Better connected13 August 2010
Richard Sammons, Chief Executive of Simon Storage, looks at the logistical role of storage terminals as part of a better connected ‘hubs and spokes’ distribution system for the bulk liquid and gas industries.
Although the term is often used simply to describe the movement of goods from one point to another, ‘logistics’ is at the heart of an organisation’s operational efficiency. Effective logistics maintain the flow of product to ensure time-related positioning to meet market demand. Organisation of this flow according to a hub-and-spokes network, rather than point-to-point transit, optimises logistics through greater flexibility and consolidation of resources. There are a number of advantages from this approach. A reduced number of routes generally leads to more efficient use of transportation resources. Complex operations, such as break bulk as well as Customs and stock accounting, can be carried out at the hub, rather than at every node. Spokes are a simple concept, and new ones can be created easily to match changing demand patterns.
The hub-spoke distribution concept was pioneered in the US by Delta Airlines back in the 1950s to allow the most cost-efficient transportation of passengers – and also cargo – from one place to another without a direct service. This distribution model has since been applied to many other products and services and hub-spoke networks are now widely used by industry as part of a centralised, integrated logistics solution. This approach is often more cost-effective where products have several points of origin and destinations. Using a hub with connections to major sea, road, rail, and even pipeline routes, allows an operator to take advantage of the cost and time saving benefits of different transport modes. By maximising intermodal efficiencies, unit transport costs can be reduced, as well as ensuring security of product supply. At Simon we believe that the provision of more capable, flexible hubs, combined with transhipment services, is one of the keys to achieving optimum logistics within the supply chain.
A storage terminal’s location is critical to the fast and efficient flow of product within a hub and spoke distribution system. A strategic storage hub needs to have convenient access to highly developed transport links for the receipt of product into storage and also for product transfer, either to local manufacturing plants for processing or to points of consumption. The size of a strategic hub needs to be optimised to meet the geographical advantages and the volume of the hinterland market it supplies.
Offering well-located and cost-effective terminals for both exporters and importers, Simon’s storage and handling facilities have the capability and connections to surrounding transport infrastructure to receive and redistribute products via a variety of different transport methods. Bulk liquid and gas products are stored and distributed by ship, barge, rail tanker, pipeline or road vehicle, providing the flexibility to develop an optimal combination of viable transport modes, as well as realising the cost advantages that come with economies of scale. Export products are received and stored to consolidate an optimum volume before onward shipment, thereby maximising payloads. Conversely, import product may be shipped in and stored in bulk ready for onward distribution in smaller loads. In addition to these options, Simon has established pipeline links for a number of clients for transporting specific products from storage to refineries and to local manufacturing plants.
Short sea shipping
Short sea shipping is at the forefront of freight movements of wet and dry bulk cargoes and containers within Europe. Simon’s UK terminals at Immingham, Seal Sands and on the Tyne occupy prime locations on England’s East Coast – ‘the coast with the most’ – with deep water jetties, close proximity to major motorway networks, and access to transport by rail as well as road. The UK terminals are ideally placed for receiving product shipments from Continental and Eastern Europe, and have a major logistical advantage over West Coast facilities in terms of shorter and more direct routes to Europe’s ARA Ports (Antwerp, Rotterdam and Amsterdam) and to Hamburg, as well as easier access to the developing transit terminals of Eastern Europe.
This advantage is demonstrated in Simon’s contract to provide base oil storage for hocem Haase Oil Chemical GmbH at the Immingham West Terminal. The product arrives at the Terminal by ship from hocem’s transit terminal in Latvia for onward distribution by road. Having one strategic hub at Immingham ensures an enhanced service for hocem’s customers, rather than the longer sea route to West Coast facilities. Another customer taking advantage of the hub and spoke concept to maximise the efficiency of the logistics in their supply chain is a solvent manufacturer in Northern Europe. Its products are shipped to ARA for consolidation and transhipment to many destinations, including Simon’s terminal at Seal Sands. Here, taking advantage of the modern facilities for storage and road loading, the customer uses the terminal as a strategic hub for delivering its products along the spokes to its clients across the UK.
Distributing to the heart of Europe
Outside the UK, Simon’s Mannheim terminals on the Rhine in Germany provide a strategic storage hub for the heart of Europe. The terminals provide ready access to Southern Germany, France, Switzerland, Austria and Italy, as well as an efficient route to Europe’s major ports. The terminals also provide transhipment services for products received by rail from Eastern Europe and destined for Western markets. In addition, the terminals provide the capability to build bulk volumes or break-bulk to meet onward distribution demand. This flexibility allows the customers to build the most effective distribution networks in terms of transport utilisation and cost.
Enhanced hub services
In addition to providing safe storage for bulk liquids and gas products, complex operations are carried out at hubs, rather than at each spoke, thereby helping operators to make further reductions in distribution time and costs. For example, Simon has experienced a growth in demand for specialist blending of gasoline components to produce finished road fuel products at its terminals. Services offered include provision for safe product transfer from component tanks to blending tanks, and dedicated recirculation and blending systems for the production of unleaded and super unleaded petrol to the required British Standard specification. In the chemical sector, strategic hub terminals are also used for delivering a range of products utilising a single compartmented delivery vehicle taking advantage of the volume benefits achieved on short sea transit routes.
Complete logistics solution
Hub and spoke distribution systems have been successfully implemented in many different industries, including oil, gas and chemical sectors. The time and cost savings that can be made through transportation efficiencies and improved distribution processes bring benefits to operators and their customers. Storage terminals with access to multiple transportation modes can play a key role in this type of distribution network, providing hubs that are able to receive products from many different origins and consolidate shipments for fast and cost-effective onward distribution. With flexible facilities in prime locations, Simon’s storage terminals in the UK, Ireland and Germany are already serving as strategic hubs for many clients, providing a combination of storage capability and intermodal flexibility as part of a complete logistics solution.