Railcar to Truck to Silo

As a rule, buying in bulk is cheaper. In the plastics industry, one of the reasons this holds true is that shipping in bulk is cost-effective for the resin company

“The U.S. and Canada do have a very good bulk distribution system. We can cost-effectively get resin moved – and that helps everybody,” says NOVA Chemical Corp.’s Peter Masterman. Masterman is vice-president logistics and customer service.

Delivered cost is dependent on a lot of factors, such as shipping cost, cost to carry inventory, etc., so even though it’s the resin supplier’s responsibility to get resin to you, there are things you can do to improve the process and perhaps reduce the costs inputs. For a start, be flexible about your deliveries, and share forecast information with both the supplier and the carrier.

Logistics expert Bruce Street explains that resin suppliers take advantage of rail movements, railcar storage, and storage of the product at bulk transfer facilities close to the customer to minimize on-site storage requirements, and transporting costs. This facilitates quicker inventory turns, allowing the manufacturer to minimize inventory and safety stocks.

Street is vice-president of supplier platforms at Cendian, a logistics business process outsourcer serving the chemical and plastics industries.

One of Cendian’s largest clients produces a number of products for shipment into Canada, including PET and polyethylene, as well as plasticizers and alcohols. These resins and intermediaries are shipped by bulk rail and dry van to various facilities in Canada, including dry package warehouses, and transfer and bulk facilities in Ontario and Quebec. As needed, these products are shipped across Canada by tank truck or bulk hopper train.

This forward staging of product allows manufacturers to service their clients in a more cost-effective and timely manner, minimizing the need for costly investments in brick and mortar.

Street estimates that 50% or more of the resin industry is using forward inventory storage.

“Many processors are running in a near just-in-time mode, so they need some degree of visibility to the supply chain. Generally, large processors will get integrated with the supplier’s ERP system and have a relationship with the carrier as well,” says Street.

SHOULD YOU MOVE UP TO BULK BUYING?

Posted prices for resin would indicate savings of four to five cents per pound can be had by buying in large volumes. However, if you are not consuming resin at a high enough rate, the trade off between inventory carrying costs and lower per unit prices might not make sense, says Masterman.

As well, a capital investment in silos and other bulk handling equipment may be necessary. (See “Silo can be simply storage”, below, for further details on equipment needs and costs.).

If you are already buying truckload quantities, think about moving up to railcars. The railcar can be stored and unloaded at a transloading facility near your plant. If the railcar is not unloaded within 30 days, you may have to negotiate a lease to keep the car for a longer period.

“Anybody who’s buying two to three truckloads per week ought to look at transloading, for the economics, the convenience, the efficiency,” says Dave Gatti, president of Bulk Plus Logistics.

Bulk Plus Logistics is a wholly-owned subsidiary of Trimac Corporation. One of its functions is to operate rail-to-truck transload facilities. This involves everything from order processing to final delivery of the bulk shipment, including keeping track of inventory on hand and positioning the railcar for truck access to unload.

Bulk Plus Logistics owns some of its own transload facilities, and manages others on behalf of various Class 1 railroads. At facilities owned by a railroad, Gatti says shipments are generally handled on behalf of the railroad and the shipping customer. For example, the facility may receive a railcar from a resin supplier, and then portion it out for delivery to local processors as directed.

On the other hand, in facilites owned by Bulk Plus Logistics, Gatti says that the client may be the purchaser or distributor of resin, who engages Bulk Plus Logistics to receive the railcar and make truckload deliveries when requested by the buyer.

TALK TO YOUR TRUCKER

“Historically, one of the issues that we run into with the plastics industry is that everybody wants their product delivered in the morning,” says Gatti. “We get this bell curve of activity in the morning. It forces us to compress the day’s work into a seven or eight-hour time slot.”

In contrast, deliveries to the food and petroleum industries are often conducted on a 24-hour basis.

“If you can be flexible and innovative about your delivery times, a high-volume processor might be able to negotiate discounts for deliveries during off-peak hours.”

From the trucking side, Alan Potts echoes that sentiment. Potts is sales manager for the Eastern division of Trimac Transportation Services Inc.

“Our biggest issue is not having all the information” to plan shipments, he notes. “If we are able to understand the whole supply chain, we can offer solutions.”

Flexible delivery times are desireable, says Potts. Picture the trickle-down effects: “If we can play with when we pick up and when we deliver, then we can play with border crossing times, traffic and other factors. If we can shorten our trip, then everybody wins.”

