Transportation Solutions for the Ethanol Industry

By Trinity Rail | March 01, 2006
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Is demand for alternative energy sources soars, cost-effective transportation of ethanol and its byproducts is becoming increasingly important to producers. This need comes at a time when general demand for railcars is rising and lead times for newly built railcars—as well as railcar leasing costs—are increasing. This behooves ethanol producers to zero in on ways to improve their railcar utilization.

The average railcar makes less than one round trip in any given month. Upping that figure even slightly to 1.25 or 1.5 trips per month can make a significant difference to the bottom line. Ethanol producers should consider several factors when looking for ways to improve fleet utilization: route optimization, faster turnaround times at destination or unloading, maximizing railcar utilization through unit trains, and/or pooling, and tracking and expediting railcars in transit.

Companies can choose to manage these factors internally or outsource them to a railcar management services provider. "Some companies develop and manage their own internal programs to ensure that their products move as quickly and efficiently from origination point to customer and back," said Steve Menzies, group president of TrinityRail Tank Car, Leasing and Services, a leading provider of railcars, leasing and management services. "But outsourcing can be more cost-effective and allows companies to focus on their core competencies rather than logistics issues." TrinityRail partners with ItelliTrans LLC, a leading provider of distribution chain management services, to offer railcar fleet management services designed to improve asset utilization and reduce inventory costs.

Optimizing shipping routes has evolved into a sophisticated science, Menzies said, requiring a certain level of expertise and specifically designed analytical tools to determine the most cost-effective way to route railcars. Railcar route optimization software is available, but third-party fleet management services, which include route optimization and shipment expediting, can have a significant impact on an ethanol producer's shipping efficiencies.

Turnaround times at destination and origination points also impact utilization. With organization and visibility of empty railcars in transit, producers can expedite turnaround times from the point of origin, ensuring that cars are filled as soon as they arrive and on their way to customers as quickly as possible. However, getting cars returned in a timely manner after unloading can be more challenging because the car is now in the hands of the customer and commands lower priority from railroads while en route. Some companies write provisions into contracts requiring that customers unload and return cars within specified periods of time. Working with customers and railroads to expedite turnaround of empty railcars is also a service that some railcar fleet management companies provide.

Some smaller producers are using railcar pooling to expedite turnaround times. They view participating companies' railcars as one fleet and move empty cars to the closest loading points—regardless of which company owns them or whose products need to be loaded. The end result: Wasted travel time is eliminated and utilization improves. Pooling is yet another service that some railcar fleet management companies offer.

Unit trains, entire trains that carry carloads of one product directly from a single origination point to a single destination point, have dramatically improved utilization for many companies. More than 100 unit trains have run since BNSF's trademarked Ethanol Express began in 2003. Generally, single cars or small groups of cars are moved less consistently than large groups, taking up to twice as much time to reach their destinations. Unit trains save time and money through increased fleet utilization, lower inventory carrying costs and logistics coordination and support. Now, small companies are enjoying the benefits of unit trains by pooling product and shipping from one point.

Staying on top of where cars are at any given point in time is also important. Railroads now provide tracking services using RFID tags, and shippers can view progress via the railroad's Internet site. Monitoring progress is essential. Some cars, particularly those not part of a unit train, still lose valuable time sitting in train yards. Sometimes a phone call is all that's required to get the car back on the tracks and headed in the right direction. Again, third-party rail fleet management companies also provide efficiency by improving shipment monitoring and expediting services.

Railcar design can also impact the bottom line, particularly with respect to loading and unloading. TrinityRail, a leading manufacturer of railcars in North America and Europe, offers a wide range of standard and optional features for its 263,000-pound, gross rail load, non-coiled and non-insulated tank car, which has a shell capacity of 30,145 gallons. These features allow ethanol shippers to take advantage of quicker and easier unloading, more complete unloading, as well as easier and safer access to the car for operating personnel. For example, an extended operating handle for the bottom outlet valve allows the operator to open and close the valve without climbing under the car. In addition, the railcar's length has been reduced making it ideally suited for unit train service while reducing the railcar's light weight and allowing greater capacity for ethanol.

Perhaps the most visible new product for the ethanol market that Trinity Rail offers is its 6351-cubic-foot covered hopper designed specifically for DDGS. In 2001, despite a railcar industry slump, Trinity Rail realized the potential for increased consumer interest in ethanol and queried producers about the ideal design of a hopper car intended to carry DDGS. The end result is the "6351," as it is commonly called. This is one of many examples of Trinity Rail's commitment to optimizing existing car designs, as well as developing new, clean-sheet-of-paper ideas. To that end, the company's New Product Development Group is continually looking for the next breakthrough in railcar design.

"The 6351 has been quite a success," said Ray Tasch, senior vice president of sales and business development for Trinity Rail. "Through the end of 2005, over 3,300 cars have been put into service and prospects remain bright as ethanol plant expansions require the need for additional rail equipment to move DDGS."

For ethanol producers looking to capture and market carbon dioxide, Trinity Rail also offers a 286,000-pound, gross rail load, insulated pressure tank car with a shell capacity of 20,110 gallons.

"In today's competitive transportation market, using the most efficient railcars and improving railcar utilization is sound business," Menzies says. "The end result for ethanol producers will be a stronger bottom line." EP

For further details on TrinityRail's product portfolio, capabilities and service offerings, visit www.trinityrail.com. For more information about Trinity Rail Leasing and Management Services Group, visit www.gotilc.com.

For questions regarding this article please contact Ray Tasch. Reach him at [email protected] or (214) 589-8148.