Box-Plant Trucking Logistics
As the pulp and paper market becomes more competitive, companies
look for potential opportunities to reduce product cost, increase
operation efficiency, and provide better service to customers.
Logistics practices can be complicated and costly to the firm; in
addition, they often have a direct impact on customer
Although not the only transport mode employed, motor carriers
are an integral part of the transport logistics operations in the
pulp and paper industry. Trucks are employed in the transshipment
of raw inputs to pulp and paper mills, intermediate finishing goods
from paper mills to corrugated box plants, and finished goods that
are shipped from mills to distribution centers or end users. For
public carriers, there are various government regulations that
constrain a truck's operating route, size and weight, type of
equipment, and energy conservation. Truck maintenance is also
important as are various safety regulations related to hours of
operation and driver qualifications. These pose numerous challenges
in truck-logistics in the industry.
Dr. Jeff Liker of the University of Michigan and his students
have conducted several observation-based projects for the Trucking
Industry Program (TIP) Center to gain an understanding of the
current practice of trucking logistics in the auto industry. The
proposed project would benefit from the lessons learned in the
automobile project including case studies, interviews, and
questionnaire designs. See the literature review for
The auto industry survey can also be used as a comparison for
the paper industry project. Observing how these two industries
compare in the use of trucking logistics will facilitate future
analyses among other industries, such as steel, food processing,
etc. As more emphasis has been placed on trucking logistics in the
auto industry, the significant improvements made can be viewed as a
benchmark for advances in the pulp and paper industry.
Recent Changes in Industry's Logistics Operations: Some paper
manufacturers have switched from tariff-oriented freight charges to
simpler and more easily understood flat-rate tables. Captive
forwarding companies have in some cases been replaced. In addition,
some freight operations have been concentrated on fewer transport
companies. Specific logistics functions such as dispatch offices or
loading and warehousing staff (including the relevant equipment)
have, in some cases, been outsourced to logistics service providers
on the basis of vertical co-operative agreements.
In general, this has reduced the logistics costs per ton.
Several speakers from Andersen (now Accenture) Consulting and J. B.
Hunt advocated the "third-party" logistics (3PL) services in the
first Pulp and Paper Transportation and Customer Service Conference
(1996). Georgia-Pacific was one company that hired J. B. Hunt as a
3PL, reducing trucking transport costs by as much as 10% (Pulp
& Paper, 1997). However, there are concerns that know-how and
control of the flow of goods could be upset -- or even worse --
lost if functions are outsourced.
Another issue with outsourcing is that quality of service can
suffer, e.g., an unwillingness or inability to deliver rush jobs
involving small quantities on the same agreed upon conditions. As
such, firms are often reluctant to enter into co-operative
agreements with companies that are direct competitors and because
companies do not appropriately appreciate that joint storage and/or
delivery not only cuts costs but also improves customer service due
to consolidated deliveries. In this context, there is a need in the
pulp and paper and trucking industries for an objective evaluation
of the benefits and drawbacks derived from privately provided
trucking logistics operations versus outsourcing.
Potential of Information Technology: Many business operations in
the pulp and paper industry, such as eCommerce, have utilized
information technology (IT) to improve their productivity and
efficiency. Similarly, many manufacturing operations use various IT
tools to control production processes and record incoming and
outgoing materials flows effectively. Experience learned from the
auto-industry indicates that the use of IT tools also has the real
potential to change the expectations and requirements in trucking
logistics operations. Consequently, there are third party logistics
(3PL) providers using IT to enhance their service quality and
The impact of IT usage in the trucking industry has been
analyzed in a University of Michigan study (Bander, et. al., 1997).
The extent to which corrugated box plants use IT tools in their
manufacturing and trucking logistics operations, whether these
activities have impacts in the trucking logistics' cost, lead time
and quality, is not known. This project will seek to select
corrugated box plants that use similar IT tools in for the study to
limit the variation of trucking logistics due to the impact from
Future Potential Major Strategic Trends:
1. Logistics Integration: Processing incoming goods (including
the new material store), warehousing administration, internal
transport and outgoing goods processing (including the finished
goods store) frequently report to different departments within the
company, so that there is little potential for moving available
resources among various departments when work loads are
particularly heavy. Combining the fragmented individual logistics
functions into a single organizational unit with a centrally
controlled personnel pool could eliminate substantial costs
incurred by staffing additional personnel that are needed to cope
with peak requirement periods.
