Chemical firms and 3PLs create closer ties in logistics and safety

Closer ties

22 May 2008 00:00  [Source: ICB]

As supply chains become more complex, chemical firms and their third-party logistics service providers are becoming closer and more collaborative

What is your experience of third-party logistics providers? Let us know through ICIS connect

William Atkinson/Illinois

Historically, third-party logistics providers (3PLs) tended to be niche players in the chemical industry. That has changed.

"3PLs are seeing some larger potential in the industry and are responding with broader service offerings, such as participating in the American Chemistry Council' (ACC)Responsible Care program," says Glen Goldbach, a consultant in the supply chain practice of PricewaterhouseCoopers. "In addition, as chemical companies expand around the globe, they have been asking themselves whether logistics is going to remain a core competency, or if they want to work with 3PLs to handle logistics for them on a worldwide basis. The 3PLs already have the infrastructure in place."

The closer collaboration between 3PLs and their chemical customers is moving forward both in the realms of service offerings and safety and security.

EXPANDED SERVICE OPTIONS

There are powerful partnerships being developed between logistics service providers and their customers in the chemical industry.

For one of its chemical customers, Missouri, US-based Logistics Management Solutions operates a command center at the customer's packaging operations.

"We get a real-time feed on the orders, and then do consolidations from their multiple plants and ship points to create truckload shipments out of LTL [less-than-truckload] orders," says LMS president and CEO Dennis Schoemehl.

LMS also operates a marine command center for the customer. "We conduct event management on their import and export containers," Schoemehl explains. "For example, we make sure that when a container is loaded for export, we get it to the port on time so it doesn't get rolled to the next sailing."

On the import side, LMS provides visibility from the time a shipment hits the port until it gets into the company's own inventory system. So if 10 containers come in, and the warehouse can only unload five, LMS is able to tell the customer which five they should unload, based on the orders already booked.

Another 3PL, global firm BDP International, has launched innovative programs with its chemical customers.

"We are more export-oriented with our clients," says Mike Andaloro, BDP's chief operating officer. "We have found that the chemical industry is clamoring for cargo visibility so that they can make in-transit inventory management decisions."

In response, BDP offers technology tools that let customers track information and documentation. Most important, says Andaloro, the technology is able to run alerts.

"When something is not proceeding as designed, the system will kick out an alert, based on preconfigured inputs from the user," Andaloro explains. This enables BDP and the customer to take quick action.

3PLs play a major role in the logistics effectiveness of US-based Honeywell International's chemical operations. "A key to success with 3PLs is to realize that they are a part of your business, even though they are an outside entity that you pay," says Global Fleet Manager Nathan Hatheway, who is based in the firm's Baton Rouge, Louisiana, US, operations. "You have to communicate with them much more in order to get the job done properly, such as telling them what they are doing right and wrong, and making sure everyone is working toward the same goal."

Honeywell uses Lafayette, Louisiana-based Dupre Transport for its logistics needs.

"Dupre is very versatile, being able to move drivers from division to division and spot to spot, as necessary, which helps with efficiencies," states Hatheway. "In terms of safety, they have a very good driver screening process, to make sure they get good people." Hatheway also attends Dupre's safety conferences twice a year.

Dupre Transport offers a service that analyzes customer manufacturing sites and the need for short-haul services to position the manufactured product at the first point of distribution, such as a bulk storage facility, a railhead, or an ocean site.

"We have on-site management that rolls several services under a single team," explains CEO Reggie Dupre. Once the services are all rolled together, Dupre says it can typically save customers 10-20% by allowing them to remove their own people from these services.

SAFETY AND SECURITY

Chemical companies and their logistics service providers also work more closely to improve the safety and security of operations. In particular, they are participating in the ACC's Responsible Care program.

This is a voluntary chemical industry ­program introduced in 1988 that is composed of codes and practices designed to improve and protect health, safety, security, and the environment.

According to David Gleason, senior director for Responsible Care at the ACC, the industry in 1993 decided to extend Responsible Care from chemical manufacturers to the broader chemical supply chain.

This initiative was called the Responsible Care Partner Program (RCPP). It originally included motor carriers, railroads, terminals, warehouses, barges, and other providers, but not 3PLs. "The main reason was that the concept of 3PLs was not even in place yet," Gleason explains.

By 2000, however, chemical firms were beginning to work with 3PLs on a regular basis. Thus in 2001, 3PLs were added to the RCPP program.

The RCPP extends the Responsible Care ethic beyond chemical product makers to their customers, shippers, and transportation and 3PL companies, among others engaged in the chemical business.

Responsible Care Partners adhere to the same Responsible Care requirements as members of the ACC. For example, all partner companies must:

Apply the Responsible Care management system to relevant portions of their operations. The Responsible Care management system offers an integrated and structured approach to drive results in seven areas: community awareness and emergency response, security, distribution, employee health and safety, pollution prevention, process safety, and product stewardship.

• Obtain independent certification that the system has been fully implemented and functions according to professional standards.
• Measure and publicly report performance.
• Implement the Responsible Care Security Code.

For 3PLs, the RCPP also specifically requires that they have a certified program in-house, and that they use due diligence in selecting carriers to move materials.

3PLs increasingly view themselves as partners in the chemical industry. And chemical firms view their 3PLs in the same light. As the challenges associated with the global supply chain intensify, that mutual reliance will likely become even stronger.

PARTNERSHIP PORTRAIT

One example of a successful arrangement between a chemical company and a 3PL involves US-based firmsOdyssey Logistics & Technology, and specialties firm Chemtura.

One strong point of the relationship centers on Odyssey's ability to utilize technology. Odyssey's own transportation management system (TMS) provides efficiencies to clients.

"This eliminates the need for chemical companies to purchase their own TMS, which, for a large company, could be $700,000 (€451,000) to $2m, plus the cost of loading and managing the data," points out Warren Hoppmeyer, vice president - marketing and sales administration, at Odyssey. "We can hook up to SAP or almost any other ERP [enterprise resource planning] system that a client has."

Overall, the TMS helps clients realize savings in numerous ways. One is freight costs - savings that Odyssey can gain by leveraging the volume of all of its clients using the TMS. In addition, the system looks for the lowest-cost routing, be it LTL, truckload, or intermodal.

"When I came on board, I made an assessment of our corporate logistics group and strategy," recalls Nelson Baltazar, vice president of global logistics at Chemtura. "We quickly realized that we had been tactically focused, and lacked best practices and overall strategy. In other words, we were rewarded for 'chasing trucks.'"

Baltazar realized that Chemtura would either need to completely reorganize, or partner with a 3PL. It opted for the latter.

Chemtura utilizes Odyssey's full TMS solution. "They do everything for us with transportation from cradle to grave, negotiating all modes of transportation on our behalf," Baltazar says.

From a strategy perspective, this gives Chemtura global leverage. "Alone, we are a small shipper compared to some other companies," he explains. "However, when they aggregate our spend with other chemical shipper spend, they can go to market with a larger buy, which gives us cost-reduction opportunities."

Efficiencies have come in other areas, too. "Odyssey has also helped us rationalize our provider base," says Baltazar. "We went from about 120 providers to about 45, which now service all of our locations in North America."

"Our goal is to integrate their services into our ERP system, and then roll it out globally," says Baltazar. "The system has worked well in North America. The next step is Europe, and then, hopefully, Asia and South America."

Sign up for the free ICIS Chemical Logistics newsletter: www.icis.com/e-newsletters

ICIS Copyright © Reed Business Information 2009

< previous article(VIDEO – ICIS news Americas Lunchtime Bulletin 30 Oct 2009)

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.