Shipper Profile

April 1, 2001
Rohm and Haas Seeks Strategies To Counter Truck Driver Shortages

TRUCK DRIVER shortages may force Rohm and Haas Company to use more rail transport in the future. Currently, trucking handles the overwhelming majority of outbound bulk shipments.

Greater use of rail also would mean increased transloading activity for the Philadelphia, Pennsylvania-based chemical company. Rohm and Haas already does quite a bit of activity through 18 third-party rail transfer facilities in a network that stretches from Maine to California.

“Trucking companies do a fair amount of longhaul bulk shipments for us now,” says Daniel F O'Leary, Performance Polymers bulktruck operations manager. “However, driver shortages and likely changes in driver hours of service make it increasingly important to move away from longhaul trucking. In the future, we want trucking to focus more on local freight.

“Longhaul trucking just developed into its dominant position over the years. It seemed like the best way to do business at the time. The driver shortage is getting worse, though, and it's becoming more difficult to find people willing to pull long-distance freight. We probably won't save much money with rail transfer, but it will give us a means of moving our products closer to our most distant customers. Final delivery can be handled through rail-transfer locations.”

O'Leary isn't signaling any overnight change in distribution strategy, though. The Performance Polymers unit spends about $50 million a year on transportation. Much of that goes to trucking, which handles an overwhelming majority of the 45,000 to 48,000 outbound bulk shipments in North America — United States and Canada — each year. Rail and barge predominate for inbound and interplant activity.

“Most customer shipments are by truck, whether bulk or packaged,” O'Leary says. “A relatively small number of customer shipments are moved by rail at this time. In many cases, transport mode is dictated by the capacity of customer storage tanks and the inability of the railroads to provide predictable service.”

Domestic Traffic

Approximately 90% of the outbound shipments are to customers in Canada and the United States. With the exception of intermediate product shipments to Mexico, the US plants have little international activity. “We have Rohm and Haas units in other parts of the world, and we primarily serve as a backup to them,” O'Leary says. “Many of our products are competing with others so we want to make them as close to end use as possible and save transportation dollars.”

A significant amount of the international shipments of finished products are handled in drums and intermediate bulk containers. Tank containers also are used. Rohm and Haas recently began shipping intermediate materials from its Deer Park, Texas, chemical plant to Mexico in parcel tankers.

“We're moving five million pounds per shipment to Mexico,” says Lee R Barron, monomer rail fleet manager at the Deer Park plant. “After being unloaded into storage tanks at the Vopak terminal in Vera Cruz, the products are hauled by tank truck to our Mexico plants.”

All told, the Deer Park plant ships around 2.5 billion pounds of intermediate chemicals annually. Many of the products are hazardous and include methyl methacrylate, acrylic acid, ethyl acrylate, and butyl acrylate. Most of these chemicals go to other Rohm and Haas plants, and rail handles two-thirds of the shipments.

The intermediates go into mostly nonhazardous emulsion products that are used in paint and coatings, adhesives, and paper coatings. The emulsions are made at 18 Rohm and Haas plants in Pennsylvania, North and South Carolina, Kentucky, Tennessee, Illinois, Texas, California, Ohio, and the Canadian province of Ontario.

Distribution of the products is coordinated by two groups at the Philadelphia headquarters. The Logistics Group handles commercial activities and is involved in carrier selection. The Logistics and Operations Group oversees logistics, shipping, and distribution activities. It is attached to the largest Rohm and Haas business unit, Performance Polymers. Twenty-five people are assigned to the two groups.

Distribution personnel also are in place at the 18 Rohm and Haas plants in the United States and Canada. They schedule and monitor outbound and inbound shipments using software from Chesapeake Decision Sciences.

All shipment details are computerized, and most plants have the capability to e-mail loading schedules to the carriers. A graphic display shows how long it will take to load a tank trailer, and product inventory is constantly updated. A program is underway to allow for two-way electronic exchange of all pertinent data for shipment between the plant and the carriers.

Transport Mode

Transport mode is determined by the logistics team after discussion with business personnel, and trucks are the choice for most outbound shipments. Many customers lack rail or barge access, or they don't have the storage capacity to accommodate large bulk shipments. Inbound movements of intermediates arrive in bulk trucks and in rail tankcars or barges.

