Huntsman Carrier Alliance Conference examines what it takes to be chemical shipper of choice

WHAT does it take to be the chemical shipper of choice in today’s transportation market?

An expert speaker lineup addressed that question while also reviewing the transportation and overall economic outlook during the 2018 Huntsman Carrier Alliance Conference held in late September in The Woodlands, Texas.

The consensus among speakers and attendees was that the robust US economy shows no real signs of slowing and transportation capacity will continue to tighten. Fleet utilization is effectively at 100%, and there are no surplus drivers. More chemical shipments are being delayed.

Peter R Huntsman, Huntsman Corporation chairman, president, and chief executive officer, addressed some of the broader economic issues. “North America has become the largest economic bloc in the world,” he said. “The rest of the world needs our stuff more than we need theirs.”

Huntsman pointed out that the Trump Administration has helped change the economic balance by cutting taxes and reducing regulatory burdens. “The Trump Administration has generated ore wealth in a shorter time than any other presidential administration,” he said. “Capital investment trends have shifted, and more US companies are investing in new production capacity in the United States, rather than overseas.

“It also helps that we have one of the strongest energy sectors in the world, and the chemical industry certainly has benefitted from that. The peak oil theory has been repudiated, and we now see a world-wide long-term oil glut. Roughly 2.6 trillion barrels of oil are now recoverable with current technology. The Permian Basin now has reserves of roughly 75 billion barrels of oil.”

We’re going to continue to see tight transportation capacity in the chemical industry,” he said. “A lot of factors are contributing to that tightness. For instance, US unemployment is at a historic low. The US transportation infrastructure is becoming more worn down to the point that our employees can’t even get to work during bad weather. Finally, the federal government has too much debt and is spending more than it collects in taxes.”

Ben Cubitt, senior vice-president at Transplace, said the US chemical industry is well on its way to becoming the top global producer. He discussed the importance of becoming a preferred shipper in an increasingly turbulent market.

Data from FTR shows that truck utilization effectively has reached 100%, and there are no excess truck drivers in the market. Tank truck fleets face even more of a challenge due to the need for more specialized drivers and equipment.

The top mission for a preferred shipper is to help keep truck drivers in the industry. Most importantly that means helping to ensure that drivers are paid a decent wage and that the trucks keep moving.

Chemical shippers need to do a better job of forecasting loads. The more lead time, the better it is for the carrier. Shippers need scorecards tracking their own performance with carriers and drivers.

It was noted that drivers certainly are evaluating how shippers and their customers stack up. More often now, drivers are going to on-line sites (somewhat like Yelp) to fill out reviews on shipper and customer facilities. They are looking at ease of access to the facility, predictability of the transport process, and clarity of the loading process.

Better collaboration is needed between shippers and carriers. Good communication is critical. “Remember, this is a partnership,” Cubitt said. “Speed matters. You need to work together to fix problems as soon as they are detected.”

Reggie Dupré, chief executive officer of Dupré Logistics, discussed the state of the industry and the forces that are shaping it. He said US industrial production is growing steadily, and that pattern is forecast to continue into the 2020s. Chemical Week forecast 3.8% chemical industry growth in 2018, while National Tank Truck Carriers projects 3% growth for tank fleets.

All of this means more truckloads of chemicals next year and beyond. Dupré also pointed out that he sees nothing suggesting that truck utilization will fall lower than 95% even in the slowest months.

“Any delay for any reason raises the cost of transporting a load,” he said. “There is no slack time in our schedules. Any delay is a huge disincentive. We must be as productive as possible. Tank trailers are as full as I’ve ever seen them.

“Today, it’s all about people. We have to do everything we can to retain our employees. We have to treasure our workers. When a driver leaves trucking, he usually goes into construction or manufacturing. We compete head-to-head with those sectors, and we are losing.

‘We’re no longer raising children to be truck drivers. By 2026, we will need 920,000 more drivers. Truck driver quality is falling. A higher percent of driver applicants are failing drug and alcohol tests. The failure rate will go higher once the drug and alcohol test clearing house is operational.”

Truck driving is now seen as a job of last resort. “We need to improve the quality of life for truck drivers, and we need shippers to help us do that,” Dupré said. “This effort must involve chemical plant personnel and shippers’ customers.

Dupré described a strategy that would include more dedicated operations that would provide more stability for drivers. Intermodal could be a more cost-effective approach for long-lead shipments. Better shipment management could be achieved through more involvement of 3PLs.

Higher driver pay is critical. Dupré pointed out that many oilfield drivers are now making roughly $120,000 a year. “Higher pay is needed to build up the over-the-road driver supply,” he said. “Shippers buying transportation solely on price are leaving freight on the dock. Some of those loads are not moving. We’re already to that point.”

Ed Sands, Accenture global practice leader-logistics procurement services, added that truck drivers can no longer be the shock absorber for wasteful business processes. “You have to focus on making the driver productive,” he said.

He said that there no question that transportation is getting more expensive. Contract rates are up, and double-digit increases are common. Overall carrier investment in truck technology currently exceeds $1 billion.

He said his company’s advice is that shippers may want to avoid the large public carriers when shopping for dedicated transportation. Regional asset players are a better choice. Prices are higher, but the service usually is better.