The struggling mills, facing long-term declines in paper demand and intense international competition, wanted to grab every order they could. Changing market conditions led to variable demand levels for the mills. Instead of having a 30-day outlook for paper orders, the visibility shrank to just 10 days.
And that meant too short a lead time for Omya and its regional railroad partners, Vermont Rail System and Pan Am Railways, to reliably ship tank cars laden with limestone slurry. In general merchandise service, it took the tank cars anywhere from seven to 10 days to reach the mills.
“Having that variability…put us in a position where we were losing business to truck,” Michael Bostwick, Pan Am’s executive vice president for sales, said last month at the North East Association of Rail Shippers conference.
“Something had to change,” Sheldon Ellis, logistics manager for Omya North America, told the conference.
There was no way to smooth out demand from the mills. So Omya figured it had to focus on the one thing it could change: The variable transit time its tank cars faced on the railroads.
“The only way that was going to happen was with collaboration,” Ellis says.
Omya convened a meeting at its Florence, Vt., plant in November 2015, including everyone involved from Omya, VRS, and Pan Am.
After a daylong meeting, they developed a new plan for weekly unit train service that required changes on everyone’s part. Omya would have to load the cars in blocks. VRS had to stage the cars and build the train. And Pan Am had to commit to running the slurry train regardless of the car count.
Operating a unit train reduces switching on VRS, bypasses classification at Pan Am’s East Deerfield Yard, and limits switching at Pan Am’s yard in Portland, Maine, where the blocks are added to trains bound for the trio of mills.
“It’s the Hunter (Harrison) philosophy: Touch it one time, never touch it again,” Bostwick says.
The 70-percent reduction in car handling eliminated the transit time variability. Omya has the cars loaded by Friday night. VRS builds the train in its Rutland, Vt., yard and delivers it to the interchange at Bellows Falls, Vt., Saturday mornings. Pan Am picks it up and runs it to Portland, with delivery to the mills by Monday evening.
“Since we started this we have not shipped one truck,” Ellis says. The train, symboled BFPO on Pan Am, has been averaging around 55 carloads.
The service began through the VRS-Pan Am interchange at Hoosick Junction, N.Y. But Norfolk Southern’s purchase of the south end of the Delaware & Hudson from Canadian Pacific in the fall of 2015 ultimately changed traffic patterns and swelled merchandise volumes. VRS ran out of room at Hoosick to build the unit train.
So last year VRS made Hoosick Junction a gateway for westbound traffic and Bellows Falls the gateway for eastbound traffic, and the Omya train shifted to the Bellows Falls interchange, says Gerry Racette, vice president of business development for Vermont Rail System.
Certain states allow their local jurisdictions to assess a PROPERTY tax on inventory. Don’t confuse Income taxes with property taxes. As mentioned below, Ohio was one of them. There are others but I can’t remember all of them ( I believe Georgia also taxed inventories, but it’s been a few years since I filed prop tax returns).
Still baffled by 10 days transit time for what one could drive in a couple of hours. How could the RR not make this work.
Until 2009, the State of Ohio collected tax on business inventory on December 31st of each year. The tax was terminated to help Ohio businesses become more competitive with those in other states, hopefully to preserve Ohio jobs.
Is this the new PanAm? Aggressively working for business.
Businesses do not get taxed on stockpiled inventory, at least in the US. Just like us people, they get taxed on their net income. Businesses don’t want to stockpile inventory since they will have to pay for it long before it is used, which ties up cash that could be used for other things.
Businesses are taxed on stockpiled inventory. That’s why everyone is moving to just in time delivery.
It’s nice to see some additional traffic on the Conn River. It brought to mind a similar move on portions of that route.
In the 1960s B&M JS-4, a Monday – Saturday afternoon freight between White River Jct., Vt. and Springfield, Mass. would pick up a block of East Deerfields at Brattleboro. Saturday’s pick up was light, mainly a few empties, but on the other five days, it could run up to 50 cars, 30 or more being loaded with A & P feed, both bulk and bagged, out of Crosby Milling Company, destined for points in Maine. The next afternoon the cars were in Rigby Yard, South Portland, having been forwarded by one of the MR (Mechanicville to Rigby) trains.
When I was an OTR driver more time then I can count I would see shipments that multiple truckloads from one shipper to a receiver. On one memorable occasion the shipper was loading trucks thru boxcars when they were having railroad problems.
Years ago the solution was to have enough product “stockpiled” on site to meet demand. Is that not a valid solution any longer? Great news nonetheless!
Amazing; two railroads and a customer actually worked together to find a solution to a problem. Might the big 6 learn something? I think KCS is aware of this option.
It is quite impressive to see this train coming through our little town of Chester. In some cases, it has been headed by six units!
Mr. Carbonetti, what time does the train usually come through Chester Depot? I’ll be visiting family nearby next month and would like to get some photos at Bartonsville or the Bellows Falls tunnel, assuming the train is routed south from Bellows Falls on the Conn River Line to Palmer or Deerfield.
I’m always pleased to see a successful innovation in rail operations to keep or gain business. But I am not sure if this is true innovation, or perhaps a return to the distant past when some railroads made the effort to provide true customer service to the smaller shippers. Perhaps it also owes something to the Professional Iconoclast’s ideas of several decades ago.
Too often today it is arbitrary metrics that push decisions, and those metrics may not improve the bottom line at the end of the year.
Great to see all the sides come together and find a solution that benefits all involved. Too bad it takes the regionals and short lines to have the “guts” to step out in this endeavor. Sounds like everything meshed to make it happen. I like the idea Mr. Norton had about a stockpile. There are going to be some variables that will happen, making “just in time” not a reality, weather conditions, delays, possible derailment.
this just goes to show that if everyone works together to reach a common goal, everyone will benefit.
One thing that can be replicated: loading the cars in blocks. Another thing: a unit train for multiple destinations. The third thing: a unit train that feeds blocks into the existing merchandise network in the same manner that magazine and bulk mail printers trucks full truckloads to regional post office distribution sites.
Entirely different is the ability of Mike Bostwick and Omya logistics people and Vermont Rail Systems staff to work with each other. These relationships have been built over years and reflect the commitment from each party. That could be replicated too, but would need a change of priorities from the big railroads.
Could this be taken to the next level? Could additional Omya product flowing in the same direction go to distribution centers or other new customers? Are there other shippers from Vermont that could use a train in this direction (several come to mind). Is there a market in Vermont for Emskip containers from Portland?
This is how you take business back from the truckers for carload. Intermodal is harder but it’s possible, with service again being the key.
Mr. Norton, that was the way it was done “years ago” as you point out. But, keeping inventory on hand is expensive for these companies. Much better to get it right when you need it so it can go into production as soon as possible. I used to work for a paper company in Maine years ago. The problem was to get the railroad to deliver what we needed when we needed it. Apparently they are now listening. This is where Hunter Harrison is showing his smarts. Yarding a train three times between the producer and users that are only a couple of hundred miles apart is ridiculous. Sending it direct is the way to go. Yards have always been the “Achilles heel” of the railroads delaying deliveries and adding costs. The fewer yards the better.