June 2007 | Sponsored | Chemical Logistics

Industry Outlook: Faring Well, Despite Challenges

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Advances in safety and technology contend with stubborn tactical challenges.

The spectacular tanker fire that melted an access ramp to the San Francisco Bay Bridge dominated the news for only one day.

Never mind that it was a gasoline tanker and not a chemical tanker that crashed and burned—the incident provided an opportunity for the popular press to pry into the millions of shipments and billions of pounds of chemical products transported throughout North America every year.

But the next morning, it was back to partisan politics and American Idol.

Chemical producers and carriers likely gasped upon seeing the footage of towering flames and smoke on the highway, then heaved sighs of relief when no one began an expose on hazardous materials transport. The industry, in fact, has a good story to tell: fewer safety incidents for more ton-miles, and improved efficiency throughout the chemical supply chain.

Some of the credit for these improvements goes to producer initiatives, notably Responsible Care (RC). This code of management practice—invented in Canada and quickly adopted in the United States and worldwide—includes a provision for carriers and logistics providers to become partners.

The program has received mixed reviews, but the American Chemistry Council, an industry trade group based in Arlington, Va., plans to begin tracking and publishing data on the degree to which member companies use RC-partner carriers.

Technology also deserves credit for chemical logistics advances, say shippers and carriers. Third-party logistics providers (3PLs) are leading the way in this arena. 3PLs have realized that the power of enterprise resource management databases lends itself well to supply chain efficiencies.

At the other end of the supply chain, Elemica, a global network for chemical buying, selling, and supply chain management, has advanced the cause of e-commerce since its formation in 2001.

Software standardization, however, remains elusive among chemical producers and carriers, many of whom still use legacy systems or paper records.

Overall, shippers and carriers report chemical shipment increases. Some 3PLs have doubled their chemicals business, and even the mature less-than-truckload (LTL) highway sector is posting gains.

"We have continued our aggressive growth in the chemical market," says Steve O'Kane, president of A. Duie Pyle, a trucking carrier based in West Chester, Pa. More of the company's business is coming from new customers than from expanding operations with existing shippers, O'Kane says.

This growth reflects chemical shippers' desire to partner with carriers that maintain strong safety performance, says Tom Walker, director of import/export for A. Duie Pyle. "Our drivers have all earned hazmat endorsement," he explains.

In addition, every truck contains a spill kit, and each driver completes eight hours of hazmat training, notes Pete Dannecker, the company's safety director. These practices are standard for bulk tank operators, but not LTL carriers, he notes.

Bulk tank operators are also faring well in the current market. "We have experienced 25-percent growth per year during the last five years, and we expect to continue growing over the next five years," reports Tom Blaney, president of Northwest Tank Lines, Vancouver, British Columbia.

Northwest is focused on building relationships with shippers, often using Responsible Care as a common language. Long-term agreements drive about 95 percent of the company's business.

As with all highway carriers, Northwest continues to grapple with a shortage of trained drivers. Hoping to help mitigate the shortage, the company recently hired a recruitment and retention manager.

"We have also added a safety manager, a maintenance manager, and, as director of Responsible Care, Terry Litchfield, who is active in the Canadian Chemical Producers' Association's Responsible Care initiative," says Blaney. Northwest will begin its first RC verification audit next summer.

Remaining Challenges

Congestion and scheduling remain challenges for all chemical carriers. "Streamlining loading and unloading is key for all sectors," says Blaney.

Time lost loading and unloading puts pressure on the supply chain, explains George Grossardt, vice president and general manager of Schneider National Bulk Carriers, Green Bay, Wisc.

"One or two hours of driver time lost to loading/unloading is a high percentage. Shippers would not accept that level of inefficiency in their own production," he says.

On the shipper side, integrating logistics into the highest levels of corporate planning is becoming more common for producers such as Dow Chemical.

"We talk to carriers about their role in our supply chain, and consider logistics in strategic planning," says Dana Mathes, Dow's director of global logistics. "Logistics is quickly gaining a voice within the company."

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