No Shortage of Challenges
Lack of capacity is one of the biggest challenges chemical shippers are currently grappling with. The culprits? The ongoing truck driver shortage, and changes to the Hours of Service rules, which take effect in July 2013 and will limit drivers' time on the roads.
While capacity issues are impacting all shippers, chemical companies feel the shortage more acutely, says Michael Rohrbaugh, manager, integrated supply chain, for Pilot Chemical Company, a global specialty chemical producer that provides products and services to the household and industrial detergent, personal care, lubricant, oilfield, emulsion polymerization, textile, and agriculture industries.
"Because we ship liquid bulk chemicals, we need access to special equipment, and the drivers need specific certifications—we can't hand over our shipments to just any carrier," Rohrbaugh says.
To help combat these capacity challenges, Pilot has been working closely with ChemLogix, a transportation management and technology provider based in Blue Bell, Pa., to develop and maintain a core carrier program, as well as to contract some dedicated fleets to service Pilot's ongoing needs.
"We continue to work within the core carrier program to add new carriers that are doing a good job, and make sure we are moving in the right direction," Rohrbaugh explains.
Finding Room on the Rails
It's not only trucks that are tied up—rail capacity also has been hard to come by. Chemical shippers are all competing for the same number of limited railcars—and because the lead time to manufacture new railcars is so long, the crunch isn't expected to ease up until sometime in 2014. The boom in natural gas and shale exploration and extraction in North America also has eaten up a lot of available rail capacity.
So what are chemical shippers—and their providers—doing to get around this issue? "We work to develop a complete picture of our chemical customers' supply chain so we can see their customers' ordering patterns and try to better understand demand," says Mike Challman, vice president, North American operations for ChemLogix. "This way, we can get ahead of the capacity curve.
"We also optimize networks to help chemical producers understand how they can move, store, and deploy their products more efficiently," he adds. "It may require network changes, or alterations to customer expectations, but they have to look at their business in new ways. The industry can't operate the way it used to given the current capacity situation."
In some cases, providers themselves are developing innovative solutions that can help ease capacity concerns. Illinois-based A&R Logistics, a leading provider of bulk plastic and dry flowable transportation, uses "eliminators" to eliminate railcar dwell time and, in turn, help ease some capacity woes.
The eliminators—40-foot ocean containers imbedded with 1,500 cubic feet of aluminum cylinder—hold one truckload (48,000 pounds) of plastic resin, and essentially function as a mobile inventory storage location.
"When a railcar comes into one of our facilities, the customer may have sold three of the four compartments, which means one compartment could sit for 30 days, or longer, until they've sold enough product to use it," says Paul Sweeden, executive vice president of sales for A&R Logistics. "By storing product in the eliminator, that car can be released back into the customer's control so they can get it back to their facility and reload it with more product. It provides better railcar utilization."