By R. Bruce Striegler
CN’s significant focus on improving supply chain problems began not long after Claude Mongeau became its CEO in 2010. Soon after his appointment, Mr. Mongeau began to initiate “end-to-end” supply chain measures, described as means to improve, reduce or eliminate bottlenecks or delays in service. He recognized that when customers grow, so does the railway and creating innovative solutions within the supply chain would drive sustainable long-term growth, for both CN’s customers as well as the railway.
In a recent interview with Canadian Sailings, Jean-Jacques (JJ) Ruest, CN’s Executive Vice-President and Chief Marketing Officer says, “Our supply chain initiatives are now almost ingrained. We have sophisticated daily measures that track each container, in every port, at every terminal in each port.” He notes that in addition to data tracking, CN employs port managers, a position that did not exist in 2010. “Located within the port, the managers coordinate with operations from the terminal and people in our operations centre who are in charge of business from the port’s point of view. We have operational rail people working with terminal operations people.”
Mr. Ruest explains that the port manager reviews many streams of data including inbound rail car inventory and the status and availability of containers in the port by destination cities. This daily assessment is then used to match cargo requirements to the types and capacity of cars available, and daily train capacity available. “We really get down to the nitty-gritty of how many cars go to which terminal, the who-gets-what today. This is partly based on which destination cities they’re going to, how much product is on the ground, how old the product is. If you don’t do this every day, you can lose control fairly quickly. One cannot maintain a service for a few, as opposed to a supply chain for most.”
Replacing the silo mentality with a collaborative approach
For CN, the key is collaboration. The Company is galvanizing supply chain players to move from a silo mentality, and to engage their partners on a daily basis with information sharing, problem solving, and execution. The approach is proving successful, and Supply Chain Collaboration Agreements are being signed with ports and terminal operators for the benefit of customers. Success is measured on team achievements, rather than individual supply chain components. For the railway, dwell time, the interval a container sits at a terminal after being unloaded from the ship to the time when it leaves the terminal by rail, is a huge issue. “If you have a port with a three-day dwell time for an import container, and if you don’t maintain the tracking and monitoring processes, some of those boxes may be there for seven days. We’re trying to create a two to three day average dwell time, with most of the boxes falling within that average. At some point, this means we have to work a little harder to accomplish what is more difficult.”
As to the complexity and difficulty of implementing CN’s supply chain practices with so many participants, (ports, terminal operators and railways) Ruest explains, “We have to electronically share the data with one another through daily electronic data interchange (EDI), which is accurate and complete. Our first go-around was the creation of Service Level Agreements, which is putting in writing the highlights of what we’re doing together. We then need to be able to get that data feed from one another as well as from the shipping lines. Electronic data which is complete, accurate and timely, updated regularly so we’re working from a fresh file.” Turning to further involvement by ports and terminal operators, Mr. Ruest says, “The idea is to refine what we have, the goal now is sticking to intent, and the intent was to create a supply chain service that starts from the time when a vessel is a few days away from the port.”
“At that point, the vessel gives us an estimated time of arrival, and since we want to keep the terminal fluid, we try to set a comparable time for service, pre-arranged within reasonable limits. We want the export containers to come in just in time for the vessel sailing, not too early since a terminal generally doesn’t have enough space to stack export containers 3-4 days in advance.” He says that depending on the terminal operator, as it relates to costs, if they’re really keeping costs tight there are a number of joint service factors that will be negatively impacted.
CN’s data sharing with terminals and ocean carriers
He points out that may mean a terminal needs to spend a little more, adding night shifts, weekend shifts or making other changes. “When a terminal off-loads a vessel and puts all the work priority into off-loading the vessel, loading of railcars may become a second priority, resulting in rail footage departures being delayed. There are many trade-offs to be considered, and while we work closely with terminal operators to accomplish what they want, the level of supply chain efficiency comes down to specific operators.” Ruest notes that each individual partnership with terminal operators creates a different service matrix, all based the same principle, but with performance varying from terminal to terminal. “The question becomes how we market together and whether or not they want to be on the leading edge of service, or on the leading edge of costs.”
The conversation turned to how CN is incorporating ocean carriers into its complex supply chain matrix, and Ruest explains that CN already shares data with them. “As an example, there are many ocean carriers calling on Deltaport in Port Metro Vancouver. CN and terminal operator TSI (Now called Global Container Terminal Canada: GCT Canada) exchange all the data, and all customers that do business with CN and GCT share that down to each container. “The data we’d share with a shipping line depends on the individual line. Some already have considerable data, others have very little. It depends on how evolved they are in terms of IT systems. What they can get from us is the same, it merely becomes a question of how often. The report card data we now supply once a quarter also includes supply chain services inland,” noting that the term “inland” refers to non-ocean terminals, destinations such as Brampton, Ontario.
