Posts Tagged ‘rail shippers’

Rail Shippers Favor Trucks Over Railroads

November 27, 2020

A survey of rail shippers finds they believe trucks better meet their shipping needs than do railroads.

The survey conducted by consulting firm Oliver Wyman of shippers in seven industries found that all respondents overwhelmingly preferred trucks, seeing them as superior in providing on-time performance, shipment visibility, and the availability of equipment and capacity.

Adriene Bailey, a partner at Oliver Wyman, said during the RailTrends 2020 conference that railroads continue to lose market share to trucks and could lose $177 billion in revenue by 2030 if current trends continue.

Although Class 1 railroad executives have touted their shift to the precision scheduled railroading model as having provided better service, one automotive shipper pointedly said, “We didn’t get faster or more reliable.”

Bailey said PSR may have made railroads more profitable, which benefited shareholders, but the true test of the operating model will be whether being more efficient can result in a material and sustainable growth trajectory for railroads

Between 2012 and 2018, railroads slightly grew their share of heavy, bulky, and low-value commodities that favor movement by rail while trucks maintained their share of high-value commodities such as perishables that favor movement by highway.

That left in the middle traffic that could move either by rail or highway that Bailey said represents the best opportunity for railroads to increase their traffic volume.

More than half of freight ton-miles in North America falls into this middle catgory.

Bailey said that although this represents the best opportunity for railroads to make gains, this freight has not been trending toward railroads.

If railroads want to capture this freight they must fit better into supply chains, improve the transit experience, and become customer-centric.

That would mean understanding each shippers whole supply chain.

Shippers now have the ability to calculate the entire cost of each shipment and to weigh such factors as on-time performance and the carrying cost of inventory in transit.

Such factors could chip away at the advantage that rail has in terms of cost over trucks.

Bailey called on railroads to provide on-time and reliable delivery while providing real-time shipment tracking information.

She said shippers want railroads to offer a better customer experience, from simpler online tools to more responsive customer service, and to be accountable for service failures while providing service metrics that are relevant to shippers.

The survey reached rail shippers in seven industries, including automotive, food, chemicals, metals, retail, oil and gas, and logistics firms.

Bailey said respondents would like to use rail more often but railroads are falling short of trucks when it comes to service, ease of doing business and customer focus.

There has been a turning away from rail by some shippers who are building new facilities without rail spurs or considering whether these new locations can easily be served by intermodal. “They are essentially dealing rail out of the deck in many cases,” Bailey said.

She added that it is not a story of doom and gloom for railroads.

“There is absolutely a huge opportunity for the railroads to continue to take advantage of the efficiency and capacity dividend that they have generated over the past three years through all of the work that they’ve done and turn this into a growth story,” Bailey said.

Pandemic Effects on Supply Chains Has Been Uneven

July 2, 2020

The effects of the CVOID-19 pandemic on supply chains served by railroads have been uneven.

A panel of shippers convened on behalf of Railway Age magazine also agreed that despite the pandemic rail service has been strong in recent months with shippers able to get better pricing if they deliver volume to Class I carriers.

Whereas the pandemic had depressed paper shipping to levels one panelist called the “slowest demand environment” she has seen during her time in the industry, chemical shippers have been relatively unaffected because they were deemed to be providing essential services.

The shippers expect traffic volumes in July to exceed those of June but two shippers predicted that July traffic will be flat when compared with the same month in 2019.

Shippers are uncertain if traffic will pick up in the fall.

The paper shipper said business has been adversely affected by retailers having to shut down during stay at home orders.

The retailers weren’t buying paper to advertise what they had for sale.

The shipper said her company has thus far shipped 23 rail cars of paper thus far in 2020 while in a typical year it would ship 750 cars for the year.

On the other hand, the shipper said, shipment of paper for packaging or masks businesses has been strong.

Shippers on the panel noted concerns about the lack of adequate customer service from railroads, which they attributed to the carriers having cut management positions in that area.

One shipper said she seldom hears from the customer service departments of the railroads she works with and another shipper said the customer service representative at the railroad he works with is too inexperienced to be helpful.

A panelist said the situation seems to be that railroads have reduced their staffing by so much that as rail shipping has begun to recover in recent weeks the carriers are struggling to get employees back to positions that could handle the increase.

That shipper said this was similar to what happened during the recession of 2008.

Railroads have been pushing shippers to use self-service applications.

However, when something goes wrong and a shipper tries to reach the railroad customer service department by phone, it has been difficult at times to reach someone who is knowledgeable and helpful.

One shipper said the more that his company uses its own technology the more a railroad it works with wants to work with them.

This has been particularly the case with trucking where anything that can eliminate wait time or paperwork for drivers is welcomed by the carriers.

Yet panelists noted that Class 1 railroads are seeking to boost their traffic volume and marketing staffs are reaching out to shippers for more business.

Although the pandemic has disrupted supply chains, the panelists do not expect it to result in major changes once the pandemic abates.

They attributed that to supply chains already being efficient before the pandemic struck.

Some panelists expect there might be a shift to less reliance on goods made in China to greater use of goods from Southeast Asia or India.

That could result in more shipments landing at East Coast rather than West Coast ports.

Asked about the effect of precision scheduled railroading, the panelists said it has helped with long-haul freight moves but the first-mile and last-mile segments remain slow and frustrating.

Some shippers highlighted a discrepancy between their unchanged transit times and the bragging of Class I railroads about improved transit times, increased velocity and lower terminal dwell.

An emphasis on trip plan compliance might be a better measurement of rail service, but shippers said trip plan compliance can be flawed, too.