Products to Market Transportation Essentials
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1 Products to Market Transportation Essentials COFI April 2015 Mark Thomson GM, Transportation West Fraser
2 Amazon Is Taking Over The World!
3 What do you need to maximize your supply chain efficiencies??
4 Be A Low Cost Manufacturer
5 Cost Effective Rail Service
6 An Efficient Transload Operation
7 Reliable Trucking
8 Shipper Challenges 2014 was a difficult year for Shippers Longer, harsher winter Extreme car shortages Vancouver Port truckers strike US West Coast Port Labour dispute Changing product mix on rail (oil/frac sand) Seasonal long haul truck shortages
9 Railway Network
10 Railway Network Increased volumes by grain, oil, and fracsand putting pressure on some parts of NA railway network As housing starts continue to trend upwards, we could see a perfect storm like Difference will be a simultaneous surge in multiple sectors rather than just housing
11 Railway Network Railway network only as strong as weakest link Interchanges like Chicago are already problematic with no short term solutions in sight 25% of all NA traffic touches Chicago -45,000 cars per day
12 Railway Network Building Railway infrastructure is expensive Infrastructure needs to be built years ahead of the business cycle Getting a railcar may not be as much of a challenge as getting a spot on the train
13 Railway Network The supply chain has to collaborate more effectively: 1) Promote greater joint efficiencies 2) Work with governments to promote additional network infrastructure needs
14 Railcar Supply Shipper s two biggest issues with all modes of transport are: Consistency of supply Price Shippers and Railways have to re-examine: Multi modal solutions (hub and spoke model) Reduce empty rail miles (triangulation) Reduce delays at origins and destinations Interchange points on cross border shipments
15 The Impact Of Freight Rates Forest products has one of the highest delivered costs for any commodity Product will ship to the lowest cost regions over time
16 The Impact Of Freight Rates x4 Random Length FOB Mill Avg Random Length Chicago Adder Freight as a % of delivered cost 14% 20% 22%
17 Will Lumber Follow the OSB Path? SYP production is the fastest growing lumber segment in NA SYP gaining more acceptance in marketplace High percentage of SYP is shipped within a 200 mile radius from where it is produced
18 Will Lumber Follow the OSB Path? SYP freight costs are much lower as a % of delivered price vs Western SPF Will SPF markets be pushed back further West like OSB? What will the effect of a new SLA and BC reduction in AAC have in lumber distribution?
19 Long Haul Trucking Challenges
20 Long Haul Trucking Challenges Avg. age of long haul driver is 55 Difficult to attract new drivers long hours, low pay Industry has not always treated trucking sector as well as we should
21 Long Haul Trucking Challenges Industry can help improve trucking by: Extending loading hours Reducing empty miles (triangulate/collaborate) Reducing wait times at mills and final destinations Appointment scheduling Contracting work (consistency) Use your companies buying power on fuel, tires, etc. Providing a more friendly workplace (access to facilities)
22 Port Metro Vancouver
23 Port Metro Vancouver PMV container volume has grown by over 1 million TEU s (twenty foot equivalent containers) in last 10 years million TEU s million TEU s
24 Simple Math! 1,639,924 Total Number of Containers PMV Handled in % 1,161,913 Total Number of 40 Containers PMV Handled in 2014
25 597,976 Import 40 s Forest Products!!! 138,191 Empty s 40 s 425,746 Export 40 s
26 Why We Matter! Imports 80% 2005 Exports 20% Forest Products!!! 2015 Imports 55% Exports 45%
27 Why We Matter! Over 70% of all 40 Export Containers loaded with FP 30% of all loaded Imports & Exports out of PMV Since you need an empty can to load We actually are involved in 60% of the container moves Forest Industry is responsible for 150,000 direct and indirect jobs in BC Lumber exports are the fastest growing sector in the container market in last 5 years
28 The Domino Effect
29 The Domino Effect FP Export business being challenged in PMV : 1) Stability of Supply Chain 2) Increased costs 3) Lack of focus/priority Drayage issues need to get solved once and for all but economics of business has to stop being ignored
30 The Domino Effect Although PMV container volumes up 3% in 2014: Lumber container volumes down 13% Pulp containers down 17% Volume increase mainly due to diverted US West Coast due to labour issue Labour agreement reached in March with ILWU backlog will take 3 months to catch up
31 The Domino Effect Inefficiencies in the supply chain are being absorbed by shippers costs keep rising It is not a matter if FP companies can pay, it is about how competitive the business is The cost to ship to China from the Interior BC used to be about the same as Texas (largest SPF market in US)
32 The Domino Effect 2005 Import container Asia to Vancouver - $3000+ Export container Vancouver to Asia - $ Import container Asia to Vancouver - $1500+ Export container Vancouver to Asia - $1000+ Exports now critical to import business
33 The Domino Effect DP World purchase of Fairview Terminal in Rupert will increase options for shippers Phase 2 expansion will see terminal capacity grow by 60% by 2017 Potential for Rupert to capture more PMV business both import and export
34 The Domino Effect If FP companies reduce PMV container usage: Container rates will rise Container Terminals costs will rise Importers may start to look elsewhere PMV will become more of a US Cargo pass through instead of a true gateway
35 Vancouver Drayage Issues Drayage issue has been problematic for over 15 years Last 3 years have been riddled with numerous work shutdowns Wait times, driver compensation, off dock container movements, & corruption have been some of the complaints
36 Vancouver Drayage Issues Too many trucks chasing too little traffic Approximately 4000 daily gate truck transactions in PMV terminals Driver needs to make 4-5 movements per day to make a decent living Truck licenses recently reduced from nearly 2000 to still too many
37 Vancouver Drayage Issues New Trucking Commissioner -Andy Smith - named February 2015 Industry Advisory group will assist in driving change
38 Vancouver Drayage Issues Solutions: Make all movements in/out Port double ended 30% or less transactions are double ended Standards for correct paperwork Bad paperwork causes minimum 30 min delays 0.5% error rate can cause 10+ hrs of lost time Limit truck volumes to 65% of gate capacity Most major World Ports operate at this level Allows flex time for problems, reduces wait times
39 Summary Need to do more with less More collaborative supply chain solutions Freight costs will influence future market distribution Shippers cannot continue to pay for supply chain inefficiencies fix the symptoms first!!!
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