The shipping market is getting tighter, says Gatti. Capacity is very constrained and finding good, qualified drivers is an issue for all trucking companies across North America. As the economy continues to strengthen, this will become an even bigger issue for all members of the supply chain.

Some factors that are driving shipping costs are:

hours of service regulations have changed in the United States, which means fewer driving hours are available;

border delays due to heightened security;

insurance rates and fuel costs are up;

the truck driving workforce is aging, and it is difficult to recruit new drivers.

NOVA’s Masterman also underlines the importance of being flexible about your deliveries and working with your carrier.

“Some companies have developed rigid policies concerning their hours for receiving shipments in the last few years. Those restrictive windows may be a benefit to the customer’s workload planning, but the carriers end up working around that narrow time frame,” he says.

“This is a huge issue right now, and it’s going to get worse. Carriers have generally not invested much over the last four to five years. As the manufacturing sector bounces back, we’re going to find that there is a capacity limit on the North American distribution system.”

“In that environment, the customer being flexible will bring a benefit,” he adds. “It may not be a cost-savings opportunity, but it could result in more reliable service. The industry is experiencing a lot of spotty service right now, so be “carrier-friendly”.”

One benefit of using a logistics service provider, says Street, is that they can look across commodities and get ideas from other industries. “For example, coffee beans and peanuts have both gone from primarily bagged shipments to bulk shipping. We’ve found ways to learn from that experience.”

“If processors can get familiar with their supply chain, they may find new and creative ways to lower costs and improve service,” he concludes.

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SILO CAN BE SIMPLY STORAGE, OR PART OF A LARGER SYSTEM

“There used to be a time,” says Rob Miller, president of automation and auxiliary equipment supplier Nucon Wittmann Inc., “that we could predict that resin prices were going up because processors suddenly wanted silos.”

He’s only partly joking. Although silos tend to be a planned purchase, Miller says he has seen some orders go from request for quote to purchase order within a day.

“There is a fair amount of demand for silos right now,” said Miller in June. Nucon Wittmann installed eight silos during a two-week period in May and June.

Assess what you need

If you choose to buy resin in bulk, the question of what to do
with all this resin when it arrives at your plant immediately rears its head.

If you are taking delivery by the truckload, it must be unloaded to either a silo or indoor surge bins. Typically, says Miller, there is not enough room inside a plant to fit an indoor silo or surge bins large enough to hold a truckload (approximately 50,000 lbs.). So usually the only realistic option is to invest in a silo.

If you have a rail spur, and you consume enough to justify purchasing by the railcar load, you can have the railcar delivered to the plant. You will need a railcar unloading system and a silo or two in which to store the resin. Alternatively, you could lease the railcar and use it as temporary storage.

One benefit of buying by the truckload is that the delivery trucks are generally self-sufficient, i.e. they carry all the equipment they need to unload into a silo.

Miller suggests one other possibility. You may find it economical to purchase a railcar or truck load and then have the resin repackaged into a gaylord or bag format that your plant can handle. In this way, you avoid any investment in a silo, but may still gain cost savings from buying in larger quantities.

From silo to machine

There are many ways to address the basic challenge of moving resin from the silo to the processing machinery, whether it be an extrusion line, blow molding machine, film line or injection molding machine, explains Miller. It is possible to use something as simple as a manual dump spout to pour resin into gaylords and then move it to press-side.

Moving up a step, you can have a simple electric motor attached to the silo spout to fill gaylords.

The next step up the ladder of cost and complexity is your basic central materials distribution system with vacuum pumps and hoppers, plus maybe blenders and dryers.

Another possibility is to have 4000 to 5000 lb. surge bins to act as intermediate storage inside the plant. In our climate, this is sometimes useful so that the resin can acclimatize to the plant temperature before use.

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CANADIANS COULD CHOOSE BULK

Despite our image of Canadian companies as small firms, data from the latest Canadian Plastics injection molders survey show a substantial number of firms could consider bulk purchase. A purchase of one railcar per month leads to annual consumption of about 2 million pounds. Of the 87 companies which answered the survey question about 2003 resin consumption, 19 injection molding plants said they consume more than 2 million lb./yr., and another three sites consume more than 20 million lb./yr.

Film and profile extrusion operations are generally considered to be larger consumers of resin than injection molding operations, so this data suggests there would be some bulk buyers in those segments as well.