“Rail is not a big option for the paint industry,” O'Leary says. “The paper industry is a mix. Some customers want only truck shipments, while others request only rail. We choose the carriers in most cases. There isn't much to it on the rail side. We are pleased if we can pick between two railroads since in many cases there are few options.

“We have a small amount of customer pick-up. Prepaid pricing is a limiting factor, making it unattractive for most customers to set up their own transportation. We have strict requirements for customer pick-up. Their carriers must make appointments and arrive on time. We require visual inspections to ensure that the equipment is road-worthy. We're not responsible for contamination in the tank trailer. The customer is made aware of that before we agree to a customer-pick-up arrangement.”

Basic screening and selection of carriers and rail transfer stations for Rohm and Haas-controlled shipments is in the hands of the corporate logistics team, which receives assistance from the Performance Polymers logistics group.

Core Carriers

Rohm and Haas currently works with five core tank truck carriers, and turnover is rare. The fleets are Groendyke Transport Inc, Highway Transport Inc, Quality Carriers Inc, Superior Carriers Inc/Central Transport Inc, and Trimac Transportation Services Inc.

For rail transfer operations, the chemical manufacturer works with Safe Handling Inc (Auburn ME), LMS (Bangor ME), Norfolk Southern Thoroughbred Bulk Terminal (Doraville GA), CSX TransFlo (New Haven CT and Tampa FL), Quality Carriers Inc (Saginaw TX), Pan Western (Las Vegas NV), Ventura/Lesbro (Long Beach CA), and Truck-Rail Handling (Fremont CA).

“We've been adding to the rail transfer facility list, but it's been quite awhile since we made any changes in our tank truck carrier lineup,” O'Leary says. “However, we're considering broadening our carrier list beyond the current five core fleets. We feel we've gotten as much economy as we can out of the current group. We'd like to add some local niche carriers, for instance.

“Performance is the crucial element that we want to see. We won't add any carrier just on the basis of rates. We take a close look at any carrier that wants to work for us. We examine insurance status, DOT safety record, accidents per million miles, hazardous materials training, and financial condition. We try to glean as much information as we can on how a carrier serves its other customers.”

Even though most of the polymer products shipped from Rohm and Haas plants are nonhazardous, the chemical company requests MC307 and DOT407 tank trailers. Multicompartment trailers are used at some plants, including Louisville, Kentucky, which is the most active bulk truck shipping point (more than 1,000 loads just in August 2000) in the Rohm and Haas system.

Satellite tracking is not a Rohm and Haas requirement. However, carriers must have a means of contacting the driver en route, and must make it possible for the driver to contact Rohm and Haas personnel.

The chemical manufacturer looks at many of the same factors as it does for truck fleets when qualifying rail transfer facilities. The company also reviews environmental records and inspects the physical condition and location of the facility. “We want it to be in an industrial area if possible and away from major water sources and populated areas,” O'Leary says. “We want good road access, and we want to be as close to our customers as possible.”

Responsible Care

Rohm and Haas performs a Responsible Care audit on carrier and transfer facility applicants. Responsible Care, an initiative of the American Chemistry Council, affects the entire logistics and distribution operation at Rohm and Haas, according to O'Leary.

Plant personnel are just as concerned with transportation safety as the corporate logistics managers. The plants do annual hazmat shipment reviews. In addition, Rohm and Haas tracks vehicle accidents per million miles for each of its carriers. Incident reports are filed with the chemical company when any amount of product hits the ground.

As part of the Responsible Care focus, the chemical company holds regular meetings with its carriers. One-on-one carrier meetings last one or two days. Joint meetings with all five carriers are conducted over a couple of days. The most recent joint carrier meeting was in February in Louisville, Kentucky.

“At all of these meetings, we remind carriers of our expectations for safety and performance,” O'Leary says. “We ask for input from both carrier and plant personnel. We encourage distribution managers from our plants to attend the joint carrier meetings, and we give them a chance to participate by teleconference if they can't actually attend the meeting.”

Performance Expectations

Rohm and Haas sets high expectations for all of its distribution partners. Performance is tracked in detail. “Carriers are doing a very good job of getting performance data back to us,” O'Leary says. “We're very pleased with that.”

