Grain at Vancouver
Has grain performance at Vancouver improved?
There have been many changes in the industry configuration in terms of structure and policy, with the most dramatic being the consolidation of grain companies and facilities, the termination of the CWB in 2012 and recent record tonnages in production and shipments. The question remains as to how the system is performing over time based on comparable annual events.
Vancouver is the best proxy of industry port performance as it has the highest tonnage, with terminals owned and operated by many companies, along with rail service from both railways. The port level is the best measure of performance, as it encompasses all prior delivery activities from farm to terminal. It also is the point of transfer of product to customers’ vessels.
Customer service should be the prime objective for the grain industry, something that has deteriorated over the past eight crop-years, beginning in 2009-10 when the customer service level (CSL) dropped below 98 percent. This occurred three years before the end of the CWB involvement with port pooling and car allocation and the commencement of terminal specific ordering (TSO) in 2012-13 by the grain companies and railway car allocation.
With five TSO operations, now is a good time for comparison to 2004-05 to 2008-09. (The three crop years between these two periods represent a period of transition with its performance measures falling between the two five-year periods.)
VC Terminal shipments have increased 67 percent, influenced by increasing supply and demand, with record production in 2013.
Customer service levels have decreased from 98.1 percent to 95.9 percent (based on vessel fulfilment), while unsatisfied demand increased by 2.2 percent. While railways have increased tonnage a significant amount, service levels have actually decreased, as evidenced by the excessive number of vessels and time in port.
Vessel days in port per 50,000 tonnes have increased 52 percent from 11.0 to 16.7 days, while vessel days loading per 50,000 tonnes have increased 47 percent from 6.1 to 9.0 days. In the first five-year period, there was a 3.3-day benefit due to pooling and good stock levels. On the other hand, in the last five-year period, 2.4 days more than expected were due to order fulfilment deficiencies of inadequate supply (stock levels and under delivery of rail orders). While service time decreased seven percent to 4.7 days, total wait times doubled from 6.1 days to 12 days.
Similarly, vessel tonnage per days in port loading decreased from 8,221 tonnes to 5,600 tonnes. (This compares to 6,900 tonnes reported in the McKinsey Report of 1998 for a three-year period of 1995-96 to 1997-98, then a period of industry concern of poor performance. This report also advocated for the return to terminal specific ordering, which existed prior to the 1970s when the railways did the car allocations.)
In comparison to theoretic TSO vessel tonnage per day in port loading, the first period showed a 52 percent benefit of 2,830 tonnes per day, while the last five years was below theoretic by 2,117 tonnes per day or 73 percent of expectation. Again, additional rail tonnage to increase stocks and throughput will improve performance, but TSO results will still be less than experienced with car and stock pooling and multi-terminal assignments of vessels.
Days inventory has decreased from 14.9 to 9.0 days, primarily due to throughput tonnage increase while stock levels have hardly changed. This compares to a decrease from 12.1 to 9.6 days from country car spot to terminal unload. Since replacement time is higher than days inventory in the last five years, stock levels at port are now inadequate. (Unfortunately, the Canadian Grain Commission has not reported west coast terminal stocks separately by port since 2012-13, so stock estimates have to be pro-rated to total tonnage, which may affect stock-related measures.)
Average vessel size to average terminal stocks has increased from 40 percent to 66 percent, while weekly demand to port stocks has increased from 48 percent to 80 percent. Utilization has also increased from 54 percent to 72 percent. These values show that increasing vessel size along with constant stock levels places more emphasis on having the right product in store and enroute to terminals, and in sufficient quantities.
All of these performance measurements show the need for more precision in order fulfilment to increase stock levels and throughput tonnage to improve customer service to meet theoretic values. More terminals and terminal capacity are needed and this is now being addressed to somewhat make up for lost benefits of port pooling and the increasing demand. While the railways have restricted their operations and rationed rail capacity to the grain industry for the last eight years as part of asset optimization, cost minimization and in competition with other industries for rail capacity, they are now making attempts to improve customer service. Individual company optimization does not necessarily make for system optimization.
In order to identify areas of system improvement, performance needs to be continually monitored from various perspectives since system changes and tonnage increases have masked underlying inefficiencies.
Bob Niemi (retired farmer and CWB transportation analyst)