put a lot of energy into that," Ward says. "The bottom line is, we are interested in performance, and Responsible Care is performance in a recognizable and verifiable format."
The codes also provide a common ground for close relationships between shippers and carriers. Earlier this year, for example, Dow formed a safety and security partnership with its largest rail carrier, Union Pacific (UP).
"We are focused on six key areas: supply chain redesign, next-generation tank cars, improving shipment visibility, strengthening the commitment to TransCAER, overall safety improvements, and hazardous-materials routing," says Ward.
"Some of these are Dow's responsibility, some are UP's and some are joint responsibilities. We know which is which, and we have specific performance objectives," he adds.
Other chemical companies plan to restrict their service providers to some degree.
"Honeywell has committed to using only Responsible Care carriers for its bulk chemicals, and Rohm & Haas will forego its own company audits for partner carriers," reports ACC's Phillips.
"We get a lot of inquiries on how to approach Responsible Care," she adds. "To join Responsible Care, a prospective partner firm has to be sponsored by two ACC member companies. Some members have also sponsored prospective service providers."