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Investments in Rail Transportation Spur Advantages, Growth

Rail is being chosen by more shippers of shipments of export cargo and import cargo in international trade.

Investments in Rail Transportation Spur Advantages, Growth

Rail, or intermodal, transport is fast becoming the shipping mode of choice for many businesses – specifically as an alternative to truckload. This is largely in response to many of the current market conditions in the trucking industry, like unstable fuel prices, infrastructure deficiencies, driver shortage, and government policies restricting the number of hours drivers can be on the road.

Over the past few years, the truckload industry in the United States has also seen volatile conditions in terms of rates, scheduling, and volume. The intermodal market sector, however, has been more stable. And, capital spending to upgrade the shipping rail network coupled with upgraded technology has rail freight well positioned for the future. In fact, analysts predict that intermodal freight in North America will grow at a rate of about 5.57 percent from 2017 to 2021.

The Association of American Railroads reports that our country’s freight railroads have spent more than $635 billion since 1980, including record amounts in recent years, to create a freight rail network that is second to none in the world.

These investments include maintenance, expansion, and technology. All modernizations have helped increase rail market share by improving safety, network connectivity, reliability, and overall speed. Union Pacific explains that, “Maintaining a healthy railroad is the foundation of our ability to serve customers and communities.”

Six Advantages of Rail Transportation

This trend pushing more freight volume towards intermodal will continue, especially as truck capacity tightens. For shippers considering intermodal as an alternative to truckload, here are six advantages you may find for your own logistics operation.

Reliability: Intermodal transportation gives shippers more options for transporting goods on time. Since trains run on a set schedules, there is less variability in pick-up and delivery times as compared to the truckload. HOS (hour of service) and driver performance are big variables that affect service reliability. The driver shortage, maybe above anything else, is affecting the trucking industry and has caused more companies to choose rail as a shipping option.

Cost effectiveness: Using intermodal transportation can save money, especially for longer haul loads. This is another main advantage of this mode. And, the efficiencies gained when using double-stacked containers are even greater. One ton of freight can be transported 400 miles on one gallon of fuel; far more miles than trucks, which translates to lower rates for shippers.

Environmental-friendliness: Shippers who are concerned with the environmental impact of their supply chain are attracted to intermodal as well. It produces significantly less carbon dioxide per 100 ton-miles than trucking. In fact, trains are more than ten times energy-efficient as trucks per ton/mile.

Ease of use: Shipping via rail freight transportation can be very convenient for the shipper. Typically, the company providing drayage services (i.e. getting your freight to the railroad’s ramp) is local and will be very accommodating when it comes to picking intermodal containers up and spotting trailers. In other words, they make getting your product out the door easier. 

Heavy freight: If you ship heavy and dense freight, rail is the way to go. Whereas trucks have a limited capacity of 45,000 pounds, rail is efficient at moving heavier freight over long distances. With the industry’s continued investment in capacity for moving heavy shipments, this area of rail shipping that will become even more cost-effective.

Ability to ship anything: Rail freight enables companies to ship a full range of products, including cold and frozen goods. Cold chain shippers who are looking to satisfy the intensive requirements of perishable goods with the goal to cut resource consumption have found that rail transportation can do both.

The idea of using intermodal can be intimidating for anyone not familiar with how it works. But, done right, it’s a direct way to reduce logistics costs while getting more reliable service. Start by finding a trusted partner that can help evaluate whether you can successfully integrate rail transportation into your logistics network.

Andrew Lynch is co-founder and president of Zipline Logistics, an Ohio-based 3PL that specializes in providing multimodal transportation services and business intelligence for CPG, retail, and food and beverage customers.

KPIs are important for shipments of export cargo and import cargo in international trade.

Actionable KPIs for Domestic Transportation

Common shipper-utilized key performance indicators (KPIs) include important data points like total shipments, total units shipped, and total spend. While these types of numbers can make for good targets and business health indicators, they lack enough substance for a company to be proactive with identifying new opportunities for revenue growth or improved efficiency.

Logistics KPIs, when done right, can and do make real change possible. They can be effective tools for improving not only your supply chain operations, but all other areas of an organization. In the end, KPIs are about uncovering opportunities, shaping behavior for the better, creating synergy around goals, and holding parties accountable for meeting targets.

ON-TIME DELIVERY AND MABD: You are held accountable for meeting retailer timelines, so tracking how well your partners are performing and hitting appointment deadlines makes sense. If not met, you can expect accessorial charges and unhappy buyers.

