Going to extremes
Think you have it rough? Not compared to shippers and carriers in the Far North. here's what it takes to operate a logistics network under challenging conditions.
By Mike Levans, Chief Editor -- Logistics Management, 10/1/2004
There was a time, not so long ago, when a holiday or back-to-school shopping trip for residents of Fairbanks and Anchorage, Alaska, could only be accomplished by jumping on a plane and flying to Seattle for a long weekend.
"When I moved to Alaska in the late '70s you had very little choice when it came to shopping," says Eric Britten, manager of business planning for ocean carrier Horizon Lines. "If the item you were interested in was actually on the shelf, you either bought it or you didn't—there was no selection process, no haggling over color or price. If something wasn't in stock it was on order. 'It's on order,'" he continues, "was probably the most commonly spoken phrase in Alaska at the time."
But empty shelves were about to become a thing of the past. As Alaska's economy moved through its final oil bust and began to stabilize in the late 1980s, "big box" and chain retailers began migrating north, aiming to bring Alaskans the kind of selection and availability enjoyed by consumers in the lower 48 states. Costco led the way in 1984, followed by Wal-Mart (1994), The Sports Authority (1994), OfficeMax (1995), Barnes & Noble (1996), Home Depot (1998), Pier One (1998), Office Depot (1999), and then Lowe's (2000). "All of a sudden the Alaskan stores had all this competition that they never had before," recalls Britten.
Not only did the influx of national retailers put buying power into the hands of Alaskans, it also profoundly changed the state's transportation industry. In a market where carriers held all the cards, control of logistics and transportation was shifting to the shippers that were filling the retail shelves. For the first time, carriers were forced to compete on service. "During the retail migration, carriers quickly realized we had to change everything from our attitude to our documentation to our tracking to our shipping processes," says Britten.
And change they did. "The 'big box' stores really opened the spigot in terms of volume through our internal logistics systems," says Thomas Case, dean of the College of Business and Public Policy at the University of Alaska, Anchorage. "That volume has certainly pumped up service over the last few years, and that's benefited shippers in every industry."
A 16-year stretch of uninterrupted job growth has lured even more retail chains up north, including Best Buy (2002), Abercrombie & Fitch (2003), and Sportsman's Warehouse (2004). But the road to keeping Alaska's grocery shelves stocked, lattes frothed, and necessities for modern living on hand is treacherous, and shippers must adapt to the state's unique logistics environment. "The new challenge," observes Case, "is to educate all shippers as to how to put that internal system to use as effectively and efficiently as possible."
Get the Lay of the Land
Alaska-based carriers know better than anyone that shippers spoiled by the transportation system in the lower 48 states need educating when they come north. "You won't believe some of the calls we've been getting," says Linda Leary, vice president of sales and marketing for motor carrier Carlile Transportation Systems. "Some shippers ask if they need customs paperwork; others want us to explain where Alaska is and whether or not there are any roads!" She tells of a shipper who called one morning to book a truckload from Anchorage to Fairbanks. "They needed it that afternoon, but they didn't understand that it's a 360-mile, nine-hour run—and that's on a good day," she says.
The first step toward understanding the challenging nature of this market is easy: Simply unfold a map of Alaska and get your bearings, recommends Mike Oliver of Lynden Transport, a full-service logistics and transportation provider. A good, close look at Alaska's geography will clearly show that each the state's three major markets—Central, Southeast, and Rural—has its own distinct transportation infrastructure and its own logistics challenges, he says.
Central: The primary consumer market, known as Central, South Central, or the Railbelt, includes Anchorage, Fairbanks, Homer, Kodiak, and Valdez.
The logistics lynchpins for this region are the Port of Anchorage and the Ted Stevens Anchorage Airport. The port handles about 80 percent of all consumer goods, which arrive from Tacoma and Seattle on ships operated by Totem Ocean Trailer Express (TOTE), Horizon Lines, and newcomer Lykes Lines.
With 600 cargo aircraft landings each week, the Ted Stevens Anchorage Airport ranks third in the world in terms of landed cargo weight. The airport is the home of key international cargo facilities operated by FedEx, UPS, and Northwest Cargo, and handles Alaska-based cargo for Lynden Transport and Alaska Airlines. A number of smaller, regional cargo carriers fly freight in and out of rural areas.
By land, shippers have a choice of rail or truck. The Alaska Railroad runs right through the heart of the Central region, beginning in the south at the Port of Seward and running north, by way of Anchorage, some 470 miles to Fairbanks. Motor carriers in Anchorage, meanwhile, can handle trailers that are similar to what's available in the lower 48 states—40s, 45s, 48s and 53s, says Leary. All kinds of loads are trucked to Fairbanks, and some carriers even run over 500 miles of gravel and ice on the Dalton Highway from Fairbanks to the Arctic Ocean and Prudhoe Bay, the start of the Alaska Pipeline.
As might be imagined, driving North of the Arctic Circle can be a tough haul. "It's rare when the weather is so bad that our guys can't run," says Leary. "The trucks are equipped to handle all weather, and if we're running Fairbanks and north, carriers have drivers who've had pipeline experience and are skilled in those conditions."
Southeast: Southeastern Alaska, known as the Panhandle, has no coastal highways; most coastal towns must be served by barge, ferry, or air. Key points in this region are the state capitol, Juneau; Ketchikan; Sitka; and Skagway.
