TRANSPORT

 


As quality and volume issues drive major changes in transportation, three solutions are on hand to help ship owners steer forward

 

Making the right moves in shipping

Forest product companies find themselves operating in an ever-changing environment. As a result, the transportation and distribution of paper, pulp and timber are undergoing rapid change. The main drivers of changes are the larger volumes which need to be transported and the tougher quality requirements that have to be met. One of the major trends that transportation companies have had to face up to over the last few years is the increasing size of their business partners on the pulp and paper side. An increase in scale is not new in itself, but the impact and speed of the changes over the last few decades have been overwhelming.

 

Quantity and quality

In the early 1970s, shipping companies boosted carrier capacity from the traditional 500 tons to 2,000-3,000 tons. In turn, this made it impossible for shipping companies to provide a door-to-door service as inland waterways could no longer be reached. In the 1980s and 1990s, transportation companies were forced to branch out into other areas to meet customer needs. For example they invested in stevedoring companies, added extra terminal capacity and expanded fleet sizes.

More recently, the transport industry was confronted by mergers of the scale of Stora and Enso. The forest products industry is still very fragmented and there is huge potential for further merger activity as the industry searches for economies of scale in an increasingly competitive environment. As a result of consolidation moves in the forest product industry, the shipping sector now has to contend with a declining number of customers. But at the same time, they are faced with larger volumes to transport. Customers also have to deal with increasingly complex transportation issues as they try to gain economies of scale. Large ship owners who can provide both volume and customized solutions stand to benefit in this situation.

As buyers of cargo space, the forest product industry is in the middle of a merger and takeover process, and as a seller of this cargo capacity, the shipping industry will have to adjust accordingly. Going forward, concentration on the shipping side is also to be expected. One of the major drivers behind this concentration will be the availability of capital for expansions in the shipping sector. Only a certain sized company will be able to secure sufficient capital to carry out large-scale investments, for example in a new fleet of vessels.

The second driving force in today's changing environment is quality. Since the 1960s, market demands have shifted the focus from costs on to service. Quality no longer involves achieving the 'zero defect' goal alone and customers use a range of criteria to rate and select their suppliers. These criteria include personnel and expertise, flexibility, the ability to react to change, equipment quality, day-to-day dialog between carrier and shipper, damages/claims and environmental awareness. And last but not least, there is the cost versus quality issue. Quality alone does not improve a shipping company's performance, the service also has to be on offer at a competitive price.

Certification is one tool that companies can use to improve quality. The process also allows companies to react to the increasing number of criteria which customers use to evaluate a supplier. But companies need to move beyond the certification process and develop their own quality goals to include:

• full compliance with the requirements of clients and (inter)national regulations
• protecting the environment by preventing pollution
• prevention of errors, hazardous situations and incidents
• maintaining good working conditions for all personnel
• teaming up with the customer to develop dedicated logistical solutions.

 

Three ways forward

In the near future, shippers and receivers will confront ship owners with further demands for large, high quality shipments at competitive prices. This means that shipping companies offering just one standard solution to the industry will suffer in the long term. The challenge for the shipping industry lies in supplying the industry with the right answer in each specific case. This has resulted in three main solutions emerging in the transport world - ‘multipurpose’, ‘integrated’ and ‘dedicated’. The aim of the ‘multipurpose’ solution is to provide a diverse and large fleet of modern, multipurpose vessels that can carry both raw materials and end products in bulk or containers. An ‘integrated’ solution results in a logistical service provider supplying a door-to-door service to the industrial client. ‘Dedicated’ solutions involve transport experts teaming up with the customer. Using this system, specific transport issues are dealt with by developing tailor-made solutions in close cooperation with the customer.

 

Multipurpose

Confronted with the increasing size of business partners and the need to ship large quantities, shipping companies need to prepare themselves to be able to secure large contract of affreightments (COAs). Volume figures are unpredictable and schedules can change from day to day. But with this system, the customer can rely on frequent sailing times as well as demanding flexible sailing schedules with extra times or different routes. For this solution to succeed, transport companies need to operate a large fleet of sizeable, multipurpose vessels and offer a flexible service. Further steps could involve investing in new equipment which can ship containers and sail as a complete container vessel as well. But with the current difficulties in the container market, there are few vessels using this method.

