Improving chemical industry performance through enhanced railcar utilization

Abstract

PurposeThe chemical industry is struggling to improve its supply chain performance, and improved asset utilization may help get the industry headed in the right direction. Since most chemical firms own or lease their rail fleets, rail utilization can have a substantial impact on overall asset utilization. The paper aims to focus on current managerial processes and situational factors that impact railcar asset performance.Design/methodology/approachRail car cycle data are analyzed, focusing on major sources of variation in transit inventory as railcars move from plant to customer and back.FindingsFindings include the importance of establishing and adhering to policies regarding supply chain practices; substantial differences exist between hopper and tank car performance; distance is not a major predictor of total cycle time variance; and vendor‐managed inventory relationships can operate with less customer inventory.Research limitations/implicationsThis paper addresses only one component of supply chain performance: railcar cycle time. Further analysis is needed to investigate differences between hopper car and tank car transit times. Additional research should also involve the railroad companies as participants in chemical firms' supply chains.Practical implicationsThe paper provides several practical recommendations for chemical company supply chain managers relating to process controls, focusing on large customer accounts, managing transit time and variation of rail cars between plant and factory. The findings and recommendations can be applied across many industries.Originality/valueThis paper focuses on supply chain practices in the chemical industry, which has been slow to adopt supply chain practices. In particular, this paper investigates railcar coordination as one means of enhancing supply chain performance, reducing both inventory and transportation assets.