Getting the Goods: Stocking North Dakota’s Shelves

Getting goods to a landlocked rural state where population centers are widely scattered can always be considered a challenge. But given North Dakota’s rapid expansion of business and population, challenges have grown along with the state’s exponentially expanding industries and residents.

When it comes to importing goods into the state, the goal is to have the job sites from oil fields to new home and business construction stocked: safety equipment onsite and whatever proper equipment is needed is where it needs to be. Otherwise, nobody works, according to Chuck Clairmont, executive director, North Dakota Safety Council.

It’s a challenge to get groceries and necessities into the state and, better yet, keeping the shelves stocked with everything from shampoo to cat food. Goods are flying off retail shelves and they’re not going back on as quickly. Is it a function of the logistics of importing, the rapid growth of just about everything or the difficulty of finding workforce to truck goods that aren’t oil field related and stockers to fill the shelves?

“You hit on all three of them,” said Tom Woodmansee, president, North Dakota Grocers Association. Where western counties from Bismarck to Minot and west into the rural counties used to get by with one truck to supply retail, now they need two, three or four if they can get them. Which they can’t, always, because the trucks may be needed elsewhere or may be hauling something to the industries that are busily expanding the state.

Second, with the rapid expansion of energy industry employment and construction to meet the housing needs of people moving to North Dakota to be part of that energy industry, there’s stiff competition for truck drivers to haul all kinds of goods. Retail’s struggling for trucks and drivers just like any industry that relies on ground transportation.

Third, employees. North Dakota’s unemployment stood at 3.0 in August 2012. Getting enough people to unload the trucks and even more to stock the shelves and then more to work as cashiers or in specialty areas like produce, meat and dairy is the third part of the puzzle, according to Woodmansee.

In Minot, with all the oil field activity and energy industry employment, the challenge seems less getting goods into the county and more getting goods onto the shelves.

“I can’t speak to what residents are experiencing in Williston or Dickinson or the vicinity, but I think a bigger challenge is working to stock these retail operations,” said Jerry Chavez, president/CEO, Minot Area Development Corporation.

In part that’s because Minot enjoys both a variety of state highways that cross and meet in the community, and sits at a crossing of two major railroads – Canadian Pacific north/south and Burlington Northern Santa Fe Corp (BNSF) going east/west.

Those railroads, however, traditionally supported agricultural products heading out of the state, and dealt with a seasonal schedule that ended when the crop was in. Today those same railroads are importing chemicals, sand and pipeline to the oil fields as well as trying to supply residents with goods.

The railroad import challenge is being met in some parts of the state with expansion of rail. In the Minot area expansion at Port of North Dakota will encompass 3,200 acres and add 45 miles of track infrastructure to help alleviate congestion, according to Chavez.

On the Road Again

Keeping highways up and running and in good order is an ongoing project for every state. In a state where population centers have suddenly shifted, where population overall continues to grow and the traffic patterns and numbers change daily, keeping highways up to date is critical and a challenge.

“The roads are in very difficult shape,” said Woodmansee. “They’re doing the best they can to keep them up and build bypasses, but we are fast approaching a time when that won’t be able to be done anymore as we’re getting into the winter season. But they’re doing the best they can. I think most of this will be ironed out and determined through the next few months at the legislative session for funding what roads will be done, new roads and what have you.”

Francis Ziegler, P.E., director, North Dakota Department of Transportation (NDDOT), agrees. “We’re working hard to get ahead of the curve. One of the things that’s working for our state is our Governor and our legislative leadership provided us with funding in the 2011-2013 biennium to address a lot of these needs.” The 2011-2013 Legislature appropriations totaled $9.92 billion, with 16.8 percent of the funds going to transportation. NDDOT anticipates spending $410 million in Western North Dakota in 2012, $305 million on state roads and $142 million in funds broken out over two years on county roads. “So we’re making a huge investment in Western North Dakota to bring the roads up to the standards they need to carry these loads,” said Ziegler.