"You have to think mostly air and water into Southeast, with barge or ferry service into Juneau, Ketchikan, and Sitka," advises Oliver. To get to Fairbanks, trucks head north from Skagway to the "Alcan"—the Alaska-Canada Highway. From there, drivers can go west and then south to Anchorage.
Rural: Rural, or Bush, Alaska, encompasses everything outside of the other two markets, including the western Alaska Peninsula, the Aleutian Islands, northwest to Nome, and due north to Prudhoe Bay. These isolated areas have limited transportation options. "The western islands get seasonal barge service, but most of the year you have to barge or ship into Anchorage and then fly it in," says Oliver.
"Most shippers find it hard to understand Bush Alaska," adds Leary. "We're talking, for the most part, no roads—just air and water, when the water isn't frozen." Many times, she says, shippers will promise a shipment to a customer in this region without realizing how isolated it is or how prices will skyrocket when there are no highways.
Pricing and Transit Times
Every shipper that moves goods into Alaska needs to be aware of the tremendous distances involved. Transit times and pricing are very different than most shippers are accustomed to.
While freight rates will vary—sometimes greatly considering destination, weight, and mode—there are some general pricing guidelines for this region. Air freight will be the quickest but most expensive, with overnight shipments from Seattle to Anchorage generally costing twice as much as steamship rates. Truckload service from Seattle to Anchorage can take up to 52 hours with driver teams and costs approximately 30 percent to 50 percent more than steamship.
Inbound truck-to-steamship rates—a majority of Alaska's inbound freight moves this way—are based on both class rates (truck) and commodity rates (ocean). Transit times into Anchorage from the U.S. West Coast for truck-to-steamship loads are about seven to eight days, and the average is 13 to 14 days from the East Coast. Intermodal-to-steamship shipments generally take 12 to 16 days from the lower 48 states to Anchorage and can save shippers 15 to 20 percent over truck-to-steamship service.
Barge will consistently offer the least expensive alternative, saving 10 to 20 percent over steamship to Anchorage. Barge service from Seattle/Tacoma takes five to seven days to Southeast Alaska, eight to 10 days to Anchorage, and can take 25 to 35 days to Western Alaska and the Aleutians. Barge service up the West Coast begins in June, when ice in the Bering Sea begins to break up, and concludes in September.
Carriers work hard in this part of the state, but the small, widely scattered population and winter weather conditions make it difficult to provide a high level of service. "The West Coast villages and the Aleutian Islands have grocery stores that get a produce shipment once a week," says Britten. "You have a choice of a rusty head of lettuce and a $5 gallon of milk on the shelves. This is an important area that service providers are just now starting to address."
Expect the Expected
No matter how experienced and prepared shippers and carriers may be, this is Alaska, after all, and extreme weather conditions are to be expected. Temperatures are often the biggest cause for concern. "Temperatures in the Southeast and South Central are moderate and temperate, and are consistent with temps in some of the northern states of the Lower 48 during the winter," says Britten. "But when you get up to Fairbanks and north, the temperatures can sit at 40 below for weeks on end. So, what happens to the soda you're shipping?"
Knowing all too well that temperatures will wreak havoc on food, liquids, and specialty shipments, the major carriers offer insulated containers that will hold temperatures in the range of 40 to 45 degrees regardless of the outside temperature. Containers that can maintain higher temperatures are also available for commodities such as certain types of polymers that must be kept at 70 degrees.
Surface conditions for both water and land transportation can also deal a damaging blow to freight if shippers don't prepare. Keep in mind, says Britten, that this is multimodal transportation at its roughest. "You're packing a container that's going to have a road leg, then it's going to have a sea leg, and then it may very well have another road leg once it gets to Alaska," he points out. And that container, especially in the middle of winter, will be on a ship that may be in 40- or 50-foot seas and will have to withstand 30 or 40 degrees of roll.
Winter storms have the greatest impact on barge service heading up the Gulf of Alaska. "If it's really rough, they'll lose containers and then have to pull into a cove and sit for a couple of days," Leary says. "If you're trying to plan a project by barge, you have to give yourself some leeway because they're not always on time. I've seen barges come in a day or two late that are half loaded when they're supposed to be full."
That's why when it comes to defining "on time," shippers to Alaska need to be flexible. "We do provide time-definite service, but that's got to be controlled very closely," says Oliver. "An entire ship simply can't be delivered at exactly 8:00 a.m. Monday morning."
"I don't believe any one really tracks on-time service into Alaska," adds Leary. "Sure, by air into Anchorage or by LTL into the Southeast, everything can be next-day, but it's not by the hour. But I can say this, it will get there."
In fact, that pretty much sums up the transportation scene in our northernmost state: Carriers and service providers in Alaska will do whatever it takes to deliver the goods—often in conditions that most shippers can't even imagine.
Of course, improvements in equipment, technology, and planning have helped raise their service levels in recent years. But it's questionable whether those improvements will ever entirely conquer the geographic and weather challenges that are daily fare in Alaska.
"Looking back 15 years ago, I would say the logistics and transportation infrastructure has come light years," says Britten. "The question remains whether or not that's far enough. We have integrators, third-party logistics companies, and all transportation modes working together when it comes to delivery to Anchorage and Fairbanks. But as far as tying the rest of the state together, we still have a long way to go."
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