Formed in 1994 to help Midwest sugar beet farmers sell their crops, United Sugars has grown into America’s largest marketer of industrial sugars and a leading consumer supplier. Today, the company supplies more than 5 billion pounds of sugar to retailers and commercial producers of beverages, baked goods and prepared foods. With annual sales of more than $1 billion, the private cooperative supplies almost 30 percent of the country’s sugar needs. Based in Bloomington, Minn., United Sugars markets sugar for American Crystal Sugar, the Minn-Dak Farmers Cooperative and United States Sugars Corporation.
- Challenge
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A casual walk down the grocery aisle confirms that consumers have lots of choices when it comes to sugar. The same is true for commercial manufacturers in an extremely competitive market for the sweet commodity that is a key ingredient in so many of the products Americans eat and drink every day. Sugar prices are notoriously volatile and the producers that provide a quality product at the lowest cost usually come out on top.
United Sugars has been extremely successful in growing its market share by meeting customers’ needs for variety, value and superior service. Key to the company’s success has been its ability to continually drive costs out of its supply chain.
With eight processing plants in Florida, Minnesota, Montana and North Dakota and 25 distribution hubs in 17 states, United Sugars already has one of its industry’s most extensive and efficient distribution networks. But with their continuous improvement mindset, company managers are always looking for ways to improve the efficiency of the rail network that provides an essential link between farmers, processing plants, distribution centers, manufacturers, retailers and consumers’ pantries.
- Solution
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United Sugars uses a fleet of specialpurpose railcars to move processed sugar from processing plants to distribution centers. Since 2004, the company has leased about 225 railcars of various types from CIT Rail, which is a part of Transportation Finance at CIT.
CIT Rail is one of the country’s largest and most experienced providers of financial services to the freighttransportation industry. Leasing specialists at CIT Rail are experts at designing innovative leases on one of the industry’s newest and best-maintained fleets of railcars and locomotives. CIT Rail specializes in providing full-service leases that are tailored to meet each customer’s specific needs.
Through their relationship with the United Sugars management team, CIT Rail specialists were well aware of the company’s emphasis on efficiency and cost reduction. So when some new-generation, food-grade rail cars became available in the CIT inventory, rail financing specialists put together a proposal to help United Sugar managers show how replacing a portion of the company’s aging railcar fleet could improve efficiency, reduce costs and bolster the bottom line. The proposal was presented in mid-2009.
- Results
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United Sugars recognized the inherent value in the CIT Rail total cost of ownership approach to the rail business, which combines the benefits of the industry’s newest and best-maintained rail fleet with the advantages of a flexible, full-service lease. In their due diligence, United Sugars learned that no other leasing company could provide comparable cars at an affordable price and meet their schedule requirements.
After careful consideration United Sugars accepted the CIT Rail proposal to provide 50 new railcars under a multiyear lease that met all of United Sugars’ specifications.
The new railcars are equipped with state-of-the-art features, including stainless steel gates and other features that dramatically increase efficiency by saving time during both the loading and unloading processes. The cars also can carry up to 105 tons of sugar, at least 10 tons more than current-generation cars, enabling the company to move more sugar per car.
Because these cars were already in the CIT inventory, they were delivered in the first quarter of 2010, and United Sugars was able to put them into service and begin realizing the cost and productivity benefits almost immediately.
United Sugars projects that the cars will help further improve its already efficient distribution network and help the company achieve its objective of providing superior products, value and customer service.