Are todays Railroads as competitive in transportation vs truck hauling ship continers?

Josef:

The rule of thumb for well over a decade has been that rail can compete with trucks for intermodal shipments only at distances greater than 400-500 miles.  Each container shipment can be different; so the rail or truck decision is some combination of cost AND transit time with only the customer knowing which carries more weight in their modal decision.  Anyhow; with this in mind; containers coming into JAX, Savannah or Charleston that are destined to points in the Southeast will likely make their entire trip over the road.  To some extent, NS and CSX seem to be acknowledging this reality, by building new intermodal ramps (CSX at Cartersville, GA and NS at Gainesville, GA) where the idea is to have containers trucked from the ports, consolidated at the ramps and then moved by rail to destinations outside the Southeast. 

This is kind of a reverse process to what both NS and CSX do in the northeastern U.S. where containers from the west and south bound for points in New Jersey and metro New York City and Philadelphia are ramped in Harrisburg (NS) and Chambersburg, PA (CSX) and moved over the road. 

The one exception to short haul intermodal seems to be the FEC.  We have a production site near Mobile and have trucked containers to JAX; transferred them to FEC intermodal trains and railed to Miami for loading aboard ships.  Transit time wasn't as important to us as cost and this was actually less expensive than trucking the entire distance.  Ramping the containers in Mobile on either CSX or NS wasn't really an option as neither railroad supported intermodal trains / schedules that would work for the Mobile to Jacksonville leg.

Wall Street rail analysts and Class 1 CEO's are scared to death of autonomous trucks.  I won't pretend to be a visionary but; I question the level of concern.  Our interstates are already jammed with trucks - try driving on I-40 in Arkansas or Tennessee or I-81 in Virginia.  If you removed even 25% of the intermodal traffic currently moving by rail and tried to put in on the highway (assuming the dray carriers could find the drivers); I think you would have near gridlock.  To me; the only way autonomous trucking can successfully divert large volumes of intermodal business from rail to truck is by having dedicated rights of way over which autonomous vehicles may operate.  And we've already got those dedicated rights of way - they are called railroads.

Curt

Josef, 

Curt is spot on. May I add there are certain service routes which because of time requirements trucks must be used for a portion of the service?  For example, toys and toy parts from the Far East destined to a toy distribution center in Cincinnati.  The containers would probably be brought into the USA at Seattle.  Then COFC via BN to Chicago in about forty eight hours.  If the container were to stay on a flat car, that car would be interchanged with the Chessie system or NS for the Chicago to Cincinnati leg of its journey.  That could easily add 36 hours to the transit  time and would still be needed to put on a highway chassis for delivery to the consignee.  However, if the container were unloaded and placed on a highway chassis in Chicago, a cartage company could deliver that container to the consignee's dock within seven hours. 

If you care to see a nice operation, do a search for the operation of the BNSF piggyback terminal in or near Willow Springs, Illinois.  Any outbound or inbound train has at least fifty containers with Schneider or JB Hunt markings.  There is no other way those containers could be delivered to southern California via the highway at a competitive cost.  A two man railroad crew changed at appropriate points will deliver 100 containers within 46 hours. If sent on the highway, you'd get delivery in a slightly longer time if the truck had a team of drivers, a single driver would take about four days for the run.  If only one train leaves Chicago for California each day, those containers would require another four hundred drivers(100 each day, four days in transit) to replace the rail service. Let's give the railroad credit for providing such good service at a very competitive price.  No price gouging.

John in Lansing, ILL

John, your example brings up a point that never ceases to irritate me.

There is no toy anywhere of any kind that "absolutely, positively has to be there on time."  In fact, there is very little of anything that "absolutely, positively has to be there on time."  We waste vast resources with our obsession with speed.

The system is self-perpetuating, but it is based on a tremendously flawed premise.  Only when fuel becomes astronomically expensive--because it will be increasingly rare--will we begin to see that, Alas!  I am not environut, but I do deplore waste.