2. Partnerships and Alliances: Company mergers and acquisitions
in an industry occur for a variety of reasons, including a desire
to expand their operations in target markets, strengthen their
global position, boost earnings and/or generate cost savings, or
stabilize prices. The $10 billion merger between Mead and Westvaco
in January 2002 (Walden's Paper Report, 2001) is a recent example
in the pulp and paper industry. However, the logistics activities
of these companies are often disconnected. Integration (from the
group point of view) and co-operation (from the plant point of
view) would be beneficial. The recent alliance between
Georgia-Pacific, ConAgra and International Paper (Green Bay
Press-Gazette, 2002) is an example of this beneficial
Correspondingly, a paper mill and a corrugated box plant and
their related transportation provider(s) may have logistical
problems due to a lack of integration. The relationship between
these two entities can vary quite significantly, from a vertically
integrated structure in which the firm and transportation provider
are universally controlled, to a market exchange in which the
transportation function is completely outsourced to a 3PL (Liker,
2002). Reeves and Liker (2002) used resource theories, transaction
cost economics, game theory and real options to articulate the
decision on the structure of partnerships.
Profiling Studies: Improved trucking logistic operations can
save costs (from transportation, material handling and storage,
loss from wastes, etc.), shorten lead time and enhance service
quality for various firms in the pulp and paper industry Conducting
profiling studies -- based on case studies of a few box plants for
understanding their current logistics practices, their trucking
operation culture and the effects of government regulations -- will
be very helpful in understanding how to improve the trucking
logistics operational performance.
Comparisons among companies will be explored using
observation-based interviews and data collection. From this
information, performance measures and improvement strategies can be
developed and used to analyze the trucking logistics operations of
operations included in this project.
There are several challenges in profiling studies. First, there
are many pulp and paper companies, of varying sizes, many of which
own paper mills at numerous locations. There may be geographical,
social, and regulatory reasons that certain trucking practices have
been conducted over the years. Although records of all trucking
routes, schedules, load sizes, weights, maintenance, fuel
consumption, labor cost, safety, financial information, etc. may be
collected at one location, it is very possible that these records
are kept manually at various sites, and are not shared. In
addition, many box plants have multiple clients, each with specific
data requirements for shipping, accounting, tracking, etc. that do
not coincide. Very few box plants seem to utilize information
technology to integrate these data together and study plant-wide
logistics operation improvement strategies.
As a consequence, this study will focus on the trucking
logistics operations for the materials (e.g., containerboard,
chemicals, inks, etc.) going to box plants and identify how these
operations differ from trucking logistics operations in
transporting finished goods to end-users. Because trucking
logistics operations for corrugated box plants may differ due to
the plant's scale of operations (e.g., utilizing a range of 30 to
over 100 thousand tons of containerboard per year) and size of
production environment (e.g., a range of thousand to tens thousand
square feet in warehousing and manufacturing facilities), we will
focus on "main stream" box plants -- those consuming over 80,000
tons per year of containerboard with similar sizes of production
environment. This focusing is necessary to help limit possibly
uncontrollable variations in our project studies that would emulate
from too broad of a study.
Besides profiling the "standard of measure" of trucking
logistics, such as the unit cost of travel or lead-time,
characterizing the processes employed for deciding which truck
should be used for what purposes at what time, etc. is also
important. For example, many retailing companies adopted
"just-in-time" and "supplier managed inventory" in their
supply-chain management logistics operations. If the pulp and paper
industry is moving in this direction, there will be more pressure
on the industry's logistics and transportation operations for
achieving higher performance. As such experience learned from
projects on full truckload, less than truckload and package express
conducted by the Trucking Industry Program could be beneficial to
Proprietary Information/Related Study Constraints:
Some of the information in participating firms' cost estimates
and logistics operations could be proprietary or difficult to
retrieve. For example, it may be useful to get some idea of the
overall portion of production costs attributed to transport
logistics and then look in more detail at these costs on a per mile
basis. Then we could compare the per mile costs across mills and
draw some conclusions of the performance in a firm's logistical
operations. However, the financial data could be proprietary. There
is also a need to value the impact of a shortened lead-time and
enhanced service quality to the customer's operations. Some of
these evaluations may be very difficult or time-consuming to
To resolve these concerns, many of the project's analytical
steps may be able to be based on aggregated data, which is usually
less proprietary. We will also use available data (e.g., trucking
costs in auto-industry, fuel consumption, gas price, traveling
speed, route distance, etc.) from other sources (e.g., US DOT,
Bureau of Transportation Statistics, Vehicle Inventory and Use
Survey, State Freight Transportation Profile) to estimate the cost,
lead-time and other needed information for our research.
