RAILROADS' JUST-IN-TIME EFFORTS ATTRACT INDIANA STEEL SHIPPERS

RAILROADS' JUST-IN-TIME EFFORTS ATTRACT INDIANA STEEL SHIPPERS

Steel shippers in northwest Indiana, the nation's center for integrated steel production, are shifting a large portion of their cargoes from truck to rail.

The shift reflects a successful effort by railroads to tailor their services to the Just-in-Time inventory practices that automobile and appliance manufacturers in the Midwest have adopted in recent years."Railroads recognize that the steel industry is changing and that customers require more processing and Just-in-Time deliveries," said Gregg Duvall, manager of distribution services for Inland Steel Co. "They've created services to take advantage of the opportunity."

The northwest Indiana/Michigan area comprises the biggest concentration of steel-making and steel-consuming industries in the nation. As these industries were squeezed by foreign competitors in the 1980s, they radically altered their distribution practices.

Now, as railroads adapt to the changes, they are winning back customers.

Since 1986, Inland has increased the amount of its cargo moving by rail

from about 22 percent to 28 percent. Other steel shippers in the northwest Indiana area, including LTV Steel Co., Bethlehem Steel Corp. and USX Corp., have made similar shifts.

"What killed railroads in the past was inconsistent service," said William Reichard, district traffic superintendent at Bethlehem Steel Corp.'s Chesterton, Ind., mill. "It used to be that one shipment would be delivered in three days, another in five days and a third would get lost and take 10 days for delivery. They've cleaned up those problems."

The inconsistent service made railroads the big loser when automobile and appliance makers first adopted Just-in-Time principles. From the mid-1970s to the mid-1980s, the amount of northwest Indiana steel moving on rail declined

from around 50 percent to 20 percent, traffic managers say.

Trucks, because they were faster, more flexible and more reliable, were better suited tothe steel industry's Just-in-Time logistics than railroads. To compete, railroads realized they had to change.

To win back steel shippers, railroads improved service, introduced dedicated steel trains from northwest Indiana to Michigan and offered warehousing and local delivery services. In some cases, railroads even began to perform steel processing for shippers.

The most prominent example of a railroad tailoring its service to steel shippers is Consolidated Rail Corp.'s, SteelTrain, a dedicated, overnight, five-day-a-week service between the northwest Indiana steel mills and Detroit.

The SteelTrain picks up steel Tuesday through Saturday in northwest Indiana and delivers it to Conrail's SteelNet terminals in Dearborn and Jackson, Mich., by 8:00 the next morning. At the terminals, steel can be off- loaded directly onto trucks for immediate delivery or stored.

In its first year of operations beginning in May 1989, the SteelTrain hauled 6,338 cars of steel - 2,400 of which was new business that was taken

from trucks, according to Michael Yeager, Conrail's marketing manager for steel.

Shippers laud SteelTrain for reducing shipment time between northwest Indiana and Detroit from about a week to within 24 hours, for its on-time reliability and for the lack of damage to the steel.

"We're very impressed with the commitment Conrail has made to the SteelTrain; they run it whether they have three cars or 54 cars," said Greg Levy, manager of rail field operations for LTV Steel. "It's definitely taken a number of trucks off the road."

In other corridors, the volume of steel shipments is not sufficient to support a dedicated rail service. However, railroads are offering warehousing and local delivery service to woo shippers from trucks.

Conrail, CSX Corp. and the Grand Trunk Railroad Corp. all provide warehousing facilities for steel emanating from northwest Indiana. As is the case with the dedicated train, warehousing with local delivery conforms to the Just-in-Time inventory approach taken by many steel-consuming industries.

Conceivably, steel companies could use trucks to move steel to warehouses. However, with the large volumes of steel involved, railroads frequently make more sense.

"As we ship more to distribution centers, we begin to get more volume going to a single location," noted Mr. Duvall of Inland. "That's a situation that's tailor-made for rail shipping."

Grand Trunk has advanced the warehousing concept one step further: It provides steel processing services at one of its terminals, said Ken LaDuke, marketing manager for metal products.

"The rail/truck warehousing concept has become very popular," Mr. LaDuke said. "The processing is an added service that some shippers like."

Mr. Reichard of Bethlehem Steel believes that rail service to terminals, followed by local truck delivery, will become an even bigger part of steel industry logistics in the years ahead.

For the most part, Mr. Reichard noted, steel customers are demanding that railroads store steel near their plants, a requirement that necessitates decentralized warehousing. To offset the cost of warehousing, steel companies will use railroads wherever possible.

"There's a cost savings in using railroads," Mr. Reichard said. "So if the steel is going to be stored in the warehouse, rather than moving directly to a customer, it makes sense to use rail to get it there."