Overcoming Rail Logistics Congestion in the Chemical Industry

As shale gas becomes a game-changer for the US chemicals industry it will, in all likelihood, promote growth within the chemicals market. However, the negative side of this change is that it is also slated to become a significant factor in constricting transportation capacity, with shale oil and fracking materials consuming rail cars and tank trucks.

On top of this, the rules of engagement are changing for the types of rail cars that companies are compelled to acquire and, in combination with the backlog in tanker manufacturing, market strategies are being severely impacted.

All of these elements combine to raise a number of key questions which chemical companies and their carrier partners will have to answer:

• How to align and create a win-win relationship between disparate stakeholders using a constrained railroad network?

• How to rise to the new challenges, reduce costs and maintain competitiveness?

• How to develop an innovative approach to market access and transportation?

Taking a new approach

The current shortfalls and imbalances in chemicals logistics are forcing chemical companies to take a fresh look at how they manage and operate their supply chain. Each segment in the chemical industry value chain is looking for new strategic approaches to achieving greater reliability with minimal disruptions, lower costs, easier and more direct route utilization, intermodal optimization, and increased optionality. Achieving this requires truly effective collaboration between chemical companies and rail transport providers which can only be achieved by alignment of common goals and an understanding at C-suite level of the mutual benefits that can be achieved. Reaching this consensus can be easier said than done where long-standing partnerships have been left to stagnate, so how to move forward?

Rising to the challenge

Companies should consider the benefits of bringing in seasoned rail logistics specialist to help executives overcome the challenges posed by a congested rail network, regain control in transporting products to market and achieve stronger, more strategic relationships with rail road partners whilst reducing costs and improving performance. An example of taking this new approach is evidenced by the work we did to help a major chemicals company regain control of getting its materials to market. We reduced their rail shipping costs by 10%, cut transit times from 8 days to 1 and developed a more strategic relationship with the Class 1 Railroad company. Sound interesting?

Where do you go from here?

We believe it is crucial that executives develop a robust strategy and operating plan. A plan that enables them to more effectively leverage their own transportation agenda with the interests of disparate stakeholders that are utilizing the constrained rail infrastructure they depend upon. It's high time we dispelled the all too prevalent view that, companies in a captive railroad situation can't transform their rail capabilities; they can and they must if they are to remain competitive.