Tools such as structural modeling (e.g., multiple regression),
moving average or forecasting tools could be useful in these
estimates. They will also be beneficial for helping to fill in
"missing" or "incomplete" data" due to difficulties in data
collection. Finally, use of industry contacts from the CPBIS and
TIP will be critical to communicate with people having the needed
authorities to aid our data collection and survey efforts.
II. SPECIFIC PROPOSAL GOALS
- Work with CPBIS and TIP to identify two or three operations to
be included in the case study analysis. Minimally, we would like to
include an operation that meets its transportation needs with
private carriage and another that meets its needs with a
- Literature review of other traditional and similar industries
in order to get a better understanding of trucking transportation
logistics in those industries and to enable the project team to
formulate hypotheses and identify concerns that can be addressed in
the data-gathering phase of this project.
- The case studies will start with personal visits and telephone
interviews to conduct a rigorous science-based profiling-study on
the selected operation's logistics records and processes (see Task
#2 in Full Description for details). Techniques for estimating
"missing" or "incomplete" data will be used to retrieve some of the
needed information difficult to obtain.
- Create measurable indicators to describe the operations'
logistics operation environment.
- Investigate factors leading to successful trucking related
logistics (either in-house or outsourced activities), and develop
strategies for improving the firms' trucking logistics operation
efficiency and cost structure.
- Develop questionnaires and contact lists for conducting an
industry-wide logistics survey that would form the basis of a
second year of funding.
III. LITERATURE REVIEW
A. Search Results from IPST's and GIT's Databases
We have worked with the Associate Librarian, Mr. Hartley K.
Phinney, Jr., in the Haselton Library and Information Center in
order to identify previous research on the logistics and trucking
operations in the pulp and paper industry. Surprisingly, a search
of Paper Chem USA and PIRA (CD-ROM databases) as well as a variety
of transportation journals (e.g. J. of Transportation and
Statistics, J. of Transportation Engineering, Atlantic Journal of
Transportation, J. of Air transportation, Transportation Research
E) produced few citations. The following summarize information from
a few key relevant abstracts (out of 150 or so abstracts
1. Several abstracts used indicators and perspectives to address
why consolidation (and "integration") in pulp and paper industry is
needed for the survival and future growth of the industry. This
will affect the environment of the industry's logistics
2. Many European pulp and paper companies created
third-party-like logistics companies (e.g., SCA Transforest, SCA
Transport UK) to generate new coordination possibilities,
rationalize transport flows, reduce inventories, and form a
partnership with various distributors.
3. Customer demand for "just-in-time" delivery created the needs
for a new distribution system.
4. A few abstracts discussed alliances in intermodal transport,
especially in the European countries.
5. Many abstracts focused upon the use of IT and related
technology, including eCommerce (e.g., PaperExchange -- now out of
business -- and Schenker alliances) and supply-chain management, to
improve their logistics operation quality.
6. Several abstracts discussed the transportation and storage
issues of "dangerous goods"; others addressed energy and
environmental issues in transportation.
7. A few abstracts described new technology in
packaging/storing, loading and unloading materials/goods on trucks
for saving manpower and cost, and enhancing productivity and
8. Some abstracts reviewed the standards and regulations of
B. Lesson Learned from Auto-Industry's Trucking Logistics
Dr. Liker's team has conducted several projects (see one of their
project reports in the references) for the trucking center in order
to understand the status of the trucking logistic operations in the
auto-industry. Tools such as exploratory studies, site visits,
phone and/or face-to-face interviews and industry-wide
questionnaire surveys are used in their observation-based studies.
For example, they conducted an in-depth case study with
Transfreight (a third-party logistics company) working for Toyota's
production plants to ship parts and finished products to various
Transfreight uses the Toyota Production System (TPS) Principles
of small lot sizes, high frequency of delivery, first in first out,
and level flow to achieve accurate, quick, and cheap logistics
service. Their services include route planning and operation,
sub-contractor supervision, contingency planning and operation,
sequenced part delivery, cross docking, EDI parts order management,
yard control and on-site management of all services. Their
"just-in-time" practice transports "the right material at the right
time in the right amount" and uses tight time windows for main and
sub routes with leveled schedule and cross-dock process.
