All the right answers

Source: FTR Associates


As one of the world's largest suppliers of polymer products, PolyOne Corp. would seem to be in a good position to get all the truckload capacity it needs. And yet, PolyOne, like virtually every other shipper large and small, is discovering that the capacity crunch will last at least through the end of 2005, with only a vague possibility of some improvement next year.

In fact, Steve Feliccia, director of corporate logistics for PolyOne, doesn't anticipate any significant relief in the capacity crunch over the next few years. "While we may see some incremental capacity added to the marketplace, carriers will only add it selectively in specific markets," he predicts.

PolyOne, a $ 2 billion company, serves primarily as a single source for its customer's polymer, colorants and additive product requirements. The majority of its shipping volume is truckload. The company's North American operations include 30 plant locations and 30 regional warehouses.

"We have such a significant warehousing infrastructure that our distribution business unit —PolyOne Distribution — sells our plastic resins to those in the injection molding industry, those who can't buy directly from manufacturers who only sell product in railcar quantities," explains Feliccia.

For that reason, it's important that PolyOne has warehousing locations close to all of its customer locations in Canada and the U.S. The company buys resins in bulk railcar quantities, then packages and sells it to small-and medium-sized injection molders, handling a lot of same-day and next-day orders for its distribution business customers.

For distribution division requirements, PolyOne has a dedicated fleet of 90 trucks in its network, about half of which are used for local deliveries that service its regional warehousing network.

"We used to operate our own private fleet, but have contracted all of those operations out to Schneider Dedicated," says Feliccia. "They have to worry about the new engine emissions control standards, driver availability and all the liability issues involved in operating a dedicated fleet."

Increasing the size of its dedicated fleet is just one step PolyOne has taken to address capacity issues. The company seeks and uses alternative modes for shipments. Its use of intermodal, for instance, has increased significantly, although as Feliccia notes, intermodal use is lane-specific.

"Utilization is confined to lanes where we get not only consistent service from point-to-point," he says, "but also competitive rates, because intermodal is not always competitive with truckload."

Another step Feliccia has taken is to increase PolyOne's use of transportation brokers. He feels that brokers offer capacity in specific lanes that's not always available in a normal relationship with an asset-based carrier.

Schneider Logistics manages carrier contracting, freight payment and transportation routing for PolyOne. "They handle capacity for our packaged goods transportation modes, which include intermodal, truckload and less-than-truckload (LTL), as well as all the routing for our dedicated business," Feliccia says.

PolyOne's suppliers handle the majority of its inbound logistics since most of its raw materials are bought in railcar quantities. If there are inbound package goods that would move either via LTL or truckload, then Feliccia becomes involved in those operations.

Recognizing that there would be an impact from the 2003 Hours of Service rules, the company worked directly with its carriers to minimize driver delays both at the point of pickup from PolyOne and at its customer locations.

Feliccia has taken another step in combating capacity challenges. "We're giving our carrier base more lead time to meet our requirements," he says. "We used to give them 24-hour advance notice on pickups. Now we're trying to provide a minimum of two days advance notice on all pickups, particularly in those areas where we've historically had trouble."

Jon Meier, vice president of transportation and logistics for Cargill Meat Solutions Corp., puts a high value on his company's relationships with its carriers.

"We don't consider our business a commodity business — we provide specific solutions for our customers — and we don't look at our transportation providers as commodities, either," Meier says. "They are an extension of us."

Cargill Meat Solutions (CMS) is a wholly owned subsidiary of $62 billion food giant Cargill Inc. and is, among other things, the largest exporter of beef in the country. Its primary raw material is animals. Dealing with livestock producers, food processors, retailers, foodservice operators and distributors, CMS processes and ships turkey, beef, pork and case-ready products from a multitude-of different business units.

Meier explains that CMS is predominantly a user of truckload motor carriage. The company uses many contract outside carriers — both large and small — that serve as the backbone of its transportation network.

The company's length of haul varies between locations and regions, although most of its processing locations are in what's called the "meat patch" that runs up the middle of the U.S. From those points CMS ships throughout the country. All of its shipments are temperaturecontrolled. CMS moves approximately 4,000 shipments a week from all of its facilities across the country.

One of the contract carriers used is inhouse — Cargill Meat Logistics Solutions Inc. "It supplies probably 10% of our total needs," explains Meier. "We basically use it for perspective. We want other carriers to recognize we know what they're going through. We run it not only to have available and flexible capacity when needed, but also to be able to relate to and occasionally challenge our carriers."

As with other shippers, Meier has been challenged with capacity issues. Up to several years ago CMS was driven predominately by larger sized carriers. In order to increase capacity, the company has been able to develop business with smaller carriers while retaining its valuable relationships with its larger carriers because, among other reasons, the company needs drop trailers.

"We need carriers who are able to put trailers in our yards when we need them," he says. "We have to have a good mix of all types of carriers. As we have grown through acquisitions, we've enlarged our carrier base with large carriers while adding some smaller carriers."

CMS has its own in-house brokerage business and has been able to serve smaller carriers with backhauls that might not otherwise have been available because of limitations of size of their sales force, among other reasons.

Meier uses dedicated contracts very sparingly because CMS is concerned about the impact it might have on the industry. "What a lot of shippers do with dedicated is to only optimize one way," he notes. "If everyone does that, the industry as a whole could suffer by taking available capacity and making it less efficient. That's why we're trying to promote collaboration not only with our carriers but also with other shippers and our valued customers."

Intermodal offers potential for capacity growth for CMS, although there are some problems. Limiting factors are availability of equipment and service to specific locations. Although intermodal is helpful to Meier in some key lanes, rail cannot always duplicate truck service for him.

As CMS has grown and anticipates continued growth, each new business acquisition has brought its own expertise, culture and system. In order to maximize potential at all of its locations and to gain vision into transportation as a whole as opposed to each business seeking to optimize itself, the company is working with a transportation management system from Nistevo Corp. The solution provides load optimization, shipment execution and full visibility of all in-transit inventories for improved customer service.

Even with new technology, reaching out to smaller carriers and use of alternate modes, relationships with its carriers is paramount to Meier.

"In fact," he claims, "it's what sustained us through the tough times last year. If we didn't have relationships with carriers and treat them fairly, we would not have been able to get through [the recession]. Our goal is to be a preferred shipper for carriers. We are open to collaboration with our customers and carriers and other shippers."

Resources

Cargill Meat Solutioms Corp.
www.cargillmeatsolutions.com
Nistevo Corp.
www.nistevo.com
PolyOne Corp.
www.polyone.com
Schneider Logistics
www.schneiderlogistics.com

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