January 2007 | Case Studies | Casebook

Freezing Transport Costs in Their Tracks

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To get its potato products from the freezer to the fryer more effectively, food distributor Martin-Brower migrates to rail shipping. The cost savings are gravy.

Some people in the logistics industry might consider Todd Hopkins a bit "out there."

Hopkins, general manager for The Martin-Brower Company, a food distributor in Manassas, Va., made a risky move a few years ago by converting 100 percent of the company's inbound frozen potato products to rail transportation.

The risk paid off, however, and nay-sayers of the past are now watching as Hopkins enjoys the last laugh.

Martin-Brower provides the food distribution network for 600 McDonald's restaurants throughout the Mid-Atlantic region. The company operates 14 locations in the United States and Canada, and employs 190 people at its Manassas facility, which runs around the clock.

Like many companies, Martin-Brower faced escalating transportation costs a few years ago and needed a solution. The company was shipping all its frozen potato product from Manitoba, Canada, to its Virginia location via truckload. Not only were costs getting out of hand, but the company's docks were backed up because of the number of trucks queuing up at its doors each day.

Hopkins put feelers out to explore other transportation options.

Thinking outside the motor freight box, he looked into the possibility of shipping some of Martin-Brower's product via rail.

Committing to Change

"Shipping via rail requires a big commitment. I knew we would have to make infrastructure changes and dedicate capital to the project," Hopkins recalls.

The upside to a rail conversion, however, is that it would alleviate significant congestion at the company's docks, while also slashing its transportation costs.

Many of the rail companies Hopkins approached turned down his idea. But eventually, Cryo-Trans, a logistics and transportation provider based in Owings Mills, Md., offered a solution.

Through a concerted effort, Martin-Brower and Cryo-Trans successfully converted all shipments of Martin-Brower's inbound frozen potato products to rail, saving the company millions in yearly transportation costs.

To get the new rail program up and running, Hopkins had to bring an old rail line to the DC, built years before, back into operational shape. "The rail line was used for only two years, and had been sitting inactive for about 15 years," he explains. "Norfolk Southern helped us clear the line out so we could use it."

Cold Cars

Another issue was finding refrigerated rail cars, which many eastern U.S. and Canadian railroads no longer offer. Cryo-Trans, however, builds and leases mechanically refrigerated rail cars, which made it a good partner for Martin-Brower.

The rail cars further appealed to Hopkins because they are equipped with two-way GPS systems, allowing the company to track and react to car locations.

Another required infrastructure change was made to the dock doors at Martin-Brower's facility. "We had to reconfigure the doors because the Cryo-Trans rail cars are about one-and-a-half times the size of regular rail cars," explains Hopkins.

Hopkins secured support from two rail carriers—Canadian Pacific Railway and Norfolk Southern—and the new program was underway.

Martin-Brower began its transportation conversion by shipping 50 percent of its inbound frozen potato product volume via rail. As the company soon found out, rail transportation is slower than truckload, so Hopkins had to make adjustments.

"Initially, it took the rails 18 to 21 days to deliver products, versus the four-day delivery time we had with truckload carriers," he says. "To address that time difference, we re-routed the rail cars. Over the course of four years, we've been able to peel five days off the delivery time."

The delivery time delay also required Hopkins to rework the company's inventory levels. "We used to store about one day's worth of safety stock, but now we keep about 3.5 days of inventory on hand," he reports.

Hopkins makes sure the rail cars are packed for maximum efficiency—the company uses 100 percent of the space inside the rail cars on every shipment. Because they are so well packed, the shipments require significant time to unload.

"We receive two cars each day, and it takes about eight hours to unload them," Hopkins says. "We palletize the product as it comes off the rail cars and move the pallets into a freezer unit. Then we prepare truckload shipments to the stores."

A Modern Twist

While some people consider rail an old-fashioned transport method, the rail cars Martin-Brower uses are monitored by thoroughly modern technology. The tracking service Cryo-Trans provides via its GPS units is one key component to the efficiency of Martin-Brower's rail operations.

"Every rail car we lease provides tracking capabilities. Inventory visibility in the food chain is key," explains Herman Haksteen, CEO of Cryo-Trans. "Many of the railroads lost their food business because they didn't have visibility and their transit times were inconsistent. We constantly monitor our cars to ensure that our customers receive consistent transit times."

The Martin-Brower rail cars are tracked 24/7, allowing Cryo-Trans to carefully watch the company's cargo.

"The GPS units report the location of the rail cars, as well as any irregularities in the reefer units," says Haksteen. "If a refrigerated unit malfunctions for any reason, we receive an alert, and can access a full report about the problem. We perform remote diagnosis on the unit to identify the issue."

The technology also allows Cryo-Trans to make any modifications necessary to address the problem. The solution could be to restart a reefer unit, or adjust the temperature, for instance. These adjustments are performed from a remote location, which saves Martin-Brower time and allows it to reduce maintenance costs.

Rolling Along

Since beginning to ship via rail, Hopkins and his team have constantly tweaked their processes to ensure steady delivery. The company has increased its rail volume each year, and in September 2006, celebrated 12 consecutive months of shipping 100 percent of its inbound frozen potato products via rail.

The transformation to rail shipping was almost seamless for Martin-Brower's suppliers and customers. "Our french-fry supplier had to strengthen its boxes for rail shipping, but overall, our service helped the company reduce its costs," Hopkins says.

Switching to rail transportation wasn't thrilling to everyone, however. When Hopkins first ran the idea past other employees and customers, it was received with skepticism.

"When I told everyone about my idea, they were nervous," Hopkins admits. "But once it began paying dividends, they were sold."

Even Haksteen was unsure how much volume Martin-Brower would be able to ship on the rails. "I never thought the company would be able to ship more than 50 percent of its volume via rail," he says. "But Martin-Brower asked us to go the extra mile, and it has paid off."

Today, Martin-Brower is one of few rail car users in the food industry to ship 100 percent of any frozen product via rail.

"Even shipping 70 percent of frozen product volume via rail is living on the edge," Haksteen says. "A lot of extra effort is required to ensure such a strategy works."

Hopkins' vision has paid off for Martin-Brower as the company now enjoys a significantly reduced transportation bill. While most of the company's other distribution centers are not properly equipped or located to receive rail shipments as the Manassas facility is, it plans to build all future DCs with rail-receiving capabilities.

Clearly, Hopkins' vision and willingness to go "back to the future" with rail was a risk worth taking.

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