CSX has a huge complex in Baldwin, FL only a 30 minute drive from Jax, yet few trucks head that way even to load onto rails as one would expect. CXS building the spurs at the Port are hardly used. Of the 2 truckers I know that work out of the Port and haul long distance to areas in Arkansas, Indiana a and even Illinois, one would assume that shipping by rail would be faster and possible cheaper once a train is made up of cars going those directions.

Seriously, I'm not familiar with shipping over the road or by rail which would prove more cheaper, or faster. But toward my last years with Amoco before merging with BP, I started seeing less shipment by hopper cars of material going out of state and more being hauled by trucks to the same companies and locations that we shipped to by rail. Many times 3 or 4 trucks would be needed going to same company with our raw material, were one hopper car would do. Also were we would get railcars of Raw Earth material, including Cobalt or Manganese Dioxide, Acetic Acids, etc., were now delivered by tanker trucks coming all the way from West Coast, or the Gulf Coast. Were I use to see SF engines come twice a day, was now maybe at that time down to 2 maybe 3 times a week.

rattler21 posted:

Josef, 

 

If you care to see a nice operation, do a search for the operation of the BNSF piggyback terminal in or near Willow Springs, Illinois.  Any outbound or inbound train has at least fifty containers with Schneider or JB Hunt markings. 

John in Lansing, ILL

Spent a lot of time near Willow Spring, and saw lots of train action there. We had a research center there, so many of my spare time was watching trains there. As to JB Hunt and their trucking firm, probable one of the best to work for. They had a home nearby and never met a trucker that worked for them say one bad word. They're equipment was always top-notch.

palallin posted:

John, your example brings up a point that never ceases to irritate me.

There is no toy anywhere of any kind that "absolutely, positively has to be there on time."  In fact, there is very little of anything that "absolutely, positively has to be there on time."  We waste vast resources with our obsession with speed.

The system is self-perpetuating, but it is based on a tremendously flawed premise.  Only when fuel becomes astronomically expensive--because it will be increasingly rare--will we begin to see that, Alas!  I am not environut, but I do deplore waste.

This isn't exactly accurate.  The toy manufacturers and distributors have to get their products to their customers (Wal Mart, COSTCO, Amazon, etc.) on that customer's schedule.  No one can sell Christmas items after Christmas at full price.  Storing stuff to sell the following year is expensive and may not be possible.  Nearly everything we buy has a deadline when it has to be in stores or available on line.  NH Joe

As if Christmas is a surprise each year?  Guess what:  it happens on 12/25.  A little planning, and you get your product to retailers prior to that date.  It reminds me of nothing more that folks who have to be at work at 8 am but don't leave till 7:45 so they can sleep a little more.  Sure, they can make it on a good day, but why not plan ahead?

Sorry:  this isn't rocket science.  It's habit bolstered by inertia.  It's also a serious misprioritizing in our culture, which makes retail into a god.

So glad they moved Christmas up.  I just can't wait until the 25th anymore!

Some great points made in this thread.  Interesting reading.

Byrdie posted:

So glad they moved Christmas up.  I just can't wait until the 25th anymore!

Some great points made in this thread.  Interesting reading.

Typo corrected!  Thanks for catching it.

This is a tad off the theme, but it may help someone. Many moons ago, the Christmas Shopping Season began Friday after Thanksgiving.  For retail stores to have toys on their shelves, those toys had to be in the retail chains' distribution centers by the Monday before Thanksgiving so the individual store's orders could be picked, loaded and trucked to be at every store no later than Wednesday before Thanksgiving.  Then, depending on the store's  schedule, the shelves would either be stocked Wednesday evening or the evening of Thanksgiving.  To be in the distribution centers by Monday before Thanksgiving, the manufacturer had to ship those orders no later than the Friday before Thanksgiving.  Which means the week of Thanksgiving, toy manufacturer's warehouses were all but empty. 

In 1975 Kenner Toys was talking with Flying Tiger Airlines about a 747 charter bringing the previous three week's production of toys from Hong Kong to Cincinnati to arrive the first part of the week before Thanksgiving.

John in Lansing, ILL

palallin posted:

John, your example brings up a point that never ceases to irritate me.

