June 2007 | Sponsored | Chemical Logistics

Producers, Providers, Technology Merge

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3PL technology hits the chemical market.

Chemical production is one of the most varied and complex industries that carriers and logistics providers serve.

Major chemical producers comprise some of the largest companies in the world, operating manufacturing complexes that sprawl for miles. Other chemical firms are family-owned businesses in niche markets, or major global producers with tiny production units.

Moreover, a small company is just as likely to be the shipper, and the huge multinational the consignee, as the other way around. And because of the specialized nature of the business, it is served by the major Class 1 railroads, as well as dozens of shortline railroads; and the largest bulk highway haulers, as well as single owner-operators.

Some producers and carriers boast the latest in enterprise resource management and logistics software, while many others still employ a cadre of clerks to keep paper records.

Even computer-enabled shippers and carriers often juggle multiple legacy systems. And shippers and carriers with single systems often find them incompatible with those of other carriers and consignees.

Many shippers with technology needs turn to 3PLs, some of which have made important inroads into the chemical industry in the past few years. The second batch of 3PLs making a push into the chemical sector is being carried on a wave of technology.

"We have doubled our business with the chemical sector over the past two years, and are on track to triple our business this year," says Mike Kinnard, CEO and co-founder of SCO Logistics, based in Northbrook, Ill.

The key to that growth, Kinnard says, is SCO's web-based planning and execution tools for both inbound and outbound transportation.

"Some customers ask us to provide a complete solution, so they can outsource several services to us. Others in-source our technology by licensing our systems," he explains.

At the core of its technology is a tendering, tracking, and tracing system that integrates business processes and allows shippers to optimize logistics across multiple trade lanes and transport modes.

Automate Everything

"We automate all processes," says Kinnard. "Our systems are completely database-driven. We receive orders from our customers' SAP or Oracle systems, then tender and review the data—all behind the scenes. This drives the process automation that is key to lean logistics, supply chain management, and manufacturing."

The lean aspect capitalizes on intelligent communication. "It is essential to keep systems scalable," says Sreelatha Surendranathan, director of technology for SCO.

Automation and communication are also available in less elaborate systems. "Even small shippers and customers can send e-mail or a spreadsheet," she notes. "The object is to automate so they only have to manage exceptions. A business rule-driven engine should handle routine workflow."

Logistics automation in action produces definitive results.

"Using a web-based tool, for example, carriers can plug their data directly into a shipper's loading schedule," says Frank McGuigan, SCO's executive vice president of sales and marketing. "With this system, shippers know what trucks to expect when, and carriers are not waiting to load, so they can better manage driver hours of service."

Some consignees now require delivery appointments, which can also be reported back with web-based tools.

Logistics Management Solutions (LMS), a 3PL based in St. Louis, also relies on technology. It started as a traditional 3PL serving Monsanto when it was a chemical company, and has continued to serve that firm as well as others that still operate in the process industries.

LMS has been a Responsible Care partner provider for about three years, and was one of the first 3PLs to join the program. The company manages LTL and truckload shipments in the United States, Canada, and Mexico for BASF, and was recently hired by plastics distributor M. Howland in Chicago.

Collaboration in Action

LMS focuses on collaboration, says Dennis Schoemehl, president and CEO. Collaboration does not mean sharing markets or customers, he says, but rather logistics capacity. Rival producers still compete aggressively for markets and customers, but agree to cooperate on shipments and storage, he explains.

After all, it is wasteful to duplicate warehouse space or multiple carrier dispatches.

"Our technology allows us to manage collaboration without divulging shippers' proprietary price or volume information," says Schoemehl.

"Everyone serves their own customers, but they share space, reduce duplication, and take cost out of the system. As long as they are not sharing cost, price, or customer data, everyone benefits.

"LTL carriers are already collaborating this way, and they are reaping the benefits. Why shouldn't shippers do it themselves and share in the savings?" he adds.

LMS uses an SAP-based ERP system to centralize planning information. By receiving orders three or four days in advance, it can optimize transportation and consolidate several LTL moves into one truckload shipment.

"This process does not require much flexibility from carriers—only the ability to make stops en route, which they likely already do. That incurs a small additional charge, but still costs less than a separate LTL shipment," Schoemehl says.

On a global level, chemical producers are starting to incorporate technology-driven logistics planning into their strategic thinking.

"We start developing supply chain strategy by asking customers what they need," says Sujit Singh, chief operating officer of Supply Chain Consultants, based in Wilmington, Del.

The firm grew out of proprietary efforts by DuPont to manage its global supply chain, but is now an independent third-party service provider.

"Once we know what customers need, we examine where production and inventory are positioned, and figure out how to meet that demand profitably," says Singh. "Starting with their needs and deciding what is required of each plant and carrier is a basic idea, but the trick is knowing how to execute that detailed plan, all the way down to scheduling."

Until recently, chemical producers might reevaluate logistics every three years or so; now they do it annually, Singh notes. "The chemical market has become a dynamic market," he explains.

SCC's technology solution, which includes forecasting and optimization engines, is called Zemeter. Some shippers hire the firm to conduct a one-time supply chain analysis; others license the software for continuous use.

Back to Basics

Two common problems persist as shippers and carriers attempt to improve operations and service through technology, notes Singh. "Many companies have not mastered the basics. If the systems inside are not under control, opening technology connections to the outside world will hurt," he says.

Even for producers and carriers that have the basics under control, applying technology intelligently can be a challenge.

"Even with a good understanding of information technology, you cannot leave processes and people out of the equation," says Singh. "Software is thought of as an answer to everything, but merely throwing tools at a problem doesn't help. Companies must think holistically."

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