Cutting Costs by Moving the Wood Pile

Moving a Lumber Reload Center 50 Miles Saves Millions

Opportunity:
A home improvement retailer’s plan to locate a rail-to-truck lumber reload center at an existing property “derailed” when they discovered that the railroad would charge an additional $650 per carload to deliver to their site.  Projected to process five cars per day, the planned facility would incur an additional $845,000 annual freight expense on top of the projected $4 million capital development to build the rail sidings and infrastructure. 

Solution:
We negotiated with the railroad that controlled the line and lowered the transfer rate. During the negotiation process, we discovered that we could eliminate the transfer fee by moving the facility 50 miles west.  We then identified multiple locations available for lease that already had sidings and facilities, allowing the client to avoid most of the $4 million capital investment. 

While the western sites would have a lease expense, we suspected that trucking cost savings would offset the lease.  We used a modeling tool to compare the different sites to determine a superior location and eliminated all but two practical candidate sites.  Then, working directly with the client’s traffic department, we negotiated with flatbed carriers for a dedicated bid, each carrier submitting a bid for each site.  Post-analysis, one site proved to be superior due to highway access and a lack of traffic congestion.

However, the superior transportation site lacked offices and shed areas.  We developed a plan that used construction site office trailers for the office and employee support facilities, designed simple “pole-barn” based “T-sheds” for storage and unloading/loading areas, and developed a project budget.  In the final analysis, the “un-improved” location proved to be the winner and became the prototype for four additional reload centers.

Result:
In this iterative and interactive engagement, we questioned everything, discovering new options that improved the project and assisting management in implementing a practical and innovative solution that delivered radically lower than planned costs for the project. We:
• Negotiated a lower transfer rate.
• Discovered a way to eliminate the transfer fee.
• Identified locations that took two days of transit off the inbound time.
• Conducted outbound hauling bids that helped determine the optimal location.
• Developed a low-cost facilities plan that was used for other reload centers.  
Relentlessly searching for alternatives, we helped the client avoid a $4 million capital investment and saved almost $1 million in annual operating expense. We created a plan that enabled the client to make revolutionary changes to the inbound sourcing of lumber products.  

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