Tag: bulk logistics

Go Pound Sand. Moving Sand Around the World with Taylor Robinson of PLG

Today on the Edge of Innovation, we are talking with Taylor Robinson of PLG Consulting about the business of logistics and moving sand around the world.

 

Introduction

Go Pound Sand. Moving Sand Around the World with Taylor Robinson of PLG

 

Paul: Hello. My name is Paul Parisi, and I’m here with Taylor Robinson, the president of PLG Consulting. Hi, Taylor.

Taylor: Good afternoon, Paul.

Paul: So what else do you cover in logistics? I mean, is it just… I don’t want to say “just” what you do, or is that one segment of what you do at PLG or are there other things?

Taylor: Yeah. That would be one-third of what we do. One-third is we help people improve their logistics. We bring experts that have been in those industries for 30 to 40 years come in and quickly solve their problems.

Paul: What kind of problems do they have?

Taylor: Cost, efficiency, waste, poor pricing on their services that they buy. So we’re helping them get better. And you call them…those are shippers. They’re the ones that are using…they’re paying for the freight. They’re paying for the logistics and the handling. They need to lower that cost to be competitive.

Paul: And how far can you go? I mean, do they have to revisit this? Or is it something that they do it once and I do this in 2017, and I don’t have to do it for another 20 years, or is it a constantly changing…

Taylor: It depends on the industry. Some of the industries don’t change much. And we will occasionally find a client that, we look over them at a very deep level, and there’s not a lot we can help.

Paul: Because they’ve done a good job.

Taylor: They’ve got the great team. They know how to do the right processes. They’ve got good technology. So therefore, they’re best in class. But that’s pretty rare because people haven’t kept up. Logistics is kind of sometimes a lower-tier job or, in the organization, it’s not as prestigious. So therefore, it gets kind of put in the corner, so we can usually go in and help folks, with our experience. And it also helps that we see multiple people in an industry, and we can take those learnings and apply them and really look at what’s best in class versus this is the way we’ve always done it.

Paul: Right. Yeah. So rather than knowing just one way to do it, you’ve seen what works and what doesn’t work across industries. So that’s really cool. So you don’t have to make mistakes on me.

So now, alright. I’m somebody. I’m working in a big company that does this plastic stuff. I make the bags that wrap bread, let’s say. Who am I? Am I a vice president, a CEO? And, what do I do? Because I know that’s only one tiny part of their job. Or is it that that’s all they do is worry about the logistics?

Taylor: Mostly we start out with the people that have logistics folks on their team. Usually it’s a C-level person that we find a way in. Sometimes we’re brought in from the working team. They just can’t find a solution, and they get permission to go find us. But normally, they don’t want us in there if they’re not a good player, they don’t want us to come in.

Paul: Right. Well, okay. So there, there’s a crisis that occurs. What manifests that crisis? Is it that we just can’t compete on price or I’m hearing rumors? So I’m the CEO, let’s say. How is that crisis going to get to my desk? Is it that my competitors are beating me all the time? Or is it that, gee, I talked to Joe at that other company, and they’re getting it there for half the price? How does it actually occur? What manifests the inflection point that makes me say, “We’ve got to do something about this?”

Taylor: Usually something’s changed. Leadership has changed. The industry is changing, and they can’t keep up. Tthey’re no longer competitive.

Paul: Dig into that a little bit — the “I can’t keep up.” What does that mean?

Taylor: That means their competitor is getting the products there cheaper, faster. They’re better.

Paul: So I’m, I’m losing out.

Taylor: On sales.

Paul: The person who is buying it is going to buy from Joe because he got it there for $10 cheaper than me. Or maybe a day earlier than me.

Taylor: Exactly.

Paul: Interesting. So I’m talking about not just one bag a flour, I’m talking about a train-load of flour that’s been processed and turned into bread or something.

Taylor: Or there’s a crisis, as you said. The supply chain breaks, and they’ve made a mistake, and they’re totally losing business, you know.

Paul: So they didn’t plan well. They didn’t predict that they need a million loaves of bread on this day?

Taylor: Yeah. So it could be a planning issue. It could be a whole host of things that causes something to break, and there’s an emergency.