C. Best Practice in Other Industries
Dr. Liker's team has also conducted several brief studies of
logistics in the food processing industry. These studies have
analyzed the food industry use of the "efficient consumer response"
system, which is a derivative of the apparel industry's "quick
response" system. They additionally have compared this industry to
the auto industry -- displaying how the two logistics operations
are related. There are some reports (see Task #4 in Full
Description for examples) in the literature stating the experience
in surveying the logistics activities in apparel, food, beverage,
and other industries. Our project will take advantage of the
lessons learned in their studies for conducting case studies,
comparing logistics operations for different industries, and
designing interview and survey questionnaires.
D. Tools for Profiling Studies
The primary tools for general profiling studies are text and
data mining techniques (e.g. Porter, Kongthon, and Lu,
forthcoming). These techniques go through text or data files and
look for designated key words or patterns. Summary statistics or
other interesting information are extracted from these files. Then,
modeling and comparison procedures, such as trend analysis,
regression modeling, association and contingency analysis,
two-sample comparison and analysis of variance, are used to study
the extracted information for understanding the knowledge contained
in the text or data files. In the data extraction and
modeling/comparison stages, experience from experts in the field is
helpful in directing the profiling studies for improving their
effectiveness. See Section 2 for details of issues considered in
the profiling research for this project
Anon. (2001), "Mead and Westvaco in 10 billion dollar merger,"
Walden's Paper Report, v. 31, n. 17, p. 1-2.
Bander, James, Nagarajan, Anuradha, White, Chelsea C., III.
(1997). "Information and the Trucking Industry," Proceedings of the
IEEE International Conference on Systems, Man and Cybernetics, v.
4, p. 3301-3306.
Cottrill, K. (2001), ""Survey of Supply Chain Management in the
Food and Beverage Industry," Traffic World, 265(24), 21-2.
Karlin, J., Liker, J. K., and Wheeler, M. (2002), "Applying
Toyota Production System Principles to Cross-Dock Operations," a
paper represented at a material handling conference from project
reports to the Trucking Center.
Liker, Jeffrey K. (2002) "Governance Structures in Logistics and
Trucking Outsourcing: A Cross-Industry Study," Presentation at
Transportation Industry Program Conference, University of
Reeves, K., and Liker, Jeffrey K. (2002), "Resource Theories,
Transaction Cost Economics, Game Theory, and Real Options -
Perspectives of Firm: Viewing the Boundary Decision for Trucking
and Logistics Services Through Various Lenses," an unpublished
report for Reeves' Ph.D. thesis proposal.
Liker, Jeffrey K. (2002), American auto parts supplier logistics
performance Study, a survey designed by Dr. Liker's team.
Literature Review Databases: Paper Chem USA and PIRA
Literature Review on Journals of Transportation and Statistics,
Transportation and Engineering and other journals related to
transportation in GIT's library.
Lu, J. C. (2001), "Methodology of Mining Massive Data Set for
Improving Manufacturing Quality/Efficiency," a chapter (pp.
255-288) for the book entitled Data Mining for Design and
Manufacturing: Methods and Applications edited by D. Braha as a
volume in a series of "Massive Computing" that is organized by
James Abello (AT&T Labs Research), Panos Pardalos (Univ. of
Florida) and Mauricio Resende (AT&T Labs Research, Kluwer
Academic Publishers: New York.
Porter, A. L., Kongthon, A., and Lu, J. C. (in press), "Research
Profiling - Improving the Literature Review: Illustrated for the
Case of Data Mining of Large Datasets," Scientometrics.
Rajamanickam, Rangaswamy, Jayaraman, and Sundaresan (1998),
"U.S. Apparel Distribution: Where We Stand and Where We're Going?"
Robbin, US, 40(4), 51-54.
Shapira, P., Youtie, J., Porter, A., Mohaptra, S., Oh, E., and
DiMinin, A. (2001), "Evaluation of the MITI Advanced Material
Processing and Machining Technology Program," Final Project Report,
Technology Policy and Assessment Center, School of Public Policy,
Georgia Institute of Technology.
Shaw, Monica (1997), "Georgia-Pacific outsources transportation
activities to reduce costs, meet demand" Pulp & Paper, v. 71,
n. 6, p. 117-119.
"Georgia-Pacific Puts Premium On Trucking (2002): The trailers
at Georgia-Pacific can travel cheaper and more efficiently thanks
in part to a collaboration with such companies as ConAgra and
International Paper", Green Bay Press-Gazette (Wis.) (7/15)