Shippers address refrigerated capacity needs

Sept. 1, 2004
Hoping to make the supply chain a more efficient tool, the panel of shippers that met with the Refrigerated Division of the Truckload Carriers Association

Hoping to make the supply chain a more efficient tool, the panel of shippers that met with the Refrigerated Division of the Truckload Carriers Association in 2003 appeared for a repeat performance at the 2004 annual meeting in Rockport, Maine. In 2003, six shipper representatives shared their concerns about trucking capacity and security. At the 2004 meeting, four shipper representatives made the return engagement, one new participant attended, and one from the previous year did not participate.

Returning members of the shipper panel were Joseph Lombardo, director of transportation at Nestle USA in DeKalb, Illinois; Daniel Siefring, director of distribution for the Sara Lee Corporation, Cincinnati, Ohio; Tom Domanski, director of transportation operations for Kraft Foods Inc and the Kraft private fleet, Middleton, Wisconsin; and Mark Sampson, director of logistics for the LambWeston division of ConAgra, Kennewick, Washington. Matt Schlosser, director of sourcing and systems at Hershey's Foods in Hershey, Pennsylvania, filled the fifth speaking position. The Refrigerated Division annual meeting was held July 14 to 16, 2004.

The Federal Court of Appeals for the District of Columbia had not rendered its opinion sending the hours of service rules back to the Department of Transportation for complete revision at the time the panel met. However, those rules that became effective on January 4, 2004, remain in effect while the case is reviewed. The Federal Motor Carrier Safety Administration has announced that it will not appeal the lower court ruling to the Supreme Court, but on August 30, 2004, FMCSA filed a motion for a stay of the appeals court ruling. This action should keep the current rules in place while the agency considers its options and attempts to make changes to the regulations that can meet court approval.

HOS awareness

Awareness of the need for improved productivity to cope with the changes in the hours of service rules for motor carriers has become apparent at Nestle, Joseph Lombardo said. In fact, the issue has become so well known that it often makes an appearance in the monthly company newsletter published by the company president, he said. “I can't speak with authority about our third party facilities, but at Nestle controlled facilities, our manufacturing plants, and our distribution centers, people are aware of the situation and are trying to move trucks a lot quicker,” Lombardo said.

Nestle is working to preserve driving time by using pools of dropped trailers and by working with distribution personnel to help ensure that drivers get in and out of shipping facilities on time, he said. Using a large volume of dropped trailers is a challenge for refrigerated carriers, because the trailer-to-tractor ratio is usually fairly low. Another helpful tactic is to spread information as widely as possible. As soon as orders are received, Nestle begins planning loads. That may be as early as 10 days before delivery — much too early to try to schedule a delivery appointment, but certainly not too early to let carriers know how to plan future fleet utilization. “We want to tender freight as early in the process as possible,” Lombardo said.

Making the process attractive to truckload carriers has helped maintain access to transportation services, but it has not added capacity to the refrigerated segment of trucking, Lombardo said. To deal with reduced capacity, Nestle has begun to use more brokers to find available trucks. The company also has started paying for the empty miles necessary to reposition equipment to serve Nestle loads. Using intermodal carriage can help provide more capacity, but shippers that use intermodal equipment have to learn to work around the delays that accompany intermodal operations. Intermodal shippers also must learn how to cope with local cartage carriers to get freight delivered from the rail ramp to receivers. On lanes that handle a lot of capacity without excessive time constraints, shipping in refrigerated boxcars is beginning to look attractive, he said.

More direct loads

“We are trying to ship more loads directly from the manufacturing plant to receivers,” Lombardo said. “The problem with direct loads instead of consolidating at a forward warehouse is that many Nestle plants make only one product. We have a tough time getting the right mix of product to our customers using plant-direct shipments. However, moving directly from a plant to a receiver does help improve capacity, because it delivers product to a customer rather than just using transportation service to set up a convenient move later.”

Trailer detention has dropped at Sara Lee during the past year, Daniel Siefring said. “Last year, our average dwell time was a little over four hours per load,” he said. “This year, it is down to a little more than two hours; that's a big improvement. A big part of this change can be attributed to the publicity that the changes in the hours of service rules received. In the distribution operation, we made a conscious effort to move information about the new rules upstream to higher management.”

Every Sara Lee distribution center is aware of changes in the rules. In fact, part of the performance rating for distribution centers requires shipping to move trucks through the system in two hours or less, Siefring said. Internally, the company has expanded its track-and-trace function to make sure that accessorial charges are handled properly and paid as warranted. One result of expanded track-and-trace is a clear picture of which consignees are responsible for lengthy unloading times. “When we know where the unloading problems occur, we can work with customers to give them an incentive to turn trucks more rapidly,” he said.