And traffic is still flowing on the roads. In fact, more than ever before. Statewide, traffic counters that work automatically 365 days a year show an increase of 10 percent statewide; in the oil counties, the increase is 25 percent.

“One of the roadways we’ve been working on had, before, 2,000 to 2,500 vehicles a day and it is now over 10,000 vehicles a day, so we’ve seen a fourfold increase in traffic,” said Ziegler. More of a concern is the change from an average of 15 to 20 percent of traffic being truck traffic to, in oil field areas, 40 to 60 percent of the vehicles on the roads are trucks.

“What that does is present us with the need to re-pave and redo a lot of those roads much sooner than we had anticipated,” said Ziegler. “These are heavy trucks, and a lot of them are heavier than our road normally carries because they’re big rigs that have to be moved under permanent conditions. They’re very heavy and we have to deal with all of that as we design our pavement.”

Winter’s Coming

Winter driving in North Dakota isn’t a surprise to truckers hauling into the state, and the roads stay open most of the year. On a typical December day in North Dakota the temperature may hover around five below zero but there’s probably not a significant accumulation of snow to deal with. The challenge the coming winter presents with regard to importing goods into the state is stopping the expansions and improvements of ground transportation.

With winter coming, some of the solutions to the problems of keeping goods on North Dakota retail shelves will be temporarily shelved themselves. Building infrastructure with frost, snow and zero degree temperatures doesn’t work. The cost of putting it up rises, and some of it just can’t be done.

“For example, asphalt parking lots, they’re starting to do footings and stuff, but it’s at an increased cost because they have to provide heat for ground thaw, and heat for concrete shear and compaction as buildings are put up,” said Greg Johnson, CEO, North Dakota Port Services. “Development of roads does not happen at all during the wintertime. It does limit the construction season on a lot of projects.”

Seeking Solutions

One solution for stocking retail would be to have the goods already in state, located in a distribution center or hub. For now, Port of North Dakota is essentially the distribution hub for all products coming into the area. “But we’re limited in our capacity and until we get the capacity built out, we will remain limited,” said Johnson. Being located next to the BNSF facility in North Dakota facilitates the Port in acting as a distribution hub. In addition, the Port of North Dakota is currently involved in expansion of not only the rail track infrastructure heading in and out of Minot, but of infrastructure and warehousing to handle increased challenges of shipping and provide service to companies looking for that type of service.

Part of the difficulty in stocking rural areas and oil field areas is in perception and understanding of how logistics works. The expectations of company personnel used to a more metropolitan area with access to any and all kinds of freight aren’t necessarily met in areas where such systems are just developing, Johnson notes.

But a few distributions centers wouldn’t be amiss. “We have two options for bringing in goods and equipment, and when you’re talking about alleviating issues about regular merchandise and goods, one of the things we’re exploring today is can we, through a railroad, partner with a Walmart or a Target to look at having them consider moving distribution operations to Minot, North Dakota, vis-a-vis through railroads. These are opportunities as we are growing very rapidly and we need to start thinking outside the box. That model works very well in other locations, Nevada being one, Chicago being another. Now we take those models and see if we can put them to work for us in our community at the local level,” said Chavez.

Roads are moving forward, weather permitting. NDDOT is doing environmental documents in a number of cities including Williston and Dickinson, and getting engineering contracts put in place. “In all these cities the norm used to be that the businesses wanted the traffic to come through the city and now they’re finding that with the heavy trucks coming through the city it’s quite a burden on the urban road systems. So the Department of Transportation is looking at the next biennium to put into place the truck reliever routes, or bypasses, around those cities,” said Ziegler.

In addition, the Department of Transportation plans to begin forming Highway 85 from Watford City to Williston with hopes to finish before the next biennium. After that will be creating four lanes between Watford City and Belfield. “There’s a tremendous amount of work that’s going to happen in the next half a dozen, 10 years,” said Ziegler.

