Sharing the Load
Transloading strategies reduce touches and costs, and give shippers greater flexibility to respond to changing demand.
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When a shipment is transloaded—transferred from one mode of transportation to another—all bets are off. The slightest transit delay or change in demand can create inventory bottlenecks or shortages that throw systems, processes, and expectations out of whack—and the more modes shippers use, the greater the potential for complications.
Transferring freight custody can obscure visibility, drive up costs, and add transit time. But intermodal also provides an opportunity for companies to take advantage of a necessary touch to manage inventory more proactively. Transloading has always been a way to expedite moves across modes, and deliver freight as quickly as possible to distribution centers or end customers. But that general rule is no longer sacrosanct.
Creating flexibility on the inbound side—whether it's at a port of entry or an intermodal ramp—is an advantage. Technology allows shippers, consignees, and service providers to recognize and execute change on arrival. Transloading becomes a flow facilitator, an inventory buffer, a checkpoint—in effect, a release valve that shippers can manipulate to manage change. It allows companies to react in tune with demand, match mode requirements to need, and reduce touches and costs. In the right circumstances, transloading can also be a supply chain change agent.
When Monroe, N.C.-based department store chain Belk began rethinking its U.S. import strategy three years ago, transloading was the crucial pivot point. The company operates more than 300 stores throughout the Southeast, and sources from 23 ports of origin all over the world, predominantly in Asia and Southeast Asia. Historically, Belk pulled about 75 percent of its product through the West Coast, shipped via rail to Memphis, then trucked shipments 200 miles to its Jackson, Miss., DC.
"We were transloading at that facility and shuttling goods to our other DC in Blytheville, S.C.," says Diane Hartjes, director of private brands operations and customs compliance officer at Belk. "We needed to remove a lot of cost and time from that supply chain."
Bringing imports closer to demand, and eliminating a costly inland dray, made sense. But it also required a different supply chain approach.
Partnering with Santa Fe Springs, Calif.-based Performance Team, a third-party logistics (3PL) provider that managed its domestic consolidation for more than a decade, Belk began transloading about 30 percent of its international volume at Performance Team's Goose Creek, S.C., location.
The new strategy worked so well that Belk continued to convert more freight to the East Coast. When Performance Team opened a leased transload facility at the Port of Charleston's Wando Welch Terminal in March 2012, the department store upped its imports to 75 percent—in effect, reversing its Asia-West Coast volumes in favor of transporting product via the Suez trade. Remaining imports, mostly from Shanghai and Ningbo, China, still follow the West Coast intermodal land bridge to Memphis.
Performance Team's facility is unique in that it is located on terminal, allowing the 3PL to transload import and export cargo directly to and from ocean-going shipping containers and trucks. While the facility was built to handle imports, it's capable of handling both imports and exports.
Its location eliminates the need for drayage, reducing the time and cost of moving containers off port, and ensuring faster speed to market for retail imports.
"Getting containers off the ship, through the transload, and on the road in two to five hours is a major advantage," says Cliff Katab, president, Performance Team. "From a speed and cost standpoint, nothing beats that."
It's also a win for the port, which worked collaboratively to bring Performance Team into the fold. Charleston sees a diverse mix of inbound and outbound freight, without a tremendous amount of seasonality, even on the import side—which is attractive to carriers. The ability to quickly offload and process ocean containers only adds to that appeal.
"Four distinct transloading operations are now located on our facilities; three years ago, we had none," says Allison Skipper, manager, public relations at South Carolina Ports Authority. "There is a shift toward on- or near-terminal transloading from rail or truckload to container."
Performance Team's facility primarily serves retail imports. The port also offers on-terminal transloading for forest and agriculture exports, and ag shippers benefit from the availability of empty containers. Exporters can bring cargo in via rail or hopper truck, and transload it into ocean-going containers, which the port has in abundance.
"Supply chain managers are looking to reduce costs," notes Skipper. "Transload operations create less need for repositioning shipping containers, and allow for greater efficiencies and cost benefits."
Performance + Team
Charleston has been a revelation for Hartjes and her team at Belk. In addition to completely shifting its U.S. import and domestic distribution footprint, the retailer gains other competitive advantages as its transload partnership with Performance Team continues to mature.
"The transload provides complete visibility to our containers," explains Hartjes. "Shipments are either on a vessel, or in the Performance Team yard. There's no middle ground. I don't have that option on the West Coast, where there's always a visibility gap between rail and drayage."
The department store also achieved some efficiency improvements using its own assets. Belk's in-house carrier makes deliveries between Performance Team's Wando Welch transload facility and the retailer's DCs—a backhaul for normal deliveries.
Making the move to Charleston also helped Belk reduce transportation costs elsewhere.
"When we first decided to use transloading, I discovered that carriers were more willing to negotiate a port-to-port rate, especially because we were bringing containers into Memphis," says Hartjes. "No carrier wants to re-position containers that are left in Memphis—it's very costly. Moving to Charleston dropped our carrier rates significantly. That's a big advantage."
Belk can generally have containers available for Performance Team to work from within one day—and sometimes within hours. Truckers come in overnight or early the next morning to deliver to the department store's DCs. "In a perfect world, we could easily have containers to Performance Team one day and to our DC the next," says Hartjes.
The proximity of the transload to berthed vessels makes unloading containers a straightforward process. Beyond that, transloading accrues countless other benefits. Belk is certified by the Customs-Trade Partnership Against Terrorism, so working with a facility on port is a positive. In addition, eliminating the dray, and converting ocean boxes to trailers at a 3:2 ratio, boosts sustainability. "And the boxes aren't sitting on chassis too long, because containerized freight is getting sucked right into Belk trailers," notes Hartjes. "It eliminates the chassis headache for us, as well."