There is no toy anywhere of any kind that "absolutely, positively has to be there on time."  In fact, there is very little of anything that "absolutely, positively has to be there on time."  We waste vast resources with our obsession with speed.

The system is self-perpetuating, but it is based on a tremendously flawed premise.  Only when fuel becomes astronomically expensive--because it will be increasingly rare--will we begin to see that, Alas!  I am not environut, but I do deplore waste.

While I understand your point, and some of the obsession with getting it there fast is kind of ridiculous,there are reasons for things to be there on time. For example a lot of manufacturing these days use just in time inventory systems, where the factory keeps relatively little parts in inventory, and suppliers and there supplies likewise operate on a time sensitive basis. Also, with the global supply chain the way it is (as we often see with our trains, shipments get delayed and companies are waiting for needed products, so time could in fact be critical. We no longer have where industries are co located (like the automobile industry  and its suppliers in the Detroit area, so time can be a factor..doesn't mean though that it always is the case. 

As far as fuel becoming astronomically expensive, I doubt that is going to be a problem any time soon, not only have supplies of oil and gas exploded in recent years (no pun intended) thanks to both new finds and extracting from existing wells, but the technology is already building for replacements for those fuels, whether it is synthetic oil and gas or hydrogen from modified photosynthesis in algae, or other sources like electric power combined with flexible power generation. To me more of a concern is the infrastructure to ship things, given concerns with the state of the roads and the impact trucks have on them, how efficient the rail network is or isn't, that may be a bigger problem than the fuel. Trains in the long haul are more efficient than trucking and even in shorter hauls I wonder if without the subsidies trucks are getting via the public highway system  and roads (railroads maintain and pay for their own track, trucks pay a fraction of the cost they cause to roads with road use taxes and fuel taxes) if even shorter hauls might be cheaper by rail..but that is another discussion. 

New Haven Joe posted:

palallin posted:

John, your example brings up a point that never ceases to irritate me.

There is no toy anywhere of any kind that "absolutely, positively has to be there on time."  In fact, there is very little of anything that "absolutely, positively has to be there on time."  We waste vast resources with our obsession with speed.

The system is self-perpetuating, but it is based on a tremendously flawed premise.  Only when fuel becomes astronomically expensive--because it will be increasingly rare--will we begin to see that, Alas!  I am not environut, but I do deplore waste.

This isn't exactly accurate.  The toy manufacturers and distributors have to get their products to their customers (Wal Mart, COSTCO, Amazon, etc.) on that customer's schedule.  No one can sell Christmas items after Christmas at full price.  Storing stuff to sell the following year is expensive and may not be possible.  Nearly everything we buy has a deadline when it has to be in stores or available on line.  NH Joe

From my now limited memories of working in a department store (the old Two Guys chain in NJ) many years ago, you don't get stuff in in November, the store's warehouses would get Christmas focused stuff in late summer and came to the stores in September  (not put out, but shipped in). Most things are done well in advance, stores make their orders from the suppliers much earlier in the year, but there is a time element to the way they get things in, when they have to be where..but there are exceptions, sometimes hot consumer items explode out of nowhere and they are trying to get them into the holiday season, happens all the time, or where other things are time sensitive, or where because of some disruption the normal chain is broken, like strikes, natural disasters, etc. 

The Norfolk container piers are setting records just about every month and they recently received a number of new cranes. Rail traffic is increasing as are trucks.

We live in Suffolk which is 20-30 minutes west of the port and NS and Chessie come thru as well as a large number of trucks going to the port from the south and returning. As was said above, how many more trucks can be crammed on the roads and how easily can they be handled at the port?

Rail also has some hurdles such as significantly reduced speeds due to ancient tracks that were not designed for the present volume, much less projected future volume. There are few overhead crossings and motorist wait times are a growing problem. 

Plans are underway for a major port expansion. Roads are not keeping up and the cost to improve is quite high due to the need for more bridges and tunnels. Consolidation at inland ports is being done.

bigkid posted:

 For example a lot of manufacturing these days use just in time inventory systems, where the factory keeps relatively little parts in inventory, and suppliers and there supplies likewise operate on a time sensitive basis. 

