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Opposites may attract, but they have to be aware of each other first. People very different in outlook may meet and form relationships, and so can companies, even if their respective products are completely dissimilar. Take, for instance, transportation by companies with very heavy products and those whose line may be feather-light.
Shippers with dense freight reach legal weight limits but can leave a significant amount of cubic capacity unused in a trailer, container or boxcar. Shippers with lower density freight can fill cubic capacity but leave weight capacity under-utilized. Oddly enough, such companies can be the perfect match for each other.
And so it was with the 2012 Supply Chain Innovator of the Year, Dal-Tile Corp., the largest provider of ceramic tile and natural stone in North America, and three of its partners, Whirlpool; Convermex, a maker of plastic plates, cups and utensils; and Werner Ladder Co. Dal-Tile's product line is very heavy while the others' are much lighter, even Whirlpool's appliances.
By combining their product lines, Dal-Tile and partners simultaneously fill both weight and cube volume. Transplace was the matchmaker, and its efforts benefited each of the shippers by reducing their net logistics cost and combined carbon footprint.
The co-load partners report that they have seen a consistent 20-percent to 30-percent net reduction in process and resource costs as a result of the program.
Ben Enriquez, Transplace's country director for Mexico, acknowledges that collaboration is not a new idea. But the pairing up in this instance was a revelation to the partners. "We acted as a transportation administrator."
The shipments of Dal-Tile and Whirlpool illustrate the success of the program. Previously, Dal-Tile's intermodal and over-the-road shipments might cover 2,000 miles at 20-percent cubic capacity utilization. Whirlpool's boxcar shipments used 20 percent of their weight capacity. Combined, the boxcar shipment now yields 70 percent to 80 percent of the capacity each shipper received in private service, as well as an environmentally friendly mode shift.
Few companies have the product diversity in-house to reach optimum freight density of 10 to12 pcf (per cubic foot), which fills the weight and cube of a trailer or container simultaneously. When shippers are left with a considerable amount of unused cube or weight capacity, they are paying millions annually for capacity that is simply idle.
A standard U.S. 53-foot truckload can hold 43,000 pounds and 3,500 cubic feet of freight at full capacity. A 60-foot high-capacity boxcar can handle almost five times that weight and delivers twice the cubic capacity. In order to "optimize" capacity utilization, companies employ numerous resources and sophisticated software to get as close to these "perfect load" metrics as possible. When either of these limits is reached, most load planners consider the load "full." But is it really?
Consider Dal-Tile transportation needs. In 2011, it transported the equivalent of 11,000 truckloads between Mexico and the U.S. While outbound loads were near the U.S. legal weight limit, each trailer departed Mexico with about 80 percent of the available cubic capacity unused.
Enter Dallas-based Transplace. "When talking with them "¦ we identified the opportunity for co-loading with other shippers, and began working collaboratively to make it a reality," says Sonney Jones, division director, transportation, Dal-Tile Corporation.
In developing the co-loading project, factors such as product type, value and overall density were considered, along with distribution center locations and shipping routes. In addition, the partners, as well as the carriers involved, had to be willing to transport the combined shipment across the border - an already detailed and cumbersome process.
Transplace identified Whirlpool as a potential partner, Enriquez says, and as the strategy evolved, Convermex and Werner Ladder were added. Convermex's plastic cups, plates and utensils and Werner's aluminum and fiberglass ladders were a good match to the targeted density. Moreover, each company also had traffic lanes that corresponded to Dal-Tile's.
All three companies showed interest, but since no two are alike in product, operation or shipping needs, a solution had to be engineered for each opportunity. Understanding how each company was structured, its priorities, potential restrictions or constraints, and what technology infrastructure was in place were just some of the details that had to be established. Transplace then created freight costing models representing both "before" and "after" scenarios that clearly identified logistics cost per unit for each partner.
Then test loading began to determine actual freight compatibility. The partners jointly executed proposed designs to visualize potential obstacles. Continuous improvement adjustments have been implemented over time. In one case, there was too much initial inventory at the origin consolidation point. There was also some crowding of boxcars during delivery, which resulted in erratic peaks in demand for drayage services, additional dwell time and storage costs.
Crossing the border from Mexico can be challenging - with shipments being subject to multiple, in-depth inspections, a plethora of paperwork, and communicating with up to five groups involved in the process, including: a U.S. carrier, U.S. customs broker, Mexican forwarder, Mexican crossing agent, Mexican customs broker, and a Mexican trucking company. These challenges are compounded when two shippers share the same trailer, container or boxcar, and multiple bills of lading.
"The key to the success of this project was education and relationships," says Jones. "We had to develop absolutely transparent processes with both U.S. and Mexican customs because of the 'consolidated' approach, and make sure everything was documented and filed properly. Even though the Mexican government was unenthusiastic about the co-load project, it proved to be a very successful idea that came to fruition."
However, the first Whirlpool/Dal-Tile boxcar to cross the border was flagged after x-ray machines showed a significant density variation in the goods packed solidly into the boxcar. The Dal-Tile and Transplace team walked officials through construction of the co-load process.
Dal-Tile is currently transporting 10 to 12 co-load shipments per day with Whirlpool, Convermex and Werner Ladder. With co-loading, product must be consolidated and deconsolidated somewhere in the supply chain, but it does not mean all products for both companies must be re-handled. The process for each co-load pairing has been carefully designed and monitored to ensure net benefits are meaningful, and that any additional work indeed adds value by eliminating substantial transportation costs.
Based on fourth quarter 2011 performance, Dal-Tile has estimated a conservative $1.2m reduction in freight costs for 2012, with additional benefits available through expanded application of the concept.
Annualizing the start-up phase of Oct-Dec. 2011, the Dal-Tile/Whirlpool co-load resulted in a reduced carbon footprint equivalent to that generated by more than 160,000 gallons of diesel fuel, as well as the nitrogen reduction achieved by moving from truck to rail mode. Annualizing the Dal-Tile/Convermex co-load for the same period resulted in a reduction in carbon footprint equivalent to that generated by over 20,000 gallons of diesel fuel.
"The DNA of this thing is to split befits 50-50," Jones says. However, "Our partners need to have a similar view of freight costs as a percentage of sales revenue. That means we stay synchronized and 'value' the relationship in the same way. No doubt, this is a key point in maintaining, as well as growing, the benefits offered through co-loading."
Keywords: international trade, transportation management, 3PL, third party logistics, logistics management, logistics services, logistics & supply chain, U.S.-Mexico trade, Whirlpool co-loading, Convermex co-loading, Werner Ladder co-loading
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