Paul: Well let’s go to that. So let’s say there was a problem with the wheat crop, just to use something that is already identifiable by people. Wheat turns into bread. So would logistics cover the fact… Would you have thought about it? Do you have contingency plans for if the wheat crop is bad? Do you have leading indicators saying, “Hey, you know, it doesn’t look like we’re going to have a lot of wheat in the fall.” Or do you just react?

Taylor: Well, either way. You can. And usually good logistics folks are good business people, and they’re looking for those leading indicators, and they’re staying up with the market. They’re listening to their sales team, and they’re trying to gather data so that they can be proactive and ready to go so that that crisis doesn’t happen.

So it’s a combination of our talents are as logistics professionals but also with a business mindset. And therefore, we can not only help the shippers, we can also help the transportation providers that are on the other side of the table.

Paul: Okay. So I’m a trucker. I own a fleet of trucks or trains. You can help me how?

Taylor: Because we understand that market, and we might be ahead of them in saying, “You know, the trend is that you have a smaller truck that can go faster,” which is not true. But anyway, we help them with those market trends because we’ve got our eyes on the market. We’ve got our eyes on the logistics methods and processes, and sometime, when you’re doing something the same all the time, you’re missing those opportunities. You’re not looking enough ahead. You don’t know the industry well enough that you’re serving.

So again, we bring, as you think about it, the shipper, the transportation provider or logistics provider, they’re just on opposite sides of the table. So if we can help one, we can help the other. A lot more strategy work for the transportation provider, for example. We’re not going to tell them how to run their business, but we might give them a direction that they ought to be heading towards this market or talking to this type of company. Or what’s the solution you’re going to bring to them?

Paul: So let me ask this. So, sand, 20 years ago, probably wasn’t in big demand like it is now. So did somebody see that coming and say, “Oh my gosh. We’ve got to get a lot of trucks or trains ready for sand”? Because, I mean, that sounds like… Let’s assume we were at a steady state so that the trains were running with plastic and whatever they were filled with. And all of a sudden, we need sand for a completely new technology effectively. It’s certainly at the consumption levels. Well, the trains are all full. In other words, they only have so many train, and they’re delivering plastic already. And they’re delivering whatever they deliver. So is that something that you guys would have helped predict? And was that something that you helped, or how did the whole logistics community react to that huge need, sort of that inrush current? Like, oh my gosh, there’s just a huge need all of a sudden.

Taylor: Yeah. It was a really interesting thing to be a part of because if you think about how much sand has moved on rail before fracking, it was really boring and steady. You know, it was moving sand to a casting shop, or it was moving sand to make fiberglass, which are decent volumes of sand, but literally, over the past, I’d say, seven, eight years, the volume of sand moved by rail has gone up, eight to ten times.

Paul: But where did they get the trains?

Taylor: It’s that type of product, you have a locomotive. And whoever is going to move the sand, they have to buy the car, or lease the car. So there were not enough of the small…what they’re called, small covered hoppers. You have to have a small car because it’s so heavy, there’s a limit. So the size of one of these small-covered hoppers was perfect for sand. It used to be used for cement too. So those cars went from, again, building one thousand or two a year to building tens of thousands a year.

Paul: Is that really? That’s the magnitude?

Taylor: Yeah, yeah.

Paul: They’re producing them now? And so they’re rushing to build these cars.

Taylor: Yeah. And over the last seven or eight years, the frac sand world has had three ups and downs. And every time, the market isn’t mature enough. All the different aspects of that market are so immature that there’s vast over-building and then shortages. Because it moves so quickly compared to conventional, vertical drilling that was very sleepy. The hydraulic fracturing came upon us very quickly. And as people figured it out, they needed all these materials—

Paul: And they needed it now.

Taylor: And they need it now, and they never had to move anything by rail.

Paul: So they don’t know how to order it or move it or get it there. So what did they do? I mean, I’m sure they’re talking about millions of dollars’ worth of investments to do these new wells. So what did they do? How did they order it? And then they call the train company and they say, “Well, we don’t have any cars.”

Taylor: Yeah. Well, that whole supply chain had to get set up because the sand was mined throughout the country for these other purposes, but nearly all the best quality sand was in Wisconsin and Illinois and Minnesota due to the geology. It was needed in Ohio, Texas, North Dakota.

