Severstal’s Hall sees planning, not price, as key to future of breakbulk logistics

Planning rather than price bodes to increasingly be the focus of breakbulk transportation, according to Larry Hall, Dearborn, Mich.-based director of logistics for major U.S. steel producer Severstal North America. As shippers look to overcome challenges ranging from brutal winter weather to a shrinking truck driver workforce, forging long-term partnerships is trumping saving a few dollars as the most critical determinant in supply chain logistics decisions, according to Hall. A veteran of more than 30 years in steel transportation, Hall, who held positions with Nibco Inc. and Heidtman Steel Products Inc. before joining Severstal in 2010, shares his thoughts – including his preference for the hunt over the kill – in an exclusive interview with the American Journal of Transportation.

Transporting steel clearly presents some distinct challenges. What are some of the greatest of these, and how is Severstal responding? The greatest challenge is that our entire supply chain of transportation services has been consolidating significantly in the last 20 years, and it’s going to accelerate a lot more the next few. Creating long-term, mutually beneficial relationships that ensure our customer delivery is going to be a key. What we’re trying to do at Severstal is develop strong core carrier bases – both truck and rail – and get our business in very strong hands and develop true partnership-type relationships with them. We don’t do an RFP [request for proposals] every year now, trying to drive price down to the lowest. We’re going to be very concerned and aware regarding cost and cost structure, but we want to be a partner. We want folks who are very, very concerned about our health and future business prospects, just as we are about theirs. Safety and capacity are more important than price. Safety is a given. That’s the first thing. Beyond that, we want capacity: When we make commitments to our customers, can we back them up and deliver? Proficient planning is going to become all that much more important. For the last number of years, the folks who have excelled as transportation and logistics managers have been aggressive rate-cutters. That’s been the mantra. But, going forward, I think the new focus is going to be planning, it’s going to be more relationship, it’s going to be more true supply chain management versus reactionary. Planning is the future of our business. With global interests spanning the gamut from Russia to the United States and Liberia to Brazil, the geographic scope of the supply chain of Severstal and its Moscow-based parent company is wide-reaching. How is your logistics plan meeting these diverse demands? We here at Severstal North America have no responsibility for Severstal OAO business outside the [United] States, so we are focused solely on the domestic side. We do have significant professional services and resources available offshore that some of our competitors do not. Some do, some don’t. Pretty much, we’re a standalone shop. Severstal North America purchases cargos from around the world. That’s just part of the supply chain. Much of Severstal’s transportation is by truck, I believe. What impact do you see tighter regulations for truck drivers having? We see capacity shrinking. We see drivers feeling increasingly frustrated by hours of service and work rules that are for a great purpose, because they’re trying to drive safety, but maybe they’re not the best in application. But we’re seeing capacity shrink, and these rules are accelerating it. I’d say 2014 has been a very problematic and difficult year. All it took were the significant weather events we have experienced as of late to show how tight capacity truly was in the Rust Belt. The northern half of the country just experienced huge delays in delivery. At Severstal, we performed very well in December and January, through the tough months. We had a pretty good plan and we executed it very well in some extremely tough circumstances. Some of our competitors struggled tremendously to make delivery. My opinion, my belief, and I think it’s somewhat justified, is that our core carrier relationships were stronger than some of our competitors. We’re talking both truck and rail. I received railcars, and I had no railcar shortages in any month of this year. We had minimal truck shortages, to the point where we made shipment numbers every month through that entire debacle. It was a tough winter. Having spent three decades in the field of supply chain management, you obviously have a passion for this business. What first attracted you to it, and what do you like most – and least – about it? There’s a sense of satisfaction. You’re very much engaged in that last link of the supply chain, whether it’s inbound to your internal customer or it’s outbound to your external customer. You get a lot of customer interaction. You can see very quickly and very clearly what your efforts bring, whether good or bad. In our world, the steel world, where I’ve spent my whole life, there’s a bit of, well, there’s always a crisis, there’s always a project, there’s always something that you can get involved in and be very much engaged in. I like the action and accomplishment. As far as what I least like, it’s unrealistic expectations. It’s like, the mill’s three weeks late, the processor’s two weeks late, and you get it Friday afternoon and it’s a transportation issue. The things I don’t like about it are sometimes the difficult operating environment. But that is the business we are in – making things happen and providing exceptional customer service. I started out in the steel business in 1981 on the foundry floor, on the furnace deck of a small EAF – electric arc furnace – at NIBCO, Northern Indiana Brass Co. Two years later, I went into transportation, and I haven’t worked an honest day since. It’s not work when you enjoy what you do. It makes it very easy to come to work in the morning. Can you share a bit about the Steel Manufacturing Association Transportation Council and your involvement with it? It’s a trade association that has a transportation council that I’ve been on for a number of years. It’s a group that includes among its members other EAF – electric arc furnace – steel mills of various products, long products, flat-rolled, tube and pipe guys… We have a fairly strong trade group, with a voice in Washington, and we interact with the STB – Surface Transportation Board – and we interact with DOT [U.S. Department of Transportation], [U.S.] Army Corps [of Engineers], all the folks who ultimately affect our transportation infrastructure and administer day-to-day operations or policy. The group has been engaged in issues such as infrastructure funding and law pertaining to weights and measures. You know, that’s a two-edged sword. A number of us support higher truck weight limits on the road, but, then again, we also have our rail component that we’re very tied to that adamantly disputes that, but it’s far more of a competition-based dispute than it is based upon logic. And it can get complex, what with different states having different size and weight limits. Do you find yourself challenged by that? Oh, absolutely. I’ve worked for many years in the Michigan, Ohio and Northern Indiana corridors, with extremely heavy loads, up to 156,000 GVW [gross vehicle weight], on an annual vehicle permit, and it’s extremely efficient, extremely efficient. Now do we need to go on entirely that broad a spectrum across the country? No, but there is significant room available in the three-axle configuration with a 100,000 GVW or so. We would see significant gains in productivity with absolutely no increase in the truck numbers on the road and a considerable decrease in fuel consumption overall. What a concept: Working smarter and more efficiently instead of harder. We as a country still need to increase our reliance on our rail and waterway infrastructure, lots of opportunities to significantly reduce cost and improve efficiencies, and high fuel prices will drive that change. I understand you recently returned to your roots in the Midwest after three years in Columbus, Miss., where your company also has mill operations. Although you’re now in Southeast Michigan as opposed to your native Northeast Indiana, are you happy to be back in the Midwest? Other than the weather, absolutely. My wife and I both have large families from Northern Indiana, so now we’re two hours from home versus 12, and that’s a positive for us. When you’re not working, what do you like to do to unwind? I’m an outdoorsman. I like to hunt. I like to fish. I read. I write. I don’t write much anymore, but, at one time, that was one of my passions. I’ve had about 20 pieces published and paid for. Outdoor humor in things like Fur-Fish-Game, Furtaker Journal and other outdoor, hunting-related stuff. It’s been 15 years since I had anything published. So do you have any interesting trophies up on your walls? Deer heads, turkey, ducks. I’m a hunter, but I don’t have a lot of trophies. Never have. Big fish, I catch ’em, I let ’em go; I don’t kill ’em. To me, the pursuit is far more of interest than the kill and having it on the wall. I still don’t have a big fish on the wall.