Fewer empty miles

Sara Lee also has a program in place to help carriers avoid empty miles. One of the most difficult lanes for many Sara Lee carriers is from a plant in West Point, Mississippi, to New York City, Siefring said. “We have eight to 10 truckloads a week moving across that lane,” he says. “As many might expect, we don't have a long line of carriers waiting to take those loads. We have tried to divide those loads among carriers who can handle about four of the New York deliveries. From New York, the carrier is left to arrange another load from a second shipper to a receiver in the Carolinas. That second load puts the carrier close to one of our raw materials points that ships to West Point, so we eliminate the difficulty of getting to rural northeast Mississippi.”

The effort to help carriers position equipment near Sara Lee freight is having an effect. The company pays for empty miles, but is paying for fewer empty miles in 2004 than it did at the same time in 2003, Siefring said. Taking control of booking inbound freight to Sara Lee plants also has helped cut payment for empty miles. “Booking inbound freight on carriers that we typically use for outbound delivery has helped cut deadhead payments,” he said. “The programs we have in place can sometimes keep a truck moving in our system for two to four movements before it goes on to haul other freight.”

Kraft Foods has taken a from-the-top-down educational program on the new hours of service rules, Tom Domanski said. A big reason for that emphasis is the Kraft private fleet. “We operate a fleet of more than 300 refrigerated trucks,” he said. “That fleet operates as a profit center. We do not have a blank check for the private fleet; we cannot operate it as a cost center. In fact, we have to justify the existence of that fleet to upper management every year. Simply providing transportation capacity is not considered a sufficient reason for keeping the fleet.”

Company-wide education

Kraft put on a traveling road show to train everybody in the supply chain from the vice-president of supply chain all the way down to distribution center personnel, Domanski said. In particular, the training process was aimed at sales personnel. “We met with carriers to make sure we knew the issues that needed to be covered,” he said. “We also made sure that drivers in our own fleet understood the rules. The changes extended into the information technology department for updating software, because the private fleet uses electronic logs.”

Information from the company track-and-trace program is analyzed monthly. “Wherever we see an opportunity to take excess time and cost out of the supply chain, we take steps to make sure it gets done,” Domanski said.

As a result of operating a private fleet, Kraft is aware of the necessity to utilize drivers efficiently. The company wants to structure its loads in such a way that Kraft becomes the shipper of choice for truckload carriers as well as the Kraft fleet, Domanski said. “We try to make things easy for drivers, and we try to make things easy for our shipping sites,” he said. “At the same time, we are trying to make things easier for the receiving community.”

When carriers have information in advance, they can plan for fleet utilization, Domanski said. Kraft holds weekly conference calls with its carriers to let them know when and where freight will move. “We may not have enough advanced information to make pick-up and delivery appointments at the time of those conference calls, but we can give carriers enough early warning that they know where to begin repositioning equipment,” he said.

Planning for spikes

Advanced planning also helps Kraft deal with capacity issues, Domanski said. The company uses data from the previous year to try planning freight movements eight weeks in advance to get ready for seasonal spikes in volume and freight demand.

One way to get accurate information is the Kraft ride-along program, Domanski said. In this program, upper managers, often vice-presidents make unannounced visits to distribution centers, both Kraft private facilities and third party facilities. These managers then ride with a driver to make a delivery and help with the loading and unloading process. Only the manager and the load dispatcher know beforehand when this will happen. “None of this is announced so the distribution centers do not know that a senior manager is scheduled for a load,” he said. “The result is firsthand knowledge of distribution conditions.”

Changing the driving hours has forced shippers and carriers to view the supply chain as a series of assets, Mark Sampson said. In one sense, the distribution function remains basically the same, because shippers have to find a balance between the assets represented by the distribution centers and their labor supply and the driver and equipment assets of motor carriers. In the past, LambWeston concerned itself mostly with on-time delivery and allowed carriers to work out pick-up appointments with distribution centers or third-party warehouses.

The new rules have changed the balance so that LambWeston has had to begin looking at timeliness at the origin warehouses. “We have found that 20% to 50% of trucks don't show up on time for loading,” Sampson said. “This can be a real problem, because we have begun to put pressure on warehouses to pre-pick loads to have them ready when the truck arrives. With loads pulled from storage and sitting on the dock, trucks have to be on time to make the whole system work.”

Conserve driver-days

Driver time is at a premium under the new hours of service rules, Sampson said. With so much of its production located in the Pacific Northwest, LambWeston is acutely aware that traffic consumes a large number of driver days. One way to conserve driver time for carriers is to ship by rail to forward warehouses that are closer to the final receivers. Rail shipments at LambWeston are increasing. Perhaps the alternative to losing the entire longhaul revenue stream to the railroads would be for truckload carriers to enter more partnerships with rail lines for the linehaul movement. “In the end, however, all freight eventually delivers by truck,” he said.

