Economic Development and Travel & Tourism

Grand River flood leaves rail-based suppliers dry

April 26, 2013
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Grand River flood leaves rail-based suppliers dry
A cargo train crosses the Grand River in Grand Rapids. Photo via youtube.com

It’s been a rough week for Michigan Rail & Storage and other businesses in the region that are reliant on Michigan’s rail system.

As the Grand River swelled, the train bridge crossing the Grand River was shut down and has yet to be reopened.

“The floodwaters being what they were, they had to park loaded cars on that bridge to keep it from being swept out of position, because the water will typically do that with some of the larger bridges,” said David Boerema, COO of Michigan Rail and Storage.

The majority of Boerema’s warehouse distribution business is conducted by rail, with a very small percentage arriving by truck.

“We haven’t received any interchanges from our railroad,” Boerema said. “What that does is creates massive backups in the system. It’s kind of like if the groceries can’t get to the grocery store, the shelves get a little more empty each day. And when resupply does come, now there is going to be a flurry of business and you’re going to need to catch up very quickly — it’s going to be a surge. I would say that right there is obviously a big concern.

“It’s probably reduced our revenues 40 percent based on volume,” he added.

Michigan Rail and Storage handles feed for approximately 8 percent of Michigan’s dairy cattle, and the company has plans to increase its business to cover 25 percent of the Michigan dairy industry, which equates to 375,000 dairy cattle.

Boerema said he is not too concerned the closure will impact his business in the long term, but does think closings can’t help but hurt relationships with suppliers on some level.

“They have to immediately find another source for supply and that can cause some frustration on their end,” he said. “That usually impacts relations going forward. There is some fear factor today with people with a just-in-time feed supply. They are more apt to get excited and look at this as ‘well, we’re not going to let that happen again.’ Well, it’s a 100-year flood; I think we’ve got that going for us.”

Boerema said that recent predictions have the rail bridge reopening this weekend. It will need to be inspected before traffic can resume, however. His business will likely have experienced a 10-day impact by that point.

In addition to no rail cars coming in, employees have been working shorter shifts since the flooding began. The company usually runs from 5 a.m. to 8 p.m. five days a week. The company employs nine workers.

“We have product here on hand and we have some cars on storage tracks up here,” Boerema said. “We’ve had limited interchange with our railroad, (and) because they are struggling with locomotive issues they have not been able to perform the necessary switches anyway. They were having mechanical problems two weeks prior, so we were already hamstrung from a lack of switches, and this just added insult to injury.”

Boerema said that in addition to his business, he is sure several other businesses that rely on rail also are experiencing challenges due to the flooding. He named Martin Marietta Corp., Packaging Corporation of America, Dow Corp., Gerber Products Co. and Sargent Sand Co. as a few businesses likely being impacted.

“Keep in mind that all of the customers in Muskegon or Grand Haven (to the) north are not receiving rail cars. Everyone north of Grand Rapids, all the way up to Ludington and Manistee, are not receiving any rail cars, so you are taking a look at large businesses.

“For larger companies like that, that run on a supply basis and can’t afford to shut their systems down, if they run out of product, which I believe right now is going by truck, that could impact the business model up there in those areas and there’s not a lot of industry up there anymore.”

Boerema said that the flooding would likely make some people more aware of the infrastructure realities in Michigan and hopefully understand the importance of that infrastructure to industry.

“It does wake people up to the fact that we’ve severed our railroads across the state over the years to the point now where we have arteries that are reliant on one piece of infrastructure and that is absolutely critical.

“I think this is a wakeup call to citizens in Michigan and industry in Michigan to make sure they take a look at their infrastructure … and what its value represents.”

Boerema said Michigan is on the brink of a renaissance when it comes to infrastructure, and he is optimistic that the outcome will be good for the state.

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