“For a customer, service does not start when a container is departing on a train from Deltaport, it begins when that container is grounded (off-loaded from the ship and on the ground) at Deltaport. The service on the train does not terminate when the train arrives at its final terminal, but rather when the container has been stripped from the train, put on the ground and it’s in our system so a customer can make a reservation to come and pick it up with a truck.” Ruest emphasizes that trucker dwell time is also a critical component of CN’s service, “Our commitment is to try and get that truck in and out within 45 minutes on a consistent basis.”
CN’s significant investment in the Chicago hub
Chicago, long considered the main rail freight hub of North America, is a critical part of CN’s network. The company’s substantial presence has been bolstered in recent years by a series of rail acquisitions and investments that have extended its network reach south, north and west of Chicago, as well as around the city. In the past five years, CN has invested well over a billion dollars in its Midwest operations. CN employs about 5,400 employees in the American Midwest, including nearly 1,400 employees in Chicago, and roughly 25 per cent of its freight traffic touches the city. In Chicago, CN continues to focus on network efficiencies, and collaboration with other freight and passenger carriers to deliver solid customer service.
Mr. Ruest says that the growth of the U.S Midwest with its large population offers greater opportunity than only living off the Canadian GDP and Canadian natural organic growth. “In order to create the product for the Midwest we acquired the former Elgin, Joliet and Eastern Railway (EJ&E), which allows us to seamlessly connect our five rail lines entering Chicago, from any part of CN to CN on our own track. It also allows us to serve Chicago from Vancouver and Prince Rupert on our own track.” He says that Chicago, as a hub, (CN has two terminals in Chicago) is a seamless way to get to Detroit without having to do an interchange with another railroad, noting that is also true to get to Memphis.
“This offers Canadian ports or terminals, such as Port of Montreal, an opportunity to create a product that serves these markets. “We have the network and assets to serve these destinations if they are willing to work with us to make that service attractive enough to compete with Port of New York, and by extension, east coast railroads CSX and Norfolk Southern.” Actions that could create these winning conditions include terminals building trains with the highest possible rates of double-stacked containers, which gives a lowest cost possible cost per train and ensuring tight dwell times at the Canadian ports. “The transit time by train from Montreal to Chicago is about two days, making port dwell time much more relevant.”
Supply chain programs and practices that give CN the edge
“Our domestic repositioning program (DRP) is an example of how we try and put ourselves in the shoes of a shipping line, and what is really important to them is their round-trip economics.” Ruest explains this program is for the export leg. “A container leaves a European port and lands in, say, Brampton or Chicago. Within ten days or less, that container returns to the ramp. It’s empty, and needs to go back to the port, and this is where a shipping line becomes concerned about round-trip economies.”
Ruest says that, generally, cities do not have a balance between laden containers in, and full containers returning out. “Most cities do not generate enough exports to make the balance of round-trip economies strong enough. CN is working with shipping lines to create that balance with other customers’ domestic freight. We take a 40 foot container, say in Chicago or Toronto, that we would be transporting in the general direction of a western port, and we’d fill it with domestic consumer goods, destined for a warehouse in Edmonton, Calgary, Vancouver or even Winnipeg. We’re now using our domestic sales force to find loads of domestic freight that could move in a non-insulated 40 foot container. Due to those efforts, the container has moved west, and the ocean shipping company hasn’t paid anything to get it to those cities.” He notes that the next step is to look for export products from Edmonton, Calgary or even Prince George to fill the container on its final leg back to Asia.
In response to a question about new markets, Mr. Ruest says, “We’ve talked about dwell times and their significance, but some commodities need even more tender loving care. One of them is reefer business. The reefer container itself is a more expensive capital asset for shipping lines, so they can’t stay in too many places for too long. Also the product in the container is generally more fragile, so avoiding delayed transit is important.” Within CN’s supply chain services, there are provisions for higher levels of attention for certain cargoes, and Mr. Ruest outlines the cold supply chain, or reefer service desk. “We handle considerable volumes of chilled product, which is very time sensitive, and we monitor the container conditions of every reefer container CN handles from the train via satellite, and we watch dwell times with a higher level of attention.”
This service was created by a small team with exceptional experience in specialized software and hardware, and Ruest says that it was an easy step to take the concept to the next product line. “We’ve applied the model to auto parts. Called Auto Desk, we have three cities where we concentrate our efforts. Brampton with auto parts for assembly plants in Ontario; Detroit, which services Michigan assembly plants, and Memphis in Tennessee.” Ruest says they track dwell time with a higher level of attention and detail, keeping a tight control so that if there are issues on the horizon, CN personnel can proactively take action before the container gets buried ten deep, or otherwise lost in the flow. “Sharing information and daily engagement is a powerful way to solve real problems and the impact and results have been impressive,” says J.J. Ruest.