The Wando facility is purposely light on automation because Performance Team wanted to keep it flexible and nimble to accommodate different types of freight. Not all transloads are created equal. Some require an offload scan and sort, and are segregated to 10 different locations before shipments are reloaded back out with a scan and manifest. Others offload directly into a trailer.
"We will get an expected electronic advanced shipping notice (ASN) from our customer—Belk, for example—and track the inbound shipment progress to the estimated time of arrival and availability of that container," says Michael Kaplan Jr., owner of Performance Team. "Once cleared, we dispatch a yard goat to make a move—250 yards from where we're picking up containers."
Performance Team pre-assigns doors based on what shipments are coming in. When a container is offloaded, it is sorted and segregated at a few scan points, then loaded into an outbound trailer.
"When we receive the ASN, one of two things occur: it's pre-split if we already have the allocation for the freight; or it may sit for 24 hours—typically no longer—until it is allocated by the customer," says Kaplan.
"One big benefit of the transload program is that it allows shippers greater flexibility in determining how to allocate freight to DCs and stores, versus deciding at origin when loading containers," he adds. "It gives them two to three more weeks to track sales data to identify where there's a need for inventory and how much."
Three weeks is a long time, especially for inventory management decisions that flow directly to sales. Shippers can use the transload to switch modes if demand changes and delivery takes on greater urgency. For example, Performance Team recently worked with a shipper to transload outerwear from the West Coast, then send it by truck to the East Coast. The product was originally scheduled to move via rail. Switching modes allowed the company to match delivery timing with a cold weather selling opportunity.
"Shippers can buy less inventory and be more efficient with it," explains Kaplan. "Although it may cost more for domestic transportation, the big picture is that they achieve better sales, quicker inventory turns, and reduced carrying costs."
Belk benefits from this type of demand forecasting flexibility as well. "We can consider last-minute sales data before we allocate inventory to stores," says Hartjes.
Using Performance Team as an import checkpoint delivered some soft ROI that Hartjes and her team didn't count on when they made the move to transloading.
Belk's two DCs are crossdocks with no storage capacity at all. Everything is GS1-128 labeled—in one door and out the other. Performance Team serves as an initial spot check where last-minute changes can be made without pulling product off site. For example, sometimes Belk has to stop and re-ticket or re-pack retail items. Performance Team can perform that value-added service at the transload.
"I don't send problem orders to the DC," says Hartjes. "If a purchase order comes through, Performance Team scans a carton in and out. If I have any issue with the GS1-128 labels, they can fix it. When a shipment comes to our DC, it moves through quickly, and we don't stop to re-label cartons. This capability speeds production."
This is how transloading becomes a strategic enabler. Apart from allowing shippers and consignees more time and flexibility to allocate orders and match modes to urgency, 3PLs can perform value-added services while product sits in inventory. Instead of packaging a product at the point of origin and perhaps incurring extra shipping costs because of less-than-optimal load consolidation, the transload can perform these same activities closer to demand.
"We have three options when we offload a customer's freight: workers pull it to the side in the transload because it will stay in the warehouse; we send it to a nearby store, bypassing the DC; or we transload directly to a DC," explains Katab. "We'll inventory the freight that stays in the warehouse. The customer's cost analysis may indicate there's no point in sending the goods to the DC just to ship them. We may hold the inventory for 30 to 40 days, and perform value-added services."
In effect, the transload becomes an extension of the DC, which is helpful when a customer such as Belk needs to hold inventory to fill a container and doesn't have that capacity at its crossdock facility.
"For vendors with a small production run of two or three deliveries, I can deliver all at once and use one container," Hartjes explains. "Performance Team will hold it at the transload facility until I need it two or three months later."
Katab sees more retail shippers trending in this direction as they look to leverage the transload strategically. Whether at the transload or another facility close to the port, importers are holding inventory and replenishing directly from that location.
"We're putting store replenishment inventory and transload freight on the truck at the same time," says Katab. "The distribution center never sees that cargo, but it's still replenished. What's in question is the time, mileage, and cost of going to DCs and re-touching inventory—with a transload you do it better, faster, and cheaper."
Transloading is all about optimization, and ports stand to gain a lot from attracting service providers such as Performance Team to their terminals. The Port of Charleston raised the stakes by leasing space to the 3PL on site.
A Model for Replication
Other ports are trying to create a similar transloading footprint. The Port of Tacoma, for example, has about 40 transload facilities near its terminals. Given past congestion issues on the West Coast, increasing throughput remains a competitive differentiator. The ports that do it best will attract more shippers.
"Having so many transloading facilities near our terminals—most of which are rail- served—is valuable to steamship lines and shippers," says Tong Zhu, chief commercial officer, Port of Tacoma.
Over the past few years, the port has seen transloading as a major growth area, offering shippers the opportunity to reduce inventory carrying costs while adding flexibility to make last-minute changes. In 2012, the port reported a 17-percent increase in rail transloaded boxes, compared to 2011.
"In 2010, an informal survey found that 30 to 40 percent of Pacific Northwest volumes are through transloads," says Zhu. "The Port of Tacoma is in an ideal location, with protected industrial zones that are attractive to transload service providers. We continue to see demand from that sector looking for properties near the port."
As the West Coast remains the dominant destination for U.S. imports, transloading growth will continue at pace. But it's spreading elsewhere. Performance Team's operational base is in Los Angeles, but the 3PL has progressively expanded its footprint in Dallas, Miami, New Jersey, Savannah, and Charleston—following shipper demand, and providing more transloading services as an alternative to conventional distribution strategies.
"We want to replicate these services throughout the country because they offer a great advantage to importers," says Katab.
As Belk and other shippers have learned, implementing strategic transloading can increase competitive advantage by optimizing transportation, reducing shipment touches, and improving responsiveness.