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PETROLEUM DIRECTORY: Span-Alaska’s experts ensure cost-effective shipping to Alaska Assembling freight loads that make optimum use of the complex shipping tariffs from the Lower 48 to Alaska can pay rich dividends Alan Bailey PNA Contributing Writer
So much of what people use in Alaska originates from outside the state, so shipping costs figure largely in most corporate budgets. Freight consolidators, the unsung heroes of Alaska business, find the most efficient ways of shipping materials and equipment to Alaska. Ship things the wrong way and you may end up paying three or four times more than you need to.
Span-Alaska Consolidators Inc., founded in 1978 by Alaska freight entrepreneur Ray Landry, specializes in moving goods from the Lower 48 to Alaska. Based in Kent, Wash., the company assembles freight for transportation by ship or barge to Anchorage. Barges also carry freight to Juneau.
In Kent, Span-Alaska can assemble different customers’ part loads into full truckloads, or it can arrange shipping of partial and complete truckloads from anywhere in the Lower 48.
From the Port of Anchorage, Midnight Sun Transportation — Span-Alaska’s partner company — unloads the trailers and containers at their terminals in Anchorage, Kenai and Fairbanks. Midnight Sun then delivers the freight to the customers’ premises. Reducing tariffs “There’s quite an advantage to using a consolidator in the Alaska market, in particular,” said Kathy Lorec, Span-Alaska’s vice president for sales.
The tariff arrangements for sea freight to Alaska differ considerably from elsewhere in the United States and require specialist knowledge. In particular, a consolidator can juggle combinations of freight between different truckloads, in order to optimize the tariffs.
This so-called paper consolidation often involves combining different customers’ freight into shipments. By combining freight consignments, customers who are freighting small amounts of material can enjoy some of the same tariff breaks as people who are shipping large loads.
“It’s very unique to be in the Alaska market to have this paper consolidation idea,” Lorec said. “The majority of freight moved in the Lower 48 is billed strictly on what’s on one bill of lading.”
Thus, each individual shipment incurs its own minimum tariff. However, shipping companies operating to Alaska apply a minimum tariff that covers all shipments within a single week, Lorec said.
“We rate a company’s freight, based on the total weight they ship per week,” Lorec said, “so that, for instance, if you had three or four shipments totaling 5,000 pounds in a week, we rate it as if it all moved once at 5,000 pounds.”
Because of volume discounts, this arrangement may prove especially advantageous for a customer that ships small loads. The high total weight of multiple shipments can result in a reduced rate per pound. Optimizing loads Skilled consolidators also can optimize tariffs by combining different types of commodities in a single load.
“The ocean carrier’s tariffs are very complicated,” Lorec said. “You don’t pay per container — you pay by what’s in the container.”
The value and fragility of the contents of a container determine the tariff. For example, a truckload of nails will cost less to ship than a container of television sets.
“Nails are very valuable in our business, in that we can load the floors of the trailers with nails and then put light freight on top,” Lorec said. As a result, the consolidator can assemble a load that does not exceed the weight limitations of the container, while optimizing the tariff rates.
“Most rates are structured as a rate-per-100-pounds on a minimum weight that you must pay for,” Lorec said. “So, it’s quite a puzzle — with different minimums for different products — you have to have very good pricing people who really know the tariffs very well and know the products.”
The question of whether to move freight by barge or ship adds yet another piece to the tariff puzzle: barge transportation costs less than ship transportation but is slower.
“Steamships are generally going to (carry) higher value commodities or time-sensitive (items),” Lorec said.
The majority of freight reaches Alaska by ship, but bulk commodities, such as sheet rock, often move by barge. The Lower 48 Although customers sometimes arrange delivery of freight direct to the Kent terminal, Span-Alaska has developed extensive expertise in moving goods to Kent from elsewhere in the Lower 48.
“We’re also very good at finding regional carriers (in the Lower 48),” Lorec said. “They have better rates and services for (their) part of the country.”
What’s more, Span-Alaska has negotiated discounts of 50 to 60 percent with some Lower 48 carriers.
Although many Alaska businesses are savvy about moving commodities by sea to Alaska, transportation managers in the Lower 48 don’t always understand the complexities of the Alaska tariffs.
“Alaska traffic may be a small part of their business, so they don’t think it’s worth looking at,” Lorec said. “But the savings can be quite dramatic using our expertise here — (they are) fairly easy savings and we will probably improve their service levels as well.” Customer service Customer service forms a hallmark of Span-Alaska’s business.
“At this (Alaska) end it becomes very much a service in terms of the customer,” Lorec said. “How fast can we get their freight to them, can you get it when they need it, in good condition, at a fair price, and does the customer know what’s going on?”
With long transit times between the Lower 48 and Alaska, consolidator expertise is critical to meeting deadlines. Missing a shipment can delay delivery time by as much as a week.
Span-Alaska keeps careful track of each consignment. “We really excel at telling the customers what is happening to their freight,” Lorec said.
Span-Alaska tracks freight coming to its facilities from all over the United States, as well as freight it has packed and shipped to Alaska.
“A good proportion of our customers are wholesalers, so they’re telling their customers what’s going to be happening regarding the product,” Lorec said. “Communication is really critical in this business.”
Span-Alaska also takes pride in the care with which it packs freight.
“We have a damage factor that’s phenomenally low in our industry — about three tenths of 1 percent of the freight that we handle,” Lorec said. “That’s about four times less than the national average.” Company growth Span-Alaska has enjoyed major growth since Ray Landry’s one-man operation was launched in 1978. The company now employs more than 100 people, working at the company’s sites in Kent, Anchorage, Fairbanks and Kenai.
Maintaining customer service while undertaking major expansion has sometimes challenged the company.
“Our major challenge in 2001 was we grew 25 percent,” Lorec said. “In the midst of that we added onto our warehouse in Kent and we also added onto this warehouse (in Anchorage). Right now we’re in the challenge of growing even more, so we’re very happy about that.”
Lorec believes that focusing on customer needs and specializing in a particular market niche provides the keys to the company’s success.
“You do what works for you and your customer and not by being everything for everybody,” Lorec said. “You know where you can make money and still add value for your customer.”
Niche expertise combined with excellent service ensures that Span-Alaska retains a strong cadre of loyal customers.
“We’re in it for the long run,” Lorec said. “We don’t want just one shipment. We want to do it for years for (the customer) and that’s how it works.”
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