Savage Develops New Generation Of Materials Management, Transport
Dec 1, 1997 12:00 PM
SAVAGE Industries Inc may be best known as an operator of coal transportation and handling systems. However, the Salt Lake City, Utah-based company has begun a major push in diversifying its rail transfer operations with the addition of chemicals, petroleum products, and minerals.
The biggest expansion into chemicals and petroleum transloading came this year with the acquisition of 11 Conrail Corporation Flexi-Flo facilities in the northeastern and midwestern United States. All told, Savage has assembled a network of 26 rail transfer terminals in 14 states, with more to come.
"The Flexi-Flo acquisition was a strategic move for us, because it provided an opening into liquids and hazardous materials," says Robin K Davidson, director of marketing and business development for the industrial and rail services unit at Savage. "The key to the acquisition was Conrail's belief that Savage would provide the best value and no-worry service to ensure a seamless transition for our mutual customers.
"We see incredible growth potential in the transloading sector. Demand for rail transfer service is growing, and I doubt that we will ever have too many facilities. We believe many transloading facilities may become more specialized as a result of the rail consolidations. In cities where multiple transfer facilities are located, some that handled a wide range of products in the past may opt to focus on a niche, such as foodgrade.
"As an example, Flexi-Flo had a strong niche in the transloading of difficult-to-handle commodities. We are proud of that heritage and want to continue Conrail's legacy. At the same time, some rail carriers are studying the concept of consolidation to mega terminals in an effort to reduce switching costs to small users and to realize unit-train economics."
Strategic Growth Davidson points out that the railroads need multimodal transloading to reach strategic new growth markets. They have to develop solutions that include trucking because trucks can do things the railroads can't. Average rail shipment time is one to two weeks. Transloading from a local source can handle a customer delivery within a couple of hours.
"We're married to each other," he explains. "For the most part, we have great relationships with railroad personnel. They want us, and we want them. They realize that we can do great things together."
Being linked closely, Savage Industries is affected by what happens to the railroads. "The future growth of the rail/truck industry is heavily dependent upon improved, consistent rail transit times and overall service," Davidson says. "However, problems resulting from current and imminent rail mergers pose potential setbacks for the transloading industry by eroding customer confidence. We may lose some fringe business that will never come back."
Future Outlook Looking toward the future, Davidson says that threats to transloading include high land lease rates and a continued loss of trackage. Trackage is at a premium now in many areas.
"The railroads can greatly assist in the strategic growth of rail-to-truck transloading by providing adequate land and trackage at reasonable costs that do not unduly burden potential transloading opportunities," Davidson says.
"A 10,000-ton-year transloading volume is typical for a smaller facility. It may take 50,000 tons a year, or a very high rate, to justify the cost of switches and track. It's easy to spend $120,000 just on a siding."
Savage Industries has been dealing successfully with the various materials management and transloading challenges for most of its more than 50 years in business. The company is probably best known in the western states, especially in its home state of Utah. However, the company now has operations coast-to-coast in 22 states.
"We are the largest over-the-road coal transporter in the United States, and much of the coal is handled in conjunction with transloading activities," Davidson says. "We transported approximately 40 million tons of bulk commodities in 1997, and coal accounted for a majority of our volume."
The company's service concept has been one of the keys to its success. Savage does everything it can to provide a 'Best Value, No Worry Relationship' in transportation, materials management, and logistics services. Systems are tailored to each customer's needs, and a manager is assigned to each operation.
Past Diversification Over the half century in business, Savage Industries diversified in many directions. The company branched out into various industries including operating the fourth largest underground coal mine in the United States, heavy truck manufacturing, aggregate mining, ready-mix concrete production, explosives manufacturing, tire sales, and land development.
By 1988, the focus had become too broad, and senior management realized the company had to return to the core business. "We decided that we are a materials management and transportation systems company, and we divested those companies that didn't fit our strategy," says Donald Alexander, Savage vice-president of operations. "As a privately held company, we can take a long-term view. We can be more proactive and less reactive."
A further reassessment in the mid-1990s was called Project 50. One outcome of this effort was a decision to organize the company into three customer-focused industry units: Coal and Coke Services, Power Generation Services, and Industrial and Rail Services. The customer base determined the industry grouping.
Flexi-Flo Purchase The Flexi-Flo facilities are among the operations included in the Industrial and Rail Services unit. Now called Savage/Flexi-Flo, the terminals are located in Boston, Massachusetts; Buffalo and Syracuse, New York; Indianapolis and Jeffersonville, Indiana; Philadelphia, Pennsylvania; Cleveland, Ohio; and Detroit, Michigan. Boston, Buffalo, and Philadelphia each have two facilities.
"Conrail did a great job in developing these locations, but rail transfer was not their primary focus," Davidson says. "We plan to increase utilization and build the customer base. Along with Conrail, we can tailor services to meet virtually any transloading need."
Most of the Conrail Flexi-Flo managers joined the Savage team, providing a combined 125 years of bulk transfer expertise. This has helped ensure continuity and a seamless transition.