Yet there are multiple ways you can look at this metric. Your carrier may arrive on time for a scheduled delivery appointment, but was that appointment within the Must Arrive by Date (MABD) provided by your customer? Tracking both KPIs can help ensure you’re seeing the full picture.

AVERAGE LEAD TIME: How much notice does your customer give you between order fulfillments? And how much notice do you give your transportation provider to find the best carrier and optimal transit schedule? It could be that shipping costs decrease by a notable amount for each additional day’s lead time allowed. Ask your partners about impacts and set an internal standard to hit a certain time window and see how your costs change as a result.

PALLET AND DISTANCE MINIMUMS: This is a good measurement of equipment utilization and a great way to identify savings. By looking at how your cost per unit is impacted by the number of units on each truck and how far they’re going you can identify a tipping point. At what quantity and distance do your costs become destructive?

Maybe your ideal minimum is 18 to 20 pallets for every truckload going over 400 miles. If you go below that threshold, you pay too much for transportation per unit. Finding a way to get five percent more product on all trailers below that point, and meet your established KPI, can equate to pure savings.

Logistics data can also dictate responses from other departments. The logistics team is told what they need to ship and when it needs to be there. But when data can show that the shipping cost per unit is higher when there are fewer than 20 pallets per truck, there’s proof for needed enhancements in collaboration. This routing constraint placed on logistics happens by decisions made upstream – working in tangent, logistics and sales departments can instead identify and execute real cost saving initiatives.

OUT-OF-NETWORK SHIPMENTS: Once you have identified how shipment quantity and distance are influencing per unit profitability, out-of-network shipment data can be isolated and evaluated for patterns that determine the root cause for cost increases.

For example, is there a percentage of your shipments being processed from non-ideal distribution centers? You’ll see direct cost impacts when product gets shipped from a distant warehouse because it was out of stock at the distribution point closest to the customer. This is an inventory management problem that gets paid for by the transportation budget. Work in tangent, leveraging data, to establish an ideal KPI for these types of transactions.

There is a clear pattern in these final examples that gets to heart of why KPIs are so valuable. The insights shippers gain from KPIs illustrate how other departments (like production scheduling, inventory planning, and sales) can affect transportation. KPIs demonstrate, in a quantifiable way, the shared responsibility entire companies have for domestic shipping costs. Using KPIs is the best way to illustrate, then tackle, issues in an objective way.

Andrew Lynch is co-founder and president of Zipline Logistics, an Ohio-based 3PL that specializes in providing multimodal transportation services and business intelligence for CPG, retail, and food and beverage customers.

What to ask 3PLs that help with shipments of export cargo and import cargo in international trade.

Five Questions to Ask When Choosing a Top 3PL Provider

It’s every logistics pro’s responsibility to look for ways to get things done more efficiently. Luckily, most of us find this type of challenge to be the most rewarding part of our jobs. We are logistics professionals; this is what we do.

Often the most visible and impactful way to improve a logistics operation is by finding new ways to save money. But shopping rates simply because it’s easy or relying too heavily on spot rates can be disruptive to your logistics operations, doing more harm than good.

Any type of procurement event is a serious exercise because the performance of your carrier or 3PL has a direct impact on your business in ways that extend far beyond a simple cost per mile rate. Here are five questions to ask when choosing to add a new transportation provider to make sure the changes you make have a net-positive impact on your logistics operation and company overall.

Is it only about finding the lowest rates?

For better or worse, rates get all the attention when it comes to managing logistics. Of course, negotiating great rates is important—and frankly it can be a fun challenge. Logistics pros are usually on the defensive, dealing with problems and having to answer to everyone. Negotiating rates is the one time it feels like you have control.

But you have to be careful. If you push partners too hard on rates, or always go with the lowest-cost provider, you end up getting exactly what you pay for. Always choosing based on cost comes with an unspoken acknowledgment that service is not the most important thing to your operations.

Before engaging in a RFQ, ask WHY your company is looking at logistics for savings. Is it because you think you’re overpaying, leaving money on the table, or because you’re trying to meet a specific target or KPI and your partner isn’t getting you there?

How will a new logistics partner help us operate better?

Adding new carriers or a 3PL partner should bring a range of new benefits to your operations, like technology, a vast carrier network, and other value-added services. For example, having a capable 3PL or core group of service providers helps to ensure better continuity of your logistics data and access to logistics technology you may not have otherwise.