Paul: And were there good trains between those places?

Taylor: Not really. Not really.

Paul: So did they build new train tracks?

Taylor: Yeah, especially to North Dakota. The railroads built billions of dollars of investment to get more capacity to move sand in and crude out. So again, it sent shockwaves through the railroads because they had to improve their service. They had to go to places they weren’t used to going to. And then you think about the shippers. They had to go out and figure out how do you get one of these railcars because an oil company didn’t use anything in rail. So that’s how we started with a couple of oil and gas companies. They realized, “We’ve gotta get good at rail. We don’t know who to call. We don’t know how to buy a car. We don’t know how to schedule service.”

So, we got to help a couple folks early on figure it out for themselves. They became experts, and we’ve moved on and helped many other folks since that. That’s another way that we help people is when they’re new. They just don’t know. And working with railroads is quite unique. So we have railroaders on our team, and we have shippers on our team, so we know how to work with the railroads.

Paul: Yeah. As we talk about this, you mentioned supply chain, and I’ve never really understood that. I’ve understood it at sort of maybe a micro level that, if I’m going to make cakes for people, I need to get salt and eggs, and flour. And then I say, “Well, I’m going to be making one cake a week. So I want it delivered on Tuesday because I can bake it and deliver the cake on Thursday. But you’re multiplying that millions or tens of millions. So I don’t need just a dozen eggs. I need a million eggs. And that’s just something that I don’t think about as I’m living my day, is the magnitude of this.

So are there other things? We’ve talked about plastic and sand. Is it just that? Bulk logistics, it’s bulk. Lots of stuff. Do you guys do anything else beyond just figure out how to optimally move stuff and improve that. And I guess, a small percentage change in that, it calculates to lots of money. So there’s huge benefit to having somebody come in and look at that because if they can save one percent, it’s still a lot of money.

Taylor: Yeah. Exactly. Those two aspects, like I said, we’ve got folks from both sides of the table — shippers, transport companies. So we can help those folks all day long improve, look in the right spot for business, etc. because of the wealth of talent. And since we’re out there helping people, we’re usually in a pretty good position to know where the trends are at.

Paul: Yeah. That’s really cool because now I can hire you and sort of know what all of the best practices are out in the world. It’s sort of a way to get intelligence out there that I wouldn’t really know otherwise. You know that if you do A, B, and C, it will work. If you do it B, C, and A, it won’t work.

Taylor: Yeah. The other third of our business — and again, these are just rough orders of magnitude — are people that are investors. And they need to be smart, very fast. So they want to—

Paul: Now you’re not talking about like me, with my IRA or my retirement fund. You’re talking about commercial or, I guess, institutional investors?

Taylor: Correct.

Paul: Big, big organizations that invest.

Taylor: Yeah. Especially private equity. Private equity wants to put your money… Somebody else, some wealthy individual’s money to work very quickly with a high return. So they want to find these trends as early as they can, make sure they’re buying, they’re paying an appropriate amount for this company that they’re buying or investing in and do it in an extremely fast manner. So they need somebody that’s an expert in one of these markets, and, as you’ve heard, a lot of these markets we deal in are very dependent on logistics.

Paul: So do you provide advice about the logistics portion of that business or the whole business?

Taylor: Could be both.

Paul: Really.

Taylor: Could be both because some of them, logistics is the business. Say they want to buy a company that cleans out chemical tanks that are on the back of a tank truck. And we’ve got chemical industry veterans. We’ve got folks that have been in the service industry. We can quickly go in and assess how good of an investment that is.

Paul: I see.

Taylor: So we also might help them with their strategy because we’re so advanced in understanding the world. Their sharp analysts might take a year or two—

Paul: I see. To come up to speed.

Taylor: —to get there, and we can get in there in six weeks.

Paul: I see. Well that’s a huge benefit. So I’m an analyst at an investment firm, and I’m thinking about buying this type of company. I identify several of them, and I can come to you to say, give me the inside scoop on some of their costs and their expenses, even where it’s going, as you could project that.

Taylor: Or how are they perceived in the marketplace.

Paul: Oh, that’s a good point. Yeah.