Workers hired for the Flexi-Flo locations learned about Savage's CSPP/Quality service incentive program, according to Steve Peterson, manager of safety and people development for the Industrial and Rail Services unit. The CSPP initials stand for cleanliness, safety, productivity, and performance. Classroom and hands-on training also covered safety, operational procedures, and regulatory compliance.
Transfer facilities are inspected and graded monthly for compliance with CSPP guidelines. Sloppy housekeeping and incidents will eliminate the cash bonus for that month. Safety is reinforced at monthly meetings and by safety specialists drawn from the ranks at each location. The safety specialists are trained at the Service Support Center headquarters in Salt Lake City, and they serve up to a year.
The Flexi-Flo facilities are open to other carriers, just as they were in the past. Operations have been reorganized to fit the Savage methodology, and each location has gone through a full-blown startup that included grand openings in Detroit and Philadelphia to introduce the new partnership.
Other Facilities Besides the Flexi-Flo facilities, Savage Industries' Industrial and Rail Services unit has transloading locations in Flint, Michigan; Louisville, Kentucky; Chicago, Illinois; Salt Lake City and American Fork, Utah; Portland, Oregon; Bowbells, North Dakota; Encino and Thoreau, New Mexico; Las Vegas, Nevada; Rifle, Colorado; and Dallas, Lubbock, and San Antonio, Texas.
With three of the depots, Portland is home to the most transloading facilities in a single location in the Savage Industries Industrial and Rail unit system. The Flint and Louisville X-rail depots operate under contract to CSX TransFlo.
Addition of the Flexi-Flo facilities has brought a significant expansion to the range of commodities transloaded and handled by Savage Industries. Those locations have a broad customer base and handle chemicals, edibles, plastics, minerals, and petroleum.
Other Savage facilities, particularly those in the western states, have focused on narrower ranges of products. For instance, Salt Lake City focuses on soda ash and Henderson concentrates on cement.
"We transload several hundred thousand tons of soda ash a year in truck-to-rail operations," Davidson says. "With regard to cement, we have capacity to transload up to 300,000 tons a year through the Las Vegas facility."
Since dry products predominate in the Savage transloading network, most of the facilities are outfitted with conveyors. The Industrial and Rail Services unit uses enclosed belt-type conveyors from Wilson, RST, Sackett, and Cambelt. Flexi-Flo locations also have portable pumps for liquids and portable air conveyors for plastics.
Truck Fleet While the company has its own tractor-trailer rigs at many of the transfer locations, Savage trucks don't drive the operation. Mitchell Dascher, Savage vice-president and general manager of the eastern region, says: "We provide truck transportation when it makes sense within the overall service package we provide to our customers. Many of our terminals are open facilities where customer trucks are welcome."
Systemwide, the Industrial and Rail Services unit operates specialized and dedicated tractor-and-trailer rigs. Vehicles are configured to meet specific customer needs.
"First and foremost, we're a materials management company," Dascher says. "Ours is a customer-driven system. We apply the Savage experience, expertise, and capital to provide quality and 'no worry' service.
"We only run trucks if that's what it takes to satisfy the customer. We haven't added any of our own trucks at the Flexi-Flo locations. However, new business will be evaluated on a case-by-case basis to see if it makes sense to run our own trucks."
Savage operates International, Kenworth, Peterbilt, and Volvo tractors. Equipment is tailored to specific jobs. The tractor fleet is young, with an average age of one and a half years. Tractors are traded at no more than 500,000 miles.
Tractors generally operate within 100 miles of the transloading facilities, although some longer runs have been needed this year due to service problems with the railroads. Tractors often make two or more trips a day.
Dry Bulk Trailers On the dry bulk trailer side, J&L Tank and Beall Corporation are the principal suppliers. "We are very comfortable with the product each manufacturer can turn out," Davidson says. "Our biggest problem is that other fleet operators also like these units a lot, and that results in long lead times."
While the trailer specifications vary somewhat from one project to another, the basic Savage objective is to maximize capacity. In some western states, the company can run combinations with gross weights as high as 129,000 pounds.
Trailers have been customized for maximum efficiency wherever possible. For instance, three-compartment dry bulkers are used in the soda ash operation to enable backhauls. Soda ash is transported one way in the large middle section, and lime is backhauled in the smaller front and rear compartments.
Wherever the company operates, it runs the most efficient equipment it can find. That's part of the Savage System marketing approach that is designed to help customers decrease total distribution costs and improve margins. The system also targets ways to increase flexibilityand improve service.
Savage System Savage holds itself out as a problem solver with the ability to handle difficult jobs. In one example, a customer needed to improve rail transit times and increase railcar asset utilization. Savage designed, constructed, and currently operates a complete transportation system in the Midwest that includes transloading.
Savage provides complete materials management, transportation, and logistics services for the customer. During the winter of 1996-97, rail service was hampered by severe weather. Savage worked with the railroad to ensure that shipments of raw materials to the customer were not interrupted.
Savage considers itself an industry leader in materials management and transportation systems. Its innovative approach to problem solving has benefited customers throughout many industries. The company's strong financial position and a willingness to invest capital in its customers has helped position Savage as a significant multimodal player for the 21st century.
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