Dealing with freight fright

By Don Anslow, Digger Magazine, Association of Oregon Nurseries.

Oregon nurseries enjoy climate, soils, and a favorable growing season that is the envy of growers across the continent. Less than enviable, however, is the long distance between Oregon and several of its important markets.  In 2006, 75 percent of Oregon nursery sales — adding up to more than $1 billion — were to out-of-state buyers, according to the Oregon Department of Agriculture. The estimated cost of shipping these goods exceeded $100 million.

There are several factors putting the squeeze on truck supplies and freight prices. They include market forces, road congestion, and even rail initiatives to stop handling certain commodities.

Then there is the effect of rising fuel prices. As of this writing, the average cost of one gallon of diesel fuel was $3.44, according to the Advantage Oregon Web site.

The cost of freight — already a major concern — may be approaching the tipping point for some buyers at the far end of the transport lanes. But rather than reach for the panic button, some Oregon growers are facing freight fright with a plan to exploit new transportation opportunities and promote the lasting value of plants grown in Oregon.

Vinny Grasso, sales manager at A&R Spada Farms in St. Paul, Ore., is quick to remind his fellow nurserymen to keep transportation challenges in perspective. He believes that distant markets will survive this transportation challenge and others. Despite any obstacles, Spada Farms can, in most cases, offer a competitive price to its East Cost customers, even as compared to growers that are based on the East Coast, Grasso said.

“Don’t forget, our East Coast competitor also must absorb increases in costs, including fuel, and he faces more expensive labor costs, less efficient short hauls, empty returns, and higher rates,” he said. “I prefer to think positively. Land, labor and weather all work in our favor. We have a mystique with our mountains, woods, soils, experience and so on. Our industry would not be growing as it has if we did not have a great delivered value.”

An ‘arsenal’ of transportation options

Grasso and a visitor stand in a nearly vacant loading area at A&R Spada’s facility. It is quiet on this fall day; two empty vans await a load.

“We ship somewhere over 2,000 loads to a total of 44 states and six provinces using a combination of truck and rail,” Grasso said. “During our peak season we couldn’t stand here. We will load up to 30 trucks a day … total chaos. We arrange about 85 percent of our buyers’ truck shipments … it’s part of providing good service, we believe. But we couldn’t do it without a good plan.”

Clearly, success in such a substantial transportation program is not the result of chaos.

“We have carefully assembled a transportation program … an arsenal of transport options,” Grasso said. “To anyone looking to get costs under control, or to flatten out rates … to get off the spot market, we recommend they do the same.”

In assembling a plan, or as Grasso puts it, “creating our own destiny,” Spada worked with Advantage Oregon, May Trucking Company, Blue Planet Logistics, and a small number of select carriers. The company secured contracted over-the-road freight rates and explored several rail options.

In addition, Spada improved loading practices, adopted proprietary loading and transportation management systems software, discontinued the use of refrigerated trucks whenever possible, and negotiated a drop program for arriving trucks which gave workers the freedom to build loads at a more favorable schedule for crews without incurring detention fees or costly delays.

Geoff Byler is the manager of Blue Planet Logistics, a transportation and logistics management provider in Wilsonville, Ore. Byler worked with Spada to assemble an “arsenal,” as Grasso put it, of transportation options.

Byler recommends nurseries consider their transportation options early, before the crush of deadlines and business-as-usual paralyze creative thinking. “If every load is going to be ‘let’s make a deal’, then no grower or buyer is going to get a good deal,” he said.

He insisted that if growers thoughtfully consider their products’ characteristics and their destinations against the full range of transportation options, and if they have the courage to adapt, they can substantially offset rising freight and fuel rates.

According to Byler, one of the best ways to reduce transportation costs is to use insulated liners for dry vans. Byler’s wife, Donna, created the high-tech liners as a “green” response to refrigeration’s environmental impact.

Blue Planet manufactures its insulated liners in Wilsonville, Ore.; they are sold under the brand name Plant ProTek™.

“In most cases, they can eliminate the need for nurseries to rely upon costly and increasingly scarce (refrigerated vans),” Byler said.

Savings with the liners can range from 5-11 cents a mile as the cost of the liner is absorbed. Thanks to the liners’ insulating and moisture-retention properties, plants can be shipped across the continent in summer or in most winter conditions with positive results, Byler said.

These days, Spada will rarely ship a dry van without a liner, nor will they order a refrigerated van unless the liner option is unavailable, Grasso said.

Rail can offer good value for growers
But there is more to the liner’s impact upon transportation than replacing over-the-road refrigerated vans. “These liners have opened up rail to nurseries like never before,” Byler said.

Prior to the liner, a lack of refrigerated rail vans kept nurseries off the rails, thereby denying growers the lower freight costs of rail in long haul and the railroad’s reliable, energy-efficient operation.

“It is time to take a closer look at rail,” Byler said. “Nurseries can’t afford to do business as usual. If they inventoried all their loads and their routes ahead of time, they might find that half are perfectly suitable for rail … and in most cases rail can save about 20 percent on shipping.”