Do they have a skill-set or knowledge-base that complements your specific industry? The power of working with a specialist can transform your operations. Their networks, tools, and insights can be transferred directly back to you. Make sure any new partner has a proven track record of onboarding and servicing businesses like yours to help ensure success.

How does the logistics service provider view our relationship?

Carriers and 3PLs, especially ones who feel beaten down on price, are never the best partners. A low per mile rate can look good on paper, but chances are it will be rare that the carrier has capacity when you need it. Worse yet, when they do, they’ll be quick to drop your load even after accepting it if a better paying load in the area comes up.

A low rate is meaningless without capacity. A good and loyal carrier relationship means you’ll get preferential treatment when capacity is tight and problems come up.

Strong relationships may even help you cut costs organically. Rather than chasing savings, a true partner will be willing to step up or take a hit when you need their help. Invested in the long-term benefits, they are stable and understanding. And in an ideal situation, they are also always on the lookout for opportunities that bring added efficiencies and savings.

Do they know our business and consignees?

Delivering products can be a very specialized process, especially for items like food. Working with carriers who do not know your products will create extra work for you and your consignees. Not calling for appointments or understanding the potential for chargebacks with certain deliveries are necessities commonly overlooked by low cost generalists.

Using a 3PL who has good, established relationships with your consignees is an undervalued advantage. For better or worse, few shippers will ever know the problems a 3PL partner has made go away on their behalf at the point of delivery.

It’s understandable when logistics professionals feel pressure to constantly be shopping rates to save a few cents per mile. These types of cost savings are important, but they need to be done as part of a larger plan. Chasing pennies at the expense of dollars is a mistake.

Companies that take a strategic approach to carrier procurement have a smarter and more efficient logistics operations. Asking the right questions of yourself before your next procurement event, no matter how small, will ensure you are making the right decisions for your company.

Andrew Lynch is co-founder and president of Zipline Logistics, an Ohio-based 3PL that specializes in providing multimodal transportation services and business intelligence for CPG, retail, food, and beverage customers.

3PLs can advise on packaging for shipments of export cargo and import cargo in international trade.

Avoiding Product Damage in High Altitudes

For all the unique challenges food and beverage manufacturers deal with when moving goods through their supply chain, one of the most difficult to control are the problems altitude creates for food packaging and the product inside.

Adding to the challenge is that the food safety risks created by altitude are not as obvious as those posed by other factors like poor temperature control.

The issue of altitude usually manifests itself by affecting package integrity. Most such breakdowns are the result of extreme changes in altitude, which creates an imbalance with internal and external pressure that the packaging can’t withstand.

Most any type of rupture to a food product’s packaging will eventually lead to spoilage or damage. It’s no surprise that exposure to outside air makes products like cookies go stale and any type of fresh food go bad much faster. The extra air inside packaging is actually an inert gas added for important reasons. For one, it acts as padding for products like snack foods by providing protection from damage during handling. It also works to maintain freshness by preventing spoilage and oxidation.

To illustrate how altitude affects packaging, take an ordinary bag of pretzels. It will leave the plant filled to the max with both product and gas for protection and preservation. As altitude increases however, so does the outward pressure of the gases inside the packaging and the likelihood the bag will pop open.

If you have manufacturing locations in lower altitudes this may be more of a common problem. Damages can be a particular concern if you are shipping to the West Coast or the Great Plains from lower altitude locations around the country like the East Coast or Southeast.

The cost of products becoming unsaleable during transportation for any food and beverage company is self-evident. This reinforces the importance of correct packaging, designed to help protect against the potential damages occurring from altitude. But this is only part of the solution, the rest lies in better logistics decision making, with attention paid to the impact that altitude has on the products being delivered.

Of course, relocating manufacturing operations to avoid any high altitude shipping entirely is rarely a realistic solution to overcoming this supply chain challenge, so here are some other ideas to help. A qualified 3PL partner can help you determine and enact the solutions that are best for your unique supply chain and product.

Change Up Your Routing: In some cases, fixing the problem of altitude affecting package integrity can be solved by simply changing the travel route. Requiring carriers to serve problem lanes by following lower altitude routes may come at the expense of more out of route miles, but this may be cheaper compared to the alternative. Working with logistics partners who can offer GPS tracking to ensure the proper route is being followed is a good way to audit carriers as well.

