Technical Paper 05-P-4

[1]LET’S TALK TRUCKING: LOG TRUCK LOGISTICS

Tim McDonald, Mathew Smidt, Robert Tufts, and Tom Gallagher
School of Forestry and Wildlife Sciences
Auburn University
Auburn, Alabama

We associate the term “logistics” with companies like FedEx or UPS, but logging can also be thought of as managing a supply chain. A logging company sorts and delivers timber much like UPS consolidates, sorts, and ships packages. The shipping distances and numbers of customers are quite different, but the idea is the same. Both industries are essentially trying to control the costs of delivering “packages.”

Supply chain management for the logger is conceptually similar, but in practice much different than for FedEx. The number of loads a logger can deliver is typically constrained by the receiving mills to a weekly maximum. It is to the logger’s advantage, therefore, to make those deliveries as quickly as possible during the week in order to guard against any potential events that might interrupt the flow of trucks. Once a load is lost for the week it can never be regained, and that is money lost to the logging company.

It’s no wonder then that loggers are very possessive of their trucking resources. Good drivers are hard to find and retain, and turnover can be quite high. Waiting times at mills, equipment breakdowns, and weather are all out of a logger’s control, contributing to the notion that trucking is a necessary evil, something that always costs but costs a lot more when things don’t go right. The logger’s only alternative seems to be to hold on aggressively to whatever system works for him.

So it isn’t surprising, when we look at the realities of logging in the South, that transport is not coordinated and optimized to the extent that it has been in other industries. Many large companies have applied new optimization and communications technologies to reduce their delivery costs and improve customer service. Over-the-road trucking companies, for example, use very sophisticated load and route optimization technology to reduce delivery times and total unloaded miles of their trucking fleets. Wood product companies in other countries have even applied these same technologies to log delivery. In Chile, for example, a system dubbed ‘ASICAM’ is used to coordinate deliveries of logs to mills. A central dispatcher assigns a contract driver to deliver a specific load of logs to a mill at a specific time. The system reportedly saves costs by reducing the number of drivers needed to deliver the same number of loads. Other benefits cited were more uniform arrival times at mill gates, reducing time spent waiting in line, and a reduction in competition between drivers for loads, which they felt made the entire process safer and fairer.

This type of system solves one of the main problems with trucking as practiced in the South, namely that a logger’s demand for trucking resources is dependent on how far he is from the receiving mills. When close by, his trucking capacity might be higher than needed and his drivers might be idle a good bit of their shift waiting for a load to deliver. When farther away, the opposite might be true—logging equipment may be idled waiting on a truck to load. The Chilean system pools the trucking resource among all loggers, shifting capacity as needed to compensate for delivery distance.

Coordinated log trucking has been adopted in other countries, including Scandinavia and New Zealand, so it seems logical to ask the question: will this approach ever be used in the South? Our contention is that it could be—but not in the short term. We’ll discuss why later, but first consider how such a system of log truck dispatch would work. Coordinating load delivery by definition would mean sharing truck resources among a group of loggers. A driver might start in the morning by checking in with a central dispatcher for his first delivery. The driver would proceed to the assigned logger, be loaded with the assigned type of logs, and deliver them to the proper receiving mill. As he leaves the mill, a call is placed to the dispatcher, and another load is assigned. In other words, loggers have turned responsibility for delivery over to someone else.

Given this scenario, one can immediately conjure up situations that would cause a great deal of heartburn for loggers. Nobody, especially a logger, likes having his or her destiny controlled by someone else. But there are advantages to be gained using centralized dispatch. By pooling truck resources, the problem of short-term capacity swings could be reduced. For any single logger truck requirements might go up or down given a number of circumstances, but for a group of loggers the capacity needs might stay relatively constant. And given even a relatively simple dispatching approach that balanced deliveries fairly between participating loggers, truck capacity could be lowered significantly. Results from simulation experiments evaluating pooled versus traditional log truck utilization indicated that the shared approach could reduce the number of trucks required to move the same amount of wood by about 20 percent.

It might not make great business sense to hand over responsibility for one’s trucking based on results of a computer simulation of the log transport system of a fictitious group of loggers delivering to a bunch of phantom mills. It should be clear, however, that even small savings in such a big and competitive business can mean large amounts of dollars, and that may grab the attention of some industry leaders. In our survey of loggers throughout the South, we found anecdotal evidence of pooled transport systems being implemented, and presumably working well. There was no evidence that these early adopters of pooled trucking were operating in niche markets or under special circumstances, but it would be difficult to conclude that there was an overwhelming level of support observed for going to central dispatch. In fact, the opposite was found: loggers, even though they complain about the headaches of managing their truck fleets, definitely do not want to relinquish control over them. Nor is there a compelling reason to do so. For example, it is difficult to see how the financial return resulting from pooling truck capacity would flow into the logger’s pocket.