Blue Planet promotes the return to rail with daily rail service to major East Coast destinations under the moniker “The Plant Train.”

As this issue of the Digger goes to press, the Plant Train’s base rate for a truckload from Portland, Ore. to Buffalo, N.Y. would be $3,495 including pick-up and delivery within 20 miles of rail ramps.

Liners have helped make rail a feasible transport alternative in the absence of refer rail vans, but an innovative young rail company, Railex, now offers refrigerated service on a 55 car train — the equivalent of 200 truckloads — that departs once a week from Wallula, Wash. to Albany, N.Y.

Their train is composed of 64-foot-long, 11 1/2-foot-tall refrigerated cars, each equipped with a fresh air exchange system. Refrigerated depots at each end of the line guarantee an unbroken cold chain to their customers (primarily produce growers as of fall, 2007).

Railex offers complete logistics packages for connections between their depots and shippers or receivers. They can handle just-in-time deliveries, mixed load capabilities and more.

Railex’s key advantage for Oregon nurseries is its regular scheduled timetable and a commitment to competitive cost, but for a grower to take full advantage of the system’s efficiencies, loads should be unitized in some form. Railex encourages the use of a 33-inch-tall collapsible, stackable bin, but nurseries that have experimented with the units report that they were not ideally sized for their plants’ heights.

A&R Spada, who shipped 20 loads with Railex last year, said they opted to ship on pallets. Even though pallets did not maximize the rail car’s capacity (3-1/2 truckloads), Spada had a successful experience with Railex.

“Railex provided a complete package … the process was invisible,” Grasso said. “They have figured out everything but the container.”

As customer services and logistics issues are worked out, rail options should increasingly exploit rail’s long-haul efficiencies while keeping more trucks and drivers in the supply side. For example, a single coast-to-coast run with Railex’s 55-car train puts at least 200 trucks back on the road.

But even with all the transportation options available, Oregon nurseries have one surefire way to succeed in the marketplace.

Above all, it’s suggested that nurseries grow their best product, then promote the Oregon-grown advantage and sell the products’ delivered value. Remember, it costs no more to ship a quality plant.

Customers of the growers will agree: the extra value will go a long way towards soothing freight’s sting.

{More information below}
Don Anslow is a Portland-area freelance writer. He can be reached at 503-819-4460. Digger magazine is produced by the Oregon Association of Nurseries Publications Department. [email protected]

Ways to save on shipping

When considering what one can do to minimize freight costs and maximize product value, the good news is that there are many answers. Consult the list below long before hitting the panic button when fuel and freight costs soar again:

•    Plan ahead. Devise transportation strategies well in advance to secure most appropriate and least expensive freight options. Avoid ordering trucks on the spot market. Capitalize on off-season rates. Plan growing and marketing strategies to maximize the Oregon-grown advantage.
•    Investigate rail services as an option in long-haul routes.
•    Adopt liners as an alternative to refer vans whenever possible.
•    Use Advantage Oregon to leverage negotiating power for low freight rates.
•    Contact the OAN and learn to calculate delivered value … and sell it.
•    Create wise marketing and shipping plans that work to your strengths.
•    Adopt excellent staging, unitizing and loading practices.

A cost-saving ‘Advantage’

Rising fuel prices have made shipping more expensive and less dependably available, and Oregon growers have felt the resulting pain. “Nurseries got frustrated with not being able to get trucks when they needed them, and the price was inconsistent,” said John Aguirre, executive director of the Oregon Association of Nurseries (OAN).

In 2004, the OAN and its Transportation Committee started looking for solutions, meeting with state officials and others. The suggestion arose that nurseries could pool their purchasing power by aggregating shipments. OAN decided the idea made sense and formed Advantage Oregon (AO), a for-profit subsidiary to meet this need.

Suelynn Callahan, a logistics industry veteran who has worked with Nike and Columbia Sportswear, became AO’s general manager. “[Aggregating shipments] is nothing new from a business perspective,” she said. “Big companies do it all the time. OAN was progressive in developing the concept through the vehicle of a trade association.”

AO asked customers to forecast their shipping needs ahead of time. The company could then negotiate better rates and service, locking in capacity based on customer needs. A web site tool makes everything plain and simple.

In response to customer input, the concept has been further tweaked. For example, there’s no need to specify the exact shipping date when forecasting shipments; just specify which half of a given month you need to ship. For another example, AO can now bill plant receivers instead of shippers once the goods arrive.

“We’ve tried to make it as easy as possible,” Aguirre said. “AO is here to support and benefit nursery shippers and focus on their needs.”

Callahan noted that some customers have not felt comfortable making forecasts months ahead. They can still use AO to purchase a baseline amount of shipping, assuring them of a committed rate for a certain quantity. If customers have further needs at shipping time, AO can save them money then as well.

“This is an alternative that can help you stabilize your freight costs,” Callahan said.

#### To Join Association of Oregon Nurseries Click Here ###

Disclaimer: Articles featured on Oregon Report are the creation, responsibility and opinion of the authoring individual or organization which is featured at the top of every article.