As for groceries – getting meat and potatoes on the table and buying laundry detergent and dog food – retailers are trying to get the product into the state as often as possible because in North Dakota primarily there are two wholesalers – the Nash Finch Company and Supervalu, Inc. “For the western part of the state, those supplies come out of Bismarck and out of Minot,” said Woodmansee. “So the biggest thing is on the part of the retailer to try and anticipate product needs and to keep in contact with their wholesaler on those needs. And then sometimes they just flat run out and don’t get it until the next truck comes.”

Some of the retailers have the ability to self-supply, through warehouses at their headquarters in St. Cloud, but that’s a good distance from the oil field areas and would result in almost round-the-clock trucking.

The only two distribution centers are Bismarck and Minot, currently,” said Woodmansee. “They could get some things from Billings, but it’s quicker from Bismarck and Minot. Billings is another two and a half hours away. If they wanted to get it quicker they’d have to go into either Dickinson or Williston and I don’t know if that’s feasible at this point.”

Adding pressure to an already stressed import system for goods, new retailers in the form of grocery and fast food are building stores in the Bakken area and due to come online in the next four to six months. Those will need to be supplied, too.

And while most of the pressure on getting enough goods and equipment imported into North Dakota has been centered in the western oil field areas, the fast expansion statewide means that even cities in the east with the state highways like I-29 and I-94 going into the area for importation of goods still don’t have the workforce to keep those goods on the shelves, and they’re still dealing with congestion in shipping and scarcity of containers for containerized shipments of goods.

In, and Out Again

Since the ‘80s and ‘90s and on into the 21st century, North Dakota has had difficulty receiving shipping containers. Containers coming in to the state went to local communities for distribution, maybe 200 miles away from the Port in Minot. They just weren’t available for export of commodities like grain and flax.

One of the benefits of the oil field industry has been the number of shipping containers coming into the state. “There are so many more imports into the state in containers that we have actually made significant progress in a sense of getting extra containers into North Dakota,” said Dean Gorder, executive director, North Dakota Trade Office (NDTO). So much is coming in there are actually enough containers to send things out. Pricing of containers still isn’t where NDTO would like to see it, but the Port is becoming a minor player in the container business with the potential to become a major player.

Historically, North Dakota has been an export state, sending out by container specialty commodities like sunflowers, granola, flax and a variety of products produced in the state which are not bulk commodities like corn and soybeans. Even machinery manufactured in the state is sent out as containerized cargo.

In the Meantime

While residents and newcomers alike wait for shelves to get stocked, North Dakota is playing a wait and see game. The oil field industry looks good to go for the next 15 to 25 years or longer, but nothing is ever definite.

“I think we’re going to have to take a wait and see attitude,” said Woodmansee. “All indications are that this (oil industry) is going to maintain its growth but as with any depletable resource, I think that you know and I know that things could change. Not overnight but if oil prices take a huge, huge drop for whatever reason, things could slow down quite a bit. We’ve been through this before in the ‘80s and it ended very quickly. They’re indicating this will stay a very long period of time, but with the price of oil determined on the worldwide market, we don’t know. But should that be the case, not the fact that they would pull out, but that they would cease operations until the price comes back up. Who knows? Those are the things that retailers consider because if the production comes to a standstill that means workers who are here from other states probably leave for the time being. So then we have another issue.”

All of which means its probably going to be a while before the challenges of stocking the shelves and importing goods into North Dakota are met.

“That’s what you look for to maintain a vibrant economy,” said Johnson. “In my mind if there’s no challenge to be met, then what else is there to do? So growth will always have challenges. Then the growth will stop. Will it get stabilized off eventually? Yes, and I’d say that stabling period, in my mind, is probably a minimum of five years out, potentially to 10, to become real stable.”

Comments

  1. TexasMontana says:

    Stabilized growth is the desirable outcome. There is a lot of growth even now, but it’s got to be managed with wisdom. Companies coming give a boost to the economy but if large infrastructures are built assuming all these people are going to stay, it will be a mistake. Companies like Aries Residence Suites offer a good compromise of providing the housing now and being able to remove them later without affecting the local real estate market.

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