Since the new hours of service rules went into effect, distribution efficiency has improved, Matt Schlosser said. In fact, parts of the distribution process have become simpler, which is not to suggest that efficiency makes things simple, he said. “The opposite is true,” Schlosser said. “It is very difficult to make things simple.”

However, getting the word out is possible. The vice-president of sales at Hershey's Foods knows what the hours of service regulations mean, and he works with customers to improve the distribution process, Schlosser said. “Coping with the rules costs money,” he said. “We know which customers cause the most delays for carriers, and we know how much delay they cause.”

Build efficient loads

The new rules have caused Hershey's to build more efficient, cleaner loads, Schlosser said. That does not especially mean heavier loads, but loads that are easier to deliver. In particular, this means cutting down on the number of multi-stop loads. If multiple stops are still necessary, the company tries to group the stops in a particular geographic area so that the carrier has a better chance of getting all the freight off the trailer in a shorter period of time, he said.

Hershey's has also attempted to help carriers make better use of their equipment. Instead of asking for drop trailers at each facility, the company has formed a common trailer pool for use by the Hershey's plant sites grouped fairly close together in central Pennsylvania, Schlosser said. “Carriers can deliver trailers to the pool area and let us worry about getting them to the loading site at the appointed time,” he said.

As capacity in the industry has tightened, carriers can handle only a given number of truckloads. Hershey's has tried to make productive use of those loads by moving them directly from manufacturing to customers, Schlosser said. The idea is to plan for freight demand and get rid of that extra transportation leg between the plant and a forward warehouse that does not result in delivering goods to a paying customer, he said.

Contracts won't help

Although the American Trucking Associations recently has announced a model contract for shippers and carriers, the relationship between the two groups depends more on relationship than contract, Schlosser said. “Typically, shippers and carriers want to do business with one another,” he said. “Shippers need transportation capacity and try to position themselves as the shipper of choice in order to receive premium service. If we need a contract to specify the rules of doing business, the relationship already has started on a downhill slide.”

As seems to happen with every panel discussion for the past three years, shippers and carriers expressed concern about load security. Some carriers remarked that receivers act as though every load is contaminated unless the carrier can prove otherwise.

Nestle has noted an increase in the number of rejected loads, Lombardo said. This is particularly true for inbound loads of raw materials. The potential for compromising the integrity of inbound ingredients drives quality control personnel absolutely ballistic. On the finished goods side of the business, the concern is a little less intense, because the products are packaged, he said.

“We have started using cable seals or bolt seals,” Lombardo said. “We know that someone who wants into a load will get in regardless of the seal. The best we can do is to make things difficult enough that an intruder will move on to the next trailer. Better seals cause trouble with receivers as well. We often hear from receivers who say that they do not have a bolt cutter to get into trailers sealed with cable or bolt seals.

“The real issue for load security is to control the load. We need to control entry to our facility, control when trailers are loaded, and get them moving as soon as they leave the dock, so that loads are on trailers for as little time as possible,” Lombardo said.

Communication stops rejection

Sara Lee has not noticed any great increase in rejected loads, Siefring said. Still, common sense has begun to take over again after the initial period of worry about anything that looked out of the ordinary. Communication is the key to preventing rejected loads. “We all know that drivers need to get inside a trailer from time to time, mostly to move freight around to alter axle weight,” he said. “The simple solution is for drivers to call before breaking the seal.”

Like Nestle, Kraft put most of its emphasis on inbound freight in the period immediately following 9/11, Domanski said. That level of concern has relaxed some recently, especially, because the company has secure distribution centers. Kraft takes one extra step for security with its private fleet. Trailer doors are secured with locks in addition to seals, he says. Carriers are encouraged to use locks as well.

A number of loads were rejected from LambWeston soon after 9/11, but not many have been questioned recently, Sampson said. Apparently many customers have instituted new quality control procedures that help maintain product security. “We are actually more concerned about thermal abuse of our products than we are about contamination,' he said. “Receivers need to know that checking the temperature of frozen potato products requires a pulp thermometer, not just an infrared scan. Carriers need to train drivers to pay attention to load temperature in transit. This is one instance where load tracking looks like a good investment so that the carrier can prove that the unit was running throughout a trip.”

While the sensitivity to the possibility of contamination has subsided over the past three years, shippers and carriers must remain on alert for potential problems. Risk to a business of the loss of its reputation because of product contamination is not insurable, Schlosser said. When the system acts as designed, product is protected, and the only real danger is physical damage. “That problem needs to be watched, because we are not interested in selling damaged candy bars. The public will not buy damaged candy, and carriers, most assuredly, do not want to buy damaged candy that no one else will buy,” he said.

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