Viewpoint: Breaking the rail myth

In casual conversation with friends, it surprises me how many myths still exist around moving freight by rail. “It must be slow, unmanageable, old fashioned.” Rail seems to conjure memories of pillows of steam hovering over charming brick stations, or lonely whistles heard from a distant train snaking through the countryside.

As Pricing columnist Pete Moore points out this month, myths revolving around rail and rail intermodal are, surprisingly, still quite prevalent among logistics professionals as well. Following a recent encounter he had with a logistics executive from a brick manufacturing facility, it became clear that shippers envision intermodal as only ocean vans in 35-foot or 53-foot lengths. Or worse, they see rail as carload-only service that requires time-consuming transloading.

For shippers who still find themselves stuck in this rut, Moore offers practical tips (page 17) to consider when you decide to open your planning to, dare I say, one of the more dynamic modes LM has been covering over the past five years.

“Shippers need to realize that highway and rail—particularly for moves over 500 miles—are competitors, and for long distances highway carriers use intermodal as an alternative to sending drivers far from home base,” says Moore. “There’s little doubt that shippers can increase their flexibility, raise competition for their freight, and drastically cut costs when they fully understand how rail intermodal can work into their network.”

Group News Editor Jeff Berman follows Moore’s lead to further dispel the myths in his 2014 Rail/Intermodal Roundtable. As he has for the past six years, Berman has pulled together three top rail analysts to offer logistics professionals the ultimate update on the rails (page 24).

“More than any other modes, the railroad and intermodal sectors have shown impressive flexibility in being able to roll with the economic and demand trends since the Great Depression,” says Berman. “Volumes since that time have made steady annual gains and are on track to exceed pre-recession levels.”

In fact, the first quarter intermodal volumes showed continued growth despite the grueling winter, while domestic containers have been historically impressive over the years, showing an eight-year cumulative average increase of 8.6 percent between 2005-2013.

Much of the success on the rails over this time is due in large part to the record high investment that the rail carriers continue to sink into equipment, infrastructure, and IT. According to the Association of American Railroads, the North American Class I carriers pledged to spend $24.5 billion in 2013, with $13 billion allocated to upgrade capacity. The result has been improved service levels, increased reliability, and efficiency levels that are helping to erase those bygone images of grit and steam.

And while service progress has been impressive, Berman and panel point out that challenges such as the possibility of re-regulation, shipper pushback on rates, and complications from the influx of volume stemming from shale production and related products are all currently putting pressure on rail network performance.

“However, carriers continue to invest billions in infrastructure and new locomotives to add capacity and reduce bottle necks,” adds panelist Bill Rennicke, partner at Oliver Wyman. “So, long-term improvements should be expected despite the challenges.”