On the move at Wagenborg’s terminal in the Netherlands

Wagenborg Shipping is one of the companies which operates a ‘multipurpose’ solution for the forest products industry. Every second week, the company ships a full cargo of paper from Finland to the East Coast of the USA. The company brings paper and pulp from the St Lawrence river back to the Mediterranean and transports clay from Savannah to the Baltic. The ships also carry all kinds of commodities and other bulk cargoes from the Mediterranean to the continent and the Baltic. The system can be easily modified by altering the shipping schedule, using another vessel or sailing with different commodities and destinations. One of the main advantages of the ‘multipurpose’ solution is that a shipping company can combine cargoes and trade lanes in various ways. When necessary, a company can change the schedule of a single vessel. But at the same time, the availability of sister vessels allows a continuous service to be maintained on the main routes.

 

Integrated chain

Further along the transport chain, a logistical service provider is able to provide a door-to-door service to customers. This ‘integrated’ solution enables the customer to solve complex transport issues with one supplier. Many customers have centralized their logistic systems or are planning to do so in the future. With a new system in place, the company can take advantage of trade-offs across the entire length of the logistic chain. An integral approach also aims to tighten up procedures and improve the flexibility of the logistic operations. The customer maintains full control of all goods during transport or in stock. This makes it essential that the customer is armed with all the necessary information, such as tracking and tracing data.

An example of an integrated solution can be seen in the delivery of paper from Finland to the Netherlands. In this case, paper is produced at a mill located in the Saimaa Lake district with a canal connection to the Gulf of Finland. The paper is then delivered to the Berghuizer mill in Wapenveld, the Netherlands, where it is processed for packaging and other uses. Restrictions on the Finnish side allow a maximum of 2,000 tons of paper to be transported per shipment and limit the length, draft and beam of the vessels.

Wagenborg transports the paper from Vuoksi to Wapenveld via Delfziil, providing sea transport, stevedoring, warehousing and road transport along the way.

In Delfziil, the vessels are unloaded by Wagenborg Stevedoring and the paper is stored in warehouses, situated directly at the quay side. As soon as a shipment of paper is loaded in Finland, full cargo specifications are transferred to Wagenborg Stevedoring in Delfziil via a computer link. By the time the vessel is loaded, every single paper roll is stored in the inventory system at Delfziil. At the other end of the chain, the Berghuizer mill is also connected to the computer, which enables the company to keep track of inventory levels.

When paper is ordered in Wapenveld, the request is printed in the office of Wagenborg Stevedoring in Delfziil, then transferred to Wagenborg's road transport company which loads the paper into the truck. Providing a full service to the paper company provides considerable gains in terms of damage, communications, time needed for trans-shipment and service.

Making waves in transportation

 

Dedicated work

When a forest product company decides to improve its transport system, this often involves changing the company's sea transport methods. In some cases, the multipurpose solution is not appropriate for the company's new logistic system. Similarly, an integrated solution is not always suitable for the company as it may have already designed an integrated system using road and rail transport. In this case, the company needs to look at a ‘dedicated’ solution. An example of this solution would be Stora Enso's new cargo unit, which can carry considerably more than a standard container unit. Under the new system, RoRo (roll-on, roll-off) vessels will start sailing from Sweden to Belgium from the end of November this year. When the last of the vessels is delivered next year, Wagenborg will be operating three RoRo vessels with Stora Enso and personnel from the two companies will continue to work closely together.

 

Flexibility is the key

It is clear that the two major forces at play in the transportation industry today are volume and quality. Growth in volumes and improvements in quality call for concentration on the shipping side and acknowledgement that quality moves beyond the certification process. While the three solutions outlined can partly help to solve the transport dilemmas of forest products and shipping companies, it is important that companies do not mix the three solutions or they will find themselves searching in vain for the benefits. The three solutions also provide a healthy long term strategy for shipping companies who are used to offering one standard solution. The bottom line is that the maxim 'adapt or die' has never been truer than in today's transport market. Those who fail to respond quickly and flexibly to these changes will lose out to their competitors.

Egbert Vuursteen is managing director of the Wagenborg Group. Jaap Teekman is director charting at Wagenborg Shipping in the Netherlands. This is an extract from their speech at PPI's 13th Transport Symposium in Quebec, Canada.



Pulp&Paper International October 1999

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