On-time performance gets close attention. Rohm and Haas wants at least 98% compliance with its on-time expectation that calls for deliveries to be made within 15 minutes of the time requested by the customer.

“I think the on-time requirement may become more of a challenge in the future due to the driver shortage,” O'Leary says. “We realize our customers may become more demanding in the future. Do our carriers have the wherewithal to meet higher expectations? I'm not sure we have an answer to that question right now.”

Taking the on-time deliveries a step farther, the chemical company is considering an improved process for notifying customers when a shipment will be late. Currently, carriers contact Rohm and Haas when a shipment is running late and the chemical company notifies the customer. “The system doesn't always work as well as it should, and we want to make it more effective,” O'Leary says.

Rohm and Haas also is looking at processes that would enable carriers to measure the chemical company's logistics performance in terms of trailer and driver utilization. “This is a partnership, after all,” O'Leary says. “We need to know what we can do to make our carriers more productive.”

One or more carriers operate out of each Rohm and Haas plant, and they are expected to haul the loads to which they have agreed. When multiple carriers serve a plant, each is assigned lanes.

“We expect them to take care of all the loads for their assigned lanes,” O'Leary says. “We don't allow turn-downs. A carrier can call in an approved subcontractor, but total subcontracting for each carrier is expected be less than 10%. A higher percentage is acceptable in some instances.”

To help carriers perform as efficiently as possible, the Logistics Group provides monthly updates on planned shipments for each plant, plus an extended 18-month business projection every quarter. Carriers must acknowledge their ability to handle the assigned volume with each new 18-month projection.

Carrier Creativity

Through the business projections and carrier meetings, Rohm and Haas logistics managers try to give fleets the tools needed to operate efficiently. However, O'Leary believes tank truck carriers need to show more of a willingness to innovate.

“The bulk truck industry needs to become more creative,” he says. “They need to draw some lessons from the less-than-truckload fleets on the use of relays and interlining for longhaul movements. They need to develop true alliances where they really help each other.

“I want to see more bulk carriers catch up with the 20th century. We're already into the 21st century, and the tank truck industry is lagging behind. I consider Steve Rush (president of Carbon Express) to be one of the real visionaries in the tank truck industry. He's always thinking about new ways to do business.

“I meet with Steve every so often just to listen to his ideas. We don't even do business with his company, but we are always bouncing ideas off each other. We met a number of years ago because he was hauling coating products out of our plants for one of our customers.”

Backhaul Opportunities

O'Leary goes on to say that he wants to work with carriers to build more backhaul traffic within the Rohm and Haas environment. “The sort of technology being used by and could play a role in that effort,” he says. “We believe we could modify our current operations to create more backhaul activity.”

While the Logistics Group is always looking for ways to cut costs from distribution and transportation activities, O'Leary realizes that carriers must make a decent profit from their efforts. However, carriers must be able to justify requests for rate increases.

“Carriers make a valid point when they say they need a better return on investment,” O'Leary says. “Tank trucking has been a low-margin business throughout the time that I have been in this job. There are a lot of fleets running on their margins. Carriers must determine what they really need, though. I don't think they have built a compelling enough argument for the rate hikes they are requesting.

“We're seeing requests for 5% to 6% across the board, and that is unacceptable in today's marketplace since we will not be able to recoup those dollars on the sales side. Carriers need to focus their rate-increase efforts on the lanes that need the most improvement. They also need to be more willing to walk away from business that doesn't make sense.”

Fuel surcharges are another issue, and O'Leary says quite a few are in effect. Contracts generally determine the amount of the surcharge, but fuel cost has escalated beyond the levels set in some contracts. “We're making adjustments and updating contracts as necessary,” he says.

While Rohm and Haas works hard to squeeze as much efficiency as possible out of its distribution and transportation network, strong tank truck carriers are crucial to the success of the program. The same goes for the rail transloading facilities that may become even more important in the future.

“We want to deliver quality products in the right condition at the designated time,” O'Leary says. “Our whole distribution system is set up with these goals in mind. Our carriers and our transfer facilities do a very good job. We're dealing with top-tier partners. We believe we really have some of the best players in the industry working with us, but we also know we cannot stand still. We must continue to find ways to drive cost out of our distribution systems.”