The simulations mentioned above were built to examine only the effect of dispatch sequence on system efficiency. Another factor that could potentially make pooled trucking more attractive would be if it could save fuel. Fuel savings would result from driving less to deliver the same amount of wood. This is only possible given a pooled transport system where trucks can be routed between mills and logging decks in a manner that reduces unloaded miles. Preliminary results based on analysis in this study showed that unloaded miles could be reduced by 10 percent, given the right circumstances. Again, the analysis may not have been based on a completely accurate depiction of the log transport system, but the potential for fuel savings has been realized in other industries. Our results just can’t definitively say how big it would be for log trucking.

So it’s a pretty safe bet that there would be some savings associated with going to a pooled log transport approach. To whom the savings would accrue and how much are debatable, but there is no doubt that fewer trucks would be needed and that they would probably drive fewer unloaded miles per ton of wood delivered. Is it realistic to assume this type of trucking system will be implemented in the near future? As we stated before, we feel the transition to pooled trucking raises some serious issues of trust that are not easily dealt with, so the transition will be slow if it happens. It is fairly easy to imagine, however, some scenarios under which the change to cooperative trucking would occur.

  1. Consuming mills could require all wood to be delivered by an “approved” transport contractor. The approved hauler (or haulers) would implement a high-tech logistics system to minimize unloaded miles driven subject to the constraint that all loads from every logger that should be delivered, in fact, are. The financial benefits of this system would be accrued by the consuming mill, provided the transport contractor could lower per-ton mileage costs. Indirect benefits might also be gained by coordinating arrivals at the mill gate, reducing congestion at the woodyard and perhaps eliminating the need for additional unloading capacity. There would also be a single point of negotiation for haul rates, perhaps lowering logging contract administration costs. Those loggers with efficient trucking operations might see a loss in total income if they were forced to quit hauling but would also be relieved of the responsibility of administering the transport of their wood. If properly implemented, the system would remove the financial burden on loggers of operating at greater distances from the mill, perhaps reducing fluctuations in their income.
     

  2. Loggers could join together in a transport cooperative, pooling their trucking capacity under a dispatch agent that is responsible to the loggers themselves. Haul rates could be negotiated such that all costs of the dispatching service were covered, with a lease rate paid to the logger for use of their truck resources. Benefits of this system would be greater for the loggers. It is unlikely that, at least initially, haul rates would be lowered. The main benefits then would be a reduction in the administrative oversight required on the logger’s part, leaving more time to supervise and improve his in-woods operations.
     

  3. A trusted third party, perhaps a wood dealer, could offer the transport service to all loggers under contract, allowing them to liquidate their trucking capacity, such that the provider would handle all wood delivery duties. Those using the service would have the same incentive as in the cooperative model above, namely that administrative overhead could be reduced and they could, perhaps, eliminate the effect of distance to the mill on their profitability.

Of these scenarios, the third is most realistic. An example of such a system was found in North Carolina, and at least from the wood dealer’s standpoint the approach was working quite well. This was despite the fact that dispatch was handled strictly ad hoc, with no use of optimization technology at all.

The other scenarios described above are very unlikely to happen in practice. In the first case, where consuming mills mandate pooled trucking, the responsibility for making the system work would fall entirely on the wood consumer. In this era of downsizing, the incentive to add personnel and infrastructure to handle dispatch of the entire procurement trucking fleet would have to be very large to convince a company to assume that duty. It would require an investment in logistics on the order of a fairly large over-the-road trucking firm, a risky enterprise according to Powell and others (2002). They reported that, despite a very sophisticated dispatch optimization system, good input data required for the best decisions was expensive and difficult to obtain and that the system was not effectively utilized. In the second case, it is unlikely that loggers would have enough trust in any cooperative system to relinquish control of their trucking. A neutral third party would be preferable.

It is our recommendation that opportunities for implementing pooled transport logistics should be explored whenever possible, and that education would likely be the most effective means of convincing loggers to participate. The best educational opportunities would likely be publicity regarding success stories. In addition, planning and simulation tools that are adaptable to local conditions could help convince skeptical groups that what works for someone else will translate well to their own situation.

In any case, there was a great deal of resistance expressed by loggers during interviews to the idea of collectivizing log transport. It is likely, therefore, that gains in trucking efficiency from application of logistics will come as a result of bottom-up initiatives from loggers themselves. Change will be slow, but the result should be a more efficient transport sector in the wood supply chain. Change could perhaps be helped along if loggers adopted newer technology in their operations. Roscher and others (2003) reported on the use of mobile data systems in Sweden. The devices were essentially in-cab GPS and GIS, plus a communication link. Although no decision support was provided to the drivers, the authors reported a 10 percent increase in the average number of daily trips for drivers using the system versus those that didn’t. These types of systems, although likely expensive, could provide some operating benefit and would also get drivers and loggers used to relying to a greater extent on technology in making tactical decisions.

[1] This is the fourth in a series of five articles written from research conducted at Auburn University during 2004 on ways to improve the productivity, efficiency, safety and costs of the trucking operation associated with logging.  For more information on this research study, please contact Tom Gallagher at tgallagher@auburn.edu . The research was funded by the Wood Supply Research Institute (WSRI).  For more information on WSRI, contact Jim Fendig at fendig@bellsouth.net.