Taylor: How, how efficient are they? What’s their infrastructure look like compared to the competitor? All those different aspects, we can help them assess it very quickly. And as you can imagine, when a company is for sale, they put together a wonderful marketing package that always has the same forecast. It’s always going up. And many times, it’s probably not going to happen. And our folks can go through the assumptions and look at the market and say, “Boy, yeah. I think they can do it.” Or, “You need to pay less because there’s no way they’re going to do that.”

Paul: I see. Well, that’s cool because everything else they’re consuming is historical. You know, it’s looking at what they did last year. It’s looking at how they did it, maybe their competition last year. But it’s nothing really looking forward. Or just an analyst sitting there saying, “Oh, I think they’re going to do this much looking forward.” Here’s tactical, right on the ground, to say this is what’s really happening. That’s very cool.

Taylor: Yeah. They might consume a lot of forecasts. And they pay tens of thousands for those forecasts. But it doesn’t mean they’re right. It doesn’t mean that they’re directionally correct, or they might have a flaw in them that nobody else realizes.

Paul: So for the normal, on-the-street person, this is a thriving business that has one aspect of the machine that is our economy. And you focus on making sure stuff gets there when it needs to get there at the most optimal way it can get there. So it seems like a niche but it’s integral to everything that happens. So if that, as you said, if that supply chain breaks down, there’s huge ripple effects, I would imagine. Businesses can’t deliver their products. People can’t buy bread, and supermarkets can’t stay in business, if we don’t have plastic for wrapping food. And so it’s really cool to me to be sitting here talking to somebody that focuses on this seemingly small, maybe even esoteric, from the pedestrian, just a normal person walking down the street. But this is so integrated into everything we do. And it’s sort of part of this big machine that goes on, that delivers all of the things that we’re used to getting.

Well, we’ve been talking with Taylor Robinson, President of PLG Consulting, experts in bulk logistics.


Also published on Medium.

The Business of Logistics with Taylor Robinson of PLG

Today on the Edge of Innovation, we are talking with Taylor Robinson of PLG Consulting about the business of logistics.

Introduction

The Business of Logistics with Taylor Robinson of PLG

Paul: Hello. My name is Paul Parisi, and I’m here with Taylor Robinson, the president of PLG Consulting. Hi, Taylor.

Taylor: Good afternoon, Paul.

Paul: So, PLG Consulting. What’s PLG mean?

Taylor: Well, it’s had several meanings for its history. It was originally founded 17 years ago called Plastics Logistics Group, and the founder Graham Brisben was really catering to the chemical and plastics world and how to help logistic solutions, broad-based logistics solutions.

Paul: Okay. Well, I understand the words. I understood plastics and group, what’s logistics?

Taylor: Logistics is most efficiently moving stuff around, whether it’s products, materials. So it’s all about making more efficiency, lowering costs, improving cycle time, helping the customers make money in the areas that they operate.

Paul: Okay, What type of companies? It doesn’t sound like a bakery, a small bakery would use your services. So it’s got to be some level of company. I’m trying to understand sort of where the market segment is and what kind of companies you work with. So you’re providing logistic services. So let’s dig into that. What does that mean? So just one example.

Taylor: Yeah. We provide logistics consulting. So we don’t help someone operate better, we don’t do it for them. We show them improvements in their efficiency. We help them get there so that they can then operate better on their own. So we’re coming in, working normally for a limited amount of time to provide them knowledge, capabilities, a path forward that’s going to help them get better.

Paul: Okay. So let’s pick an example, not an exact company, but what’s a company that you’ve done this kind of work for? Is it a… I don’t know.

Taylor: Yeah. The best way to describe it is any type of company that’s going to move bulk product.

Paul: Okay. What’s bulk product?

Taylor: Bulk is heavy, stinky, nasty material around. This isn’t moving Amazon’s boxes around. This is…

Paul: That is logistics, though.

Taylor: That is logistics, and I’m sure we can help most companies, consumer goods companies or something like that. But our specialty is industrial companies that move big products in big things. Think a big ship on the ocean full of bulk product or containerized product.

Paul: So wait a minute. You said containerized. What does that mean?

Taylor: Put in a box as opposed to…

Paul: Like a shipping container?

Taylor: Yeah.

Paul: Like the back of a truck?

