Shippers get better visibility but still want better service
By David Hannon -- Purchasing, 2/5/2004 2:00:00 AM
Bulk rail shippers in the chemicals and plastics industries have better visibility into their shipments and transit times today thanks to advancing technology from rail carriers and third-party providers. But shippers say that visibility still shows a lack of consistency in transit times while rates continue to increase, especially in captive shipper situations. The challenge for shippers is figuring out how to use the data to drive more efficient bulk rail shipping.
New technologies are improving on the existing radio frequency (RF) infrastructure in place on rail lines to give shippers better and more frequent data. Bernie Schorn, a rail systems consultant for chemicals giant DuPont (Wilmington, Del.), says the tracking technology that started as an endless stream of phone calls to carriers, later progressed to receiving batch updates electronically and can now provide regular updates three times an hour. DuPont, which makes more than 100,000 rail moves a year and spends 20% of its freight dollars on rail, today receives updates every 20 minutes on the status of its rail cars.
"The railroads are using the RF technology effectively and in the right positions so the information comes automatically to us instead of manually, as it did in the past," says Schorn. "Receiving updates every 20 minutes is sufficient. We see no need to jump to real-time updates right now."
While RF technology is the standard for railroads today, bar codes were once considered for use in tracking rail cars, Schorn says. But when cars got dirty, the bar codes could not be read. Bill Huff, director of global rail operations at the Dow Chemical Co. (Midland, Mich.), says satellite technology has also been considered for rail cars in the past, as it has been successful in the trucking industry. But satellite transponders require more sophisticated power supplies and, on a truck, that power supply can come from the central electrical system on the vehicle's battery. A transponder on a train car would require a separate battery for each car, which brings reliability and cost issues into play.
"The ability to track the route a chemical truck travels and provide an alarm if the truck goes off-route is important for security reasons," says Huff. "Obviously rail cars are not going off-route so it is not as important there. We have done some trials on satellite tracking devices for some commodities in rail but we have not been happy with the reliability or the economics of that system in rail to date."
Using the data
Shippers have several options in how they can access data from rail carriers. Some get updates direct from carriers while others use third parties to retrieve the data. Dow has its own proprietary system that takes data from carriers and provides reports and custom-generated information for its businesses and customers to use.
"The quality in these reports is approaching the level found in a Six Sigma environment," Huff says. Dow is now piloting a new tool from ShipXpress in Jacksonville Beach, Fla. to enhance the visibility or usability of the data and allow customers to access information about cars real-time, which will let customers plan inventory and production schedules more effectively.
"We also think the ShipXpress tool will result in better utilization of our rail cars," Huff says. "Rail cars are a very big expense for shippers and if you can utilize the cars better you can make more shipments per car or use fewer cars."
DuPont recently began using the TransOval system, which is based on technology from G-Log, to retrieve tracking data across modes. Schorn says DuPont has used its Six Sigma standards to improve data and encourage customers to better utilize its cars. "Some of our customers in the plastics industry use our cars like storage tanks," Schorn says. "We have seen a push by our businesses to use the tracking data and get information back to the customers and charge them for keeping cars too long. We had that information for a long time but we are using it better now, under Six Sigma processes."
For the past five years, Borden Chemical (Columbus, Ohio) has used the RailTrac tool from Bourque Data Systems (The Woodlands, Texas) to take feeds from rail carriers and better monitor rail cars' progress and review performance metrics.
"The tools [for tracking and performance monitoring] today are more user friendly and provide better reporting capabilities," says Steve Lesser, director of global logistics at Borden. "The biggest improvement in that area is moving from a client/server tool to a hosted application. Some providers are now branching out to offer more services in addition to the tool to help some of the day-to-day management operations that may have been handled in-house before."
Service and rate issues
The improved visibility into shipment tracking shows that service levels from railroads have improved, but still leave something to be desired. Rail as a mode is generally more efficient for point-to-point customers in industries shipping commodities like coal and grain, where one customer may be receiving 100 cars with the same commodity on a unit train. Chemical shippers tend to receive fewer cars and may have several commodities on a manifest train making more frequent stops, which makes the progress harder to track and less reliable.
"So the challenge for carriers is how to make the manifest trains function more like the unit trains in terms of efficiency," Huff says. Dow ships 150,000 bulk cars by rail a year in North America. Huff says the overall service trend in rail is positive, but regional service issues cause disruptions that stick in shippers' minds.
"The biggest issue shippers talk to railroads about is consistency of shipping times," Huff says. "We are concerned about the transit time for each shipment, but we are most concerned that it takes a similar amount of time every shipment. That is what is going to enable railroads to reclaim some of the volume the trucking industry has taken away in the past 20 years. Trucking has consistency of on-time delivery above 99% and is usually plus or minus 15 minutes. In rail it might be plus or minus two or three days."
Jerry Reynolds, global manager of logistics process and technology at DuPont, says he saw a drop off in service levels following the series of mergers in the rail industry in the mid to late 1990s, then an increase in service levels, but today they have leveled off or dropped in some cases of captive shippers.
"There are some significant upward price pressures on rail rates, especially on captive shippers," says Reynolds. "We are fortunate in being able to establish some master agreements, which protect us because we have a high percentage of sites that are single-served by rail carriers."
Wayne Johnson, director of logistics at American Gypsum Co. (Albuquerque N.M.), which ships starch and caustic soda by rail, says he saw bulk rail rates increase 4% in 2003 on lower demand and higher fuel costs.
Borden's Lesser says excess capacity in rail has helped mitigate rate increases (although he agrees rates have increased) and drops in service levels to some extent in the past two years. But when manufacturing picks up again and bulk rail capacity tightens, shippers can expect more rate increases unless legislation brings competition to the industry.
"The rail providers are making an effort to provide better information to shippers, specifically around accessorial charges on their Web sites," says Lesser. "But in most cases, local service issues are negotiated between our plants and local carriers."
DuPont used to send bills of lading by electronic data interchange, but recently moved to using carrier Web sites to submit that information in most cases.
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