The depressed global economy drove some fundamental inventory strategy changes that may linger into the recovery. After companies in all industries worked off inventories that had accumulated as demand slowed, they began replenishing stock more in line with demand. That strategy has kept inventories trim and reduced capital requirements, but it has also driven some changes in logistics, transportation, and supply chain management.

Matching supply to demand has specifically impacted the chemicals industry, despite its unique production and distribution qualities. Third-party logistics (3PL) and technology companies report that chemical industry customers are seeking better demand management support as they attempt to align their supply chains with the market. Volumes have increased as demand grows, but companies are stockpiling less and concentrating more effort on improving supply chain visibility.

Supply lines aren’t necessarily changing, notes Stephen H. Albrecht, manager of terminal and warehouse operations for Odyssey Logistics & Technology, a 3PL located in Danbury, Conn., but some suppliers are positioning materials closer to the point of use. “Many smaller suppliers are also consolidating shipments to take advantage of lower costs associated with shifting transport modes,” he says.

While that mode shift can mean increased use of ocean transport for imports and exports, companies managing smaller shipments are opting for truckload and rail intermodal services in place of rail bulk.

Forward staging of inventories in tank storage and bulk facilities also appears to be declining as many 3PLs report more products moving directly to consumption.

Even so, bulk terminal and tank capacity are limited, says Albrecht, fueling the move to more transloading of product into rail cars, tank trucks, and drums at the warehouse.

Truck transportation capacity is tight in general; so is capacity at certain types of facilities. That’s pushing pricing up, and logistics and transportation service providers are looking for ways to hold on to those increases. Many providers, however, have not instituted rate hikes as the downward spiraling global economy stripped away volumes and drove shippers and consignees to apply pressure on pricing to achieve their own cost-cutting goals. Pricing isn’t as much a retaliation in the back and forth battle between shippers and logistics providers as it is a new market reality.

Capacity isn’t just tight because demand returned quickly; a number of factors will likely keep it tight.

First, much of the capacity permanently exited the industry during the economic downturn. Russia and
Nigeria, for example, were strong markets for exports of used U.S. trucks and trailers.

Second, tighter emissions standards on trucks being produced now, and new mandated environmental technologies, will drive up the cost of replacement vehicles. Third, new safety requirements for drivers will make it harder for those carriers that can even get financing to fill driver’s seats and acquire capacity. Driver hours-of-service rules will be reexamined and requirements to add electronic onboard recorders are also coming.

The economic downturn focused attention and stimulated action in areas chemical supply chains need to address in light of the permanent, long-term changes that lie ahead. But the chemical logistics sector is coping with these changes and preparing for the future, as the following profiles demonstrate.

Managing Change, Innovation and creative thinking drive success

In 1980, Reggie Dupré found it difficult to get consistent fuel deliveries to his rural Louisiana service station. So, he created his own company — Dupré Transport, LLC — to haul the fuel. With an initial fleet of two trucks, Reggie Dupré became a specialized hauler of bulk liquid commodities. His persistence and attitude permeates Dupré Logistics today.

Like other specialized 3PLs, Lafayette, La.-based Dupré Logistics is facing capacity issues. For example, many shippers who buy by the load from a central location will need to adapt to the realities of a market where capacity is tight and needs to be optimized.

"When economic conditions change, as they have during the past few years, companies have to reevaluate how they do business," notes Tom Voelkel, president and COO of Dupré Logistics.

To face new economic and capacity challenges, Dupré Logistics turned inward and found help among its own employees. Crystal Faucheux, a customer service representative in the Strategic Capacity Services Group, discovered that the company's automated rating system was replacing new market prices that had been quoted to and accepted by shippers with earlier, outdated rates.

Her discovery helped Dupré put the brakes on market erosion and avoid customer billing errors. For her efforts, Dupré Logistics recognized Faucheux with its "Thinking Out of the Box" award for process improvement.

In a larger context, that kind of thinking addresses rapidly developing market issues. Procurement tends to view transportation as a price-per-load function, and fails to measure the issues they don't see that create or contribute to inefficiency.

Third-party logistics providers serving the chemical industry have worked hard to improve processes and reduce costs. "What the chemical industry needs now is a collaborative business partnership that addresses the entire supply chain," says Voelkel. "It will take some effort to uncover inefficiencies that occur in chemical transportation, as well as in other interactions between the shipper, 3PL, and consignee."

The next two to three years will be a time of high demand in the chemical industry, which will accelerate change. Other factors, such as environmental issues, will also come into play, providing a "steering mechanism for change," says Voelkel.

An unavoidable driver shortage, which will develop as more experienced drivers reach retirement age, will also require collaboration between shippers and service providers. The trucking industry, especially chemical carriers, needs to attract new drivers by improving efficiency, so drivers can feel the work they do has value. Other issues revolve around pay and how compensation systems are constructed.

Technology also helps address efficiency issues, as well as an increasing need for more complete safety and performance documentation. For example, Dupré Logistics' onboard systems provide more and better transportation information than past manual systems. Dupré uses Qualcomm satellite tracking and communications tools to provide basic time and motion data. Not only do the onboard data recording devices help with government-mandated data collection and reporting, they can enable carriers to identify and address problem areas.

While government agencies may be looking at safety and compliance issues, the data can also point to when and where delays occur. Working with the shipper and consignee, chemical carriers can do a root cause analysis and collaboratively develop a solution that improves efficiency and reduces cost for all supply chain partners.

Moving chemicals is a complicated process, and shippers need to look at their business very closely and take a total-cost approach, Voelkel advises. "Selling total-cost concepts takes time and requires a champion inside the shipper's organization," he says.
It also requires top-level support to help drive the value of collaborative relationships down through the organization. When chemical shippers maintain good relationships at the top and at the interface level, they can manage their costs without sacrificing safety, compliance, and efficiency.

Dupré Logistics • www.duprelogistics.com
With specific emphasis in the chemical, consumer products, and beverage industries, Dupré Logistics’ unique solutions provide expertise in dedicated fleets, transportation management/brokerage, materials handling, and reverse logistics. Dupré works to understand your business and measure how our system meets your expectations

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