Taylor: Certainly. Yeah, so our bulk logistics means we can help people move things. Usually it’s not as expensive of a product. The logistics is extremely important because moving heavy material around is very expensive compared to the product. So think of sand or cement. The cost of that material is extremely low, but you still have to pay someone to move it around. So you have to be extremely competitive on your logistics in these type of commodities. So in some cases, the cost of moving the product is worth way more than the product.

Paul: Oh. Interesting. So let’s talk about that with sand. Let’s say you need it. You had a business that was building something. They use sand in building, I guess? Is that true? So how much does a…? Is it a container of sand? How do you… It’s the unit of measure for moving sand?

Taylor: Yeah. So, you know, back to kind of bulk. It’s usually moved by a ship, some sort of marine vessel, a truck, or rail, or a pipeline. So usually, you have four options for many of these products. Others you have one or two. So our job is to bring those experts that have moved that product. They understand the characteristics of it. Or they know how to move a like product, and they know how to give the customer more options.

Paul: Insight, wisdom.

Taylor: More options, more competitive ways to do it, taking the price down, taking the cost down. So, you know, people have moved their product for dozens of years but they may have done it the same way, and they haven’t thought of outside ideas. So many times, we bring outside ideas or expertise that the client may not have yet.

Paul: Because it’s not their business, really. I mean, they’re building. They’re building stuff.

Taylor: Yeah. But they need to be logistics experts.

Paul: I see.

Taylor: So we help them kind of get jumpstarted with good ideas and then here’s how you can do it so that they can build their own capability to be more successful.

Paul: Okay. Well let me go down a road here of a scenario. I have no idea. So just pick in your mind — I don’t care about a company — but a job that uses a lot of sand. So what’s a train car of sand cost? Just a wild guess. I mean, you’re going to be more informed than I am, certainly.

Taylor: Yeah. So just say roughly it’s going to hold about 50 tons of sand. In high volume they’ll pay $35, $40 a ton.

Paul: Okay. So 50 times 35 is five times four is 2,000, about $200,000—

Taylor: Yeah.

Paul: —for a train car of sand. And the typical user of sand doesn’t order one train car. How much do they order? Do they order a hundred or is it million or ten?

Taylor: Yeah. In the world of frac sand, which is by far the biggest sand world now, around hydraulic fracturing, they use large amounts of sand. On average, a well now is about 55 railcars per well.

Paul: Okay. So 55 times $200,000. That’s five time $10 million?

Taylor: A million dollars. Yeah, a million dollars’ worth of sand.

Paul: Just sand. But you’re saying that the movement of the sand is actually more expensive than the sand.

Taylor: Yeah. The movement of the sand will be about 75% of the cost of the total delivered cost.

Paul: Wow. So if it’s a million dollars, it’s going to cost them a million and a half to move it.

Taylor: Exactly. Yeah.

Paul: Okay. So how often does this happen, that they use a million dollars’ worth of sand? Is this happening every day? Is this something that’s an outlier? Because I mean, as a normal person — you know, walking the street, getting up, going to work, driving my car, playing with the kids, etc. — I don’t think in those numbers. I just don’t experience the world in those numbers. You know, I buy a loaf of bread. I don’t buy a train car of flour. So is this…? Is that saying that this company A is using a million dollars’ worth of sand, does that happen once a month? Once a year? Once a day? What’s the magnitude?

Taylor: This year, probably for fracking, they will use 60 to 70 million tons.

Paul: 60 to 70 million tons. And how much do they use on one?

Taylor: About 55 railcars. So you’re talking about a major amount. You’re talking several….how many wells are they going to frac? I don’t know. 10,000 wells a year or…

Paul: And each one of them is using a trainload of sand.

Taylor: Well, a half trainload. Yeah.

Paul: Half trainload.

Taylor: Yeah. But they have some that have used two and a half trainloads of sand in one well. So there’s a range, and this is one of the key enablers to get lower and lower cost oil and natural gas. So it’s become an amazing growth story because it’s cheap. It is easily available. It’s really cheap.

Paul: The sand is.

Taylor: Yes. But to get it there is not.