Experiment with Packaging: Changing a route is not always feasible depending on the shipment origin and delivery destination. Making small adjustments to packaging based on where product is going can also help. Injecting less extra gas into packaging to leave it slightly deflated, or using a larger master pack carton allows for more expansion and can lower the incidence of packages bursting at altitude.

Give Intermodal a Try: An advantage of using intermodal, in addition to rates that are often lower than truckload, is that most rail routes tend to avoid high altitudes and stay at a more consistent level. Rail transport is constrained by gradient and track alignment so freight trains must have a slow ascent when changing altitude. Keep in mind, similar to trucks taking a longer route to avoid altitude, intermodal will often require longer transit times so make sure to factor this into your planning.

Use Temperature-Controlled Vehicles: Vehicles that are temperature-controlled can also offer a solution for high-altitude transport. Refrigerated trailers have air-flow systems and tightly sealed doors which help to keep the compartment stable. Semi-pressurized for the same reasons, these vehicles are less susceptible to imbalance issues and protect against altitude changes during transit. The one potential drawback is slightly higher costs for use of the equipment.

Product safety is the first priority for every food and beverage company. Taking steps to always ensure food is protected from damage and spoilage that may result from shipping at high altitudes must also be a consideration. With proper logistics planning, companies can remove the risk of food safety issues that result from high altitude shipping.

Andrew Lynch is co-founder and president of Zipline Logistics, an Ohio-based 3PL that specializes in providing multimodal transportation services and business intelligence for CPG, retail, and food and beverage customers.

Retailers are changing their approach to the logistics of shipments of export cargo and import cargo in international trade.

Adjusting to Lighter Shipments, Higher Frequencies

Rapidly evolving consumer trends are forcing a reshaping of inventory management operations. Physical stores are being incrementally supplemented by online shopping and home delivery services, and consumer packaged goods (CPG) and retail operators are changing quickly in order to satisfy the new demands that come along with the new consumption realities.

Consumers have quickly become accustomed to purchasing and receiving products on demand, with near-immediate fulfillment. As a result, retailers are required to facilitate faster turnaround, and are finding it increasingly difficult to justify large-scale inventories sitting in warehouses.

While the positive impacts of these new realities are clear – greater product availability, simplification of convenient purchasing – the impacts on transportation spend has been, for many, rapidly outpacing those sales opportunities.

Even before last-mile delivery challenges develop, new transportation strategies are needed. Stores are requiring smaller quantity shipments, but more frequent delivery, and CPG companies are on the hunt for cost-effective ways to optimize the new pace of product fulfillment.

Working on the front line with our CPG and retail customers, here are some of the different approaches my company has seen instituted that help to effectively mitigate cost increases.

Network Redesign. With more shipments going out, but with fewer goods, some businesses are redesigning their distribution setups. While it may have been profitable to send a fully loaded truck 1,000 miles once per month before, it doesn’t make sense to send two partially loaded trucks that same distance multiple times in the same time period.

By leveraging data analytics and geographic pricing trends, we are reevaluating warehouse selection, product mix, and inventory density. For some, warehouses are shrinking in size but increasing in number. Having inventory in more places, but in lower quantities allows for faster and cheaper servicing of changing retailer requirements.

Multi-stop Shipments. Other shippers are solving the problem with a multi-stop approach. Able to consolidate regional freight into one full truckload, they coordinate multiple drop offs and are able to avoid LTL complications. This is a strong approach for companies that don’t have a large warehouse network or who are moving product directly from the production line to customers.

But putting together a best-in-class multi-stop program can be extremely challenging and requires a true specialist and partner that understands your customer well enough to create optimized routing that brings costs under control without causing service deficiencies.

Pool Distribution. Another option is to leverage FTL or railroad for long-hauls, then break up orders at a central location where LTL shipments make more sense. There are service providers that specialize in this solution, and can help with actual repacking of large shipments into smaller orders. This approach most benefits those who work with multiple retailers that require widely differing pallet configurations.

As the retail industry and consumer demands continue to change, shifts in transportation strategy will be constant. Working with a partner who can help navigate these changes is imperative. They can share best practices learned from work with other customers, provide access to essential technologies and a vast carrier network, and should consistently help you identify areas for enhanced efficiency.

Andrew Lynch is co-founder and president of Zipline Logistics, an Ohio-based 3PL that specializes in providing multimodal transportation services and business intelligence for CPG and food and beverage customers.