This global chemical manufacturing company was facing several challenges with its rail freight each of which had the potential to shut down the client’s production plants:
Embargo – Railcar congestion resulted in an embargo by the railroad, limiting the company’s ability to move freight into and out of the largest plant.
Railcar utilization and availability – As the number of unique product formulas increased significantly, railcars were used as a short-term storage and blending solution. As a result, 70% of the 540-railcar fleet was used for product storage. This significantly reduced the availability of railcars for product shipments.
Inefficient scheduling and routing – Management of rail freight had been outsourced to a 4PL which did not have adequate processes controls and governance to ensure rail freight, routing and scheduling was optimized.
As part of a wider Total Value Optimization (TVO) supply chain transformation engagement, Maine Pointe partnered with the client’s
logistics and plant operations personnel to implement substantial improvements and rail cost reductions.
Railcar storage & demurrage – As railcar congestion increased at the storage yards, advanced placement yards were added, demurrage at the plants increased and extra rail freight costs spiraled to an annualized level of $3.5 million
Higher rail freight costs – An analysis of the rail routes being scheduled by the clients 4PL revealed freight costs could be reduced by optimizing routes using both end-to-end and Rule 11 moves
Increased switching costs at the plants – The increased number of switches required as a result of using railcars for product
storage meant switching costs had increased by more than $1M
To overcome these challenges, Maine Pointe helped implement improvements in the following four areas:
1. Third-party railcar switching – Designed and implemented a third party railcar switching solution and a partnered with the client to
design a dynamic yard management solution. This enabled the company to plan inbound and outbound freight moves more effectively
and reduce the number of moves required. Savings were comprised of rate savings (cost per move) and activity (reduction of the number of moves required). This initiative also helped the client address an embargo on one of their plants that, if not addressed in a timely manner, could have resulted in a plant shutdown. Maine Pointe team members worked with the client, the new third-party switching company and two railroads that shared
rights to the tracks connecting the plant to the mainline.
3. Railcar availability reporting – The rail industry’s transition to precision railroading meant the client needed improved visibility to the
status and location of each railcar in its fleet. Maine Pointe partnered with an industry solutions provider to develop a near real-time
railcar reporting tool which allows the client to plan deliveries to plants and inbound and outbound freight moves.
4. Insourced rail freight contracting – As the client recognized the critical need to reduce rail freight costs and improve delivery
performance, the company hired a manager to lead freight negotiations with the railroads. Maine Pointe provide training and support
to improve contracting and procurement processes and develop the ability to forecast and plan capacities which further increased
negotiating leverage.