Paul: Okay. So, well, I guess that’s some of the things. We don’t really, as consumers, understand what goes into getting our products to our table or in our pockets with our phones, or whatever it might be. And so we’re sort of peeling the onion back here, and we’re seeing that you’re telling me, particular frac sand or that particular thing, they’re using all of this sand. And I could say, “Well, I could shovel it.” No, you can’t shovel that much sand, you know. So it’s a magnitude of logistics that’s huge in comparison to our daily lives. So I’m starting to get a sense here of… Well you said it’s a million dollars’ worth of sand costs one and a half million dollars to move. So it’s wise for me to pay attention to that one and a half million dollars. It’s hard for me to comprehend it, but the companies are doing that.

Now that’s not the only thing they move. They move lots of other things, so it’s not just sand. Now PLG you said, was in plastics.

Taylor: Originally.

Paul: Originally. So what were you moving then? Was it chemicals?

Taylor: Plastic pellets.

Paul: Oh, pellets. Interesting.

Taylor: So, before you have a pressed plastic product, it usually comes from a pellet that gets melted down and made into that packaging material or the product. So that’s how PLG got started was moving these pellets around and, again, helping people be more efficient in distributing pellets to their customers throughout the country and exporting and importing.

Paul: So it’s not like you decide you’re going to make a new widget and you say I’m going to order the plastic via UPS because it’s just sheer volume. So I think that’s an important thing to pull out here, is there is a whole segment of the economy that we don’t really have good touch with. We’re not in touch with that big world, where they order a trainload of stuff. I just can’t comprehend that. I have a hard time going into Costco and buying the big amount there because I’m not going to use that much. You’re saying we’re really several magnitudes, maybe even a hundred magnitudes larger than what a normal person consumes.

And so you’ve got a company that’s good at making plastic widgets, whatever it might be. And they’re realizing that — oh, my gosh — it cost me a million dollars to buy the plastic, but it cost a million and a half to move it, so I need somebody to help figure that out, who knows all the shortcuts. Is that where you guys come in?

Taylor: Yeah. We probably get in one step earlier in the chain. Whoever is either manufacturing or distributing that plastic, they’re responsible to have it competitively to the person that’s going to use it. So it’s their job to get it there as efficiently, to keep their costs down, to be competitive in the market. So we’ll help those people that distribute it or produce it. And to help you get back to the magnitude of the volume, you’re talking 20, 30, 35 million tons a year of one grade of plastic is used in the polyethylene alone. Just one grade of plastic, polyethylene.

Paul: Wow. I’m just a little over—. You said 35 million?

Taylor: Million tons.

Paul: Tons. And how big is a ton? Is it like a train car or is it…? How much physical space would that take up?

Taylor: So a train car full, a big hopper car full it’s going to weigh, I think, in the neighborhood of 50 to 60 tons.

Paul: So a million of those. Well, maybe 700,000 of those train cars.

Taylor: Yes.

Paul: And that’s just one type of plastic.

Taylor: Yeah. That’s one type.

Paul: And how many types of plastic are there in that magnitude?

Taylor: Dozens. It’s by far the largest in the world — polyethylene, used in packaging and bags.

Paul: But it could be — just a back of the napkin — it could be several hundred million tons of plastic all in, all of the plastic in the world that’s used.

Taylor: Yeah. So again, that’s where we got started with moving bulk material. Again, you see the theme of bulk. It’s much more efficient to move it in a railcar versus in bags. Now there is a plastics company — small, niche plastics company — that buys it in 24 kilogram bags of 60 pounds. Their competitor, though, might buy 10 railcars at a time.

Paul: Okay. So they’re going to get a cheaper price. What’s the magnitude of price change there. So let’s say if a bag… How much does a bag cost, the 60 pounds? Is a $100 or $10 or a dollar?

Taylor: Yeah. A hundred dollars.

Paul: Okay. So how much would that cost if I bought it in the rain car quantity?

Taylor: That same volume? Yeah, it might be 80.

Paul: Okay. So 20 dollars, 20% discount?

Taylor: Yeah. It could be. Yeah.

Paul: So now, if I’m that business, I’ve got a 20% benefit.

Taylor: It’s the delivered cost. Including everything it’s going to be, 10, 20% cheaper. And it’s mostly the pushing a whole railcar in versus lots of bags shipped around, handled. So again, it’s all about scale. It’s about efficient moving. It’s making sure you’ve got the right supply chain set up so you’re most efficient.

Paul: So it sounds like we use lots of stuff. I mean, our consumer world and just we consume lots of stuff. It’s just hard to get your head around using that many trainloads of plastic, you know. What are they making? We’re sitting here. We have phones, and there’s plastic in there, and there’s plastic in our computers and plastic in our packaging and all that. So, it adds up quickly.

Taylor: You think about plastic packaging alone. Go to the grocery store. Nearly everything you see in there is some sort of plastic now. You know, it used to be paper. It used to be metal cans. It used to be… It’s nearly all plastic now. It’s probably a graded polyethylene or some other more specialized grade. But you look at a store. Just think about how, if you could just pile up all that plastic.

Paul: Right. Yeah, that would be fascinating.

Taylor: Yeah. It’s all around you, but you don’t realize it. So as you can imagine, plastics… part of globalization is making it plastic because as people urbanize, they used to have their pot sitting there, and the food was there. Now they have to get it on the go. They’re working in the city. They’ve moved to the city. It’s got to be held by plastic. So that urbanization and globalization is making plastic continue to grow. In North America, we use about the same as we did last year. It might go up two percent. But in the developing world, it might go up. In India it might be eight, ten percent growth a year.

Paul: Wow. Okay. So now, do you guys… I mean, this plastic that they’re buying, they have options, I imagine, for recycled and not recycled.

Taylor: Yeah.

Paul: So you’re just trying to figure out how to most efficiently get it there.

Taylor: Yeah. The version material. Get the high-grade material wherever. This polyethylene story, it’s quite interesting because our low-cost natural gas enables the United States to be globally competitive.

Paul: In, in natural gas? Or in what?

Taylor: In natural gas, which then becomes these plastic materials. They’ve refined it and made it into polyethylene. We have world-class prices now because of our low-cost gas. Right now, we export about two million tons a year — just polyethylene — all over the world. That could grow to seven, eight, nine million tons over the next 10 years.

Paul: Where are those countries, those people in other countries get it if we weren’t here?

Taylor: They have some made there. The Middle East is a huge producer because of their low-cost feedstock. And it’s a vast network throughout the world. But we’re going to win because we have low-cost, and we’re going to go from, like I said, two and a half to, say, seven and a half. We’re going to triple that over the next 10 years. And it’s mainly needed in Asia because Asia doesn’t have low-cost feedstock like we do, and they’re urbanizing which drives volume.

Paul: Right. So I need a cup to hold the coffee as I’m walking from my house to…or getting off the train going to my office, I need a plastic cup to hold the coffee. Is that sort of the urbanization?

Taylor: Yeah. Or you know, your breakfast on the go. It’s in a plastic package.
Paul: Interesting, as opposed to having eaten at home or having drank out of a ceramic cup at home and stuff like that.

Paul: So let’s think about this. There seems like there’s this other world going on that I didn’t really know about of all of this moving millions of tons of stuff. I don’t even see it, but I don’t even…I can’t even perceive it, and it’s directly related to my supermarket where I go in and everything is packaged in plastic. So are there other areas besides plastic that… I mean, we talked about sand and plastic. What other bulk things are there?

Taylor: The lots of energy-related products. Coal. Coal is heavily logistics. Very cheap. More, expensive to move it. Forest products to make paper, which is, of course, all around us. That paper product has to have been a wood product, processed and moved. Again, how? Low cost. Low-cost material.

Paul: Is this a thought in the industry: Let’s make the paper where the trees are?

Taylor: Of course, yeah. There’s more mills in the southeast US than anywhere.

Paul: I see. Okay. And the same thing with plastic is I’m going to make the plastic where the oil is, I guess?

Taylor: Yeah. Gas. The gas has come. And the Gulf Coast, especially Texas and Louisiana probably has 75 to 80 percent of the petrochemicals in the country are made there and therefore distributed across North America via rail because it’s the most efficient way to move these somewhat low-value products a long distance.

Paul: Okay. Well, we’ve been talking with Taylor Robinson, President of PLG Consulting, experts in bulk logistics. And it’s fascinating that there’s this whole sub culture, if you will, of the way things are moving, and it’s part of the breath of the country. It’s fascinating!

 


Also published on Medium.

© 2024 Paul Parisi

Theme by Anders NorénUp ↑