And it is this system that is precisely the problem.  This is the entrenched condition that I call into question.  Because it IS done that way does not mean that it SHOULD be done that way.

To me, we are looking for the Goldilocks solution:  enough stock, enough time, enough speed.

Just in time works best where supply chains are VERY close to each other.  Otherwise, you do need SOME items just in case manure hits the supply chain.

Has there been any stdies done in the REAL WORLD where just in tine actually works, and actually saves time and money.

Some items do need speed.  But there is a price to be paid.  Literally.

Lansing  John's citation of BNSF/Willow Springs is a perfect example of modern deployment of assets.  The BNSF yard at Willow Springs is right at the huge UPS distribution center. No  utterly wasteful trucking of containers cross town.

Dominic Mazoch posted:

To me, we are looking for the Goldilocks solution:  enough stock, enough time, enough speed.

Just in time works best where supply chains are VERY close to each other.  Otherwise, you do need SOME items just in case manure hits the supply chain.

Has there been any stdies done in the REAL WORLD where just in tine actually works, and actually saves time and money.

Some items do need speed.  But there is a price to be paid.  Literally.

Plenty of them, and the reality is that most manufacturing is done via JIT or similar methods, and it by far has a lot more advantages than disadvantages. It allows manufacturers to dedicate floor space to manufacturing their product, not paying for space for inventory (which is expensive); if quality issues are found with a supplier, you don't have the problem of a big stockpile of parts that are defective (which in the past would often mean a company like GM using the parts in the stockpile, throwing out those that obviously are defective, and leading to marginal products in the field) plus with JIT suppliers have much bigger incentive to produce quality parts, in the old days was considered better to produce a million units of marginal quality.

JIT also means that in the whole supply chain, things are better coordinated between the suppliers, plus if a company doesn't have a stockpile of parts, they also don't have the disincentive of producing the same product for years (or as with the auto industry, produce a whole years projected output in a short period of time, then be stuck with excess inventory they get rid of at end of year; if you don't have parts in inventory, you can't run off a hundred thousands cars in a couple of months). JIT isn't truly JIT per se, it works on a week or two of parts, and allows all parts of the chain to reduce inventory cost while having more efficient ordering, the suppliers know what the upstream people need, they know when they need to ship. It is true in a JIT situation if something happens to a part of the chain you don't have much wiggle room, but they also have dealt with that by creating efficient processes that are designed to prevent those situations, and also have multiple suppliers who work closely with the upstream portion to have flexibility. JIT is usually part of a whole package around lean manufacturing which has replaced most manufacturing outside the third world that is still using old methodology.  I don't remember the exact numbers at this moment, but it typically was in the range of 15-30% reduction in cost of manufacturing, and also used as part of a lean production process was part of improving quality and productivity while dropping the cost of manufacturing across the board. 

Dominic Mazoch posted:

To me, we are looking for the Goldilocks solution:  enough stock, enough time, enough speed.

Just in time works best where supply chains are VERY close to each other.  Otherwise, you do need SOME items just in case manure hits the supply chain.

Has there been any stdies done in the REAL WORLD where just in tine actually works, and actually saves time and money.

Some items do need speed.  But there is a price to be paid.  Literally.

Dominic,  Kaiser Aluminum supplied most of the RV, camper trailer and cargo trailer manufacturers in northern Indiana.   102" wide coils of aluminum were stockpiled at a steel service center in Cincinnati.  As needed, that service center would slit to width, cut to length and arrange transportation to those manufacturers.  One truck line (CCM) had a dedicated driver on that run.  The manufacturer could place an order before 3PM and receive their 3500 pound coils the next day before noon.   John in Lansing, ILL

As an additional point as it relates to JIT manufacturing one has to consider the pressure a public corporation is under to report ever better quarterly earnings.  By reducing the capital cost of warehousing, payroll to staff it and inventory to fill it the company can move those cost reductions into improved quarterly profits pleasing all those hedge funds that are bleeding American business dry.

Bigkid; I’ll offer this concerning the way truckers price. 

If you’ve followed the Class 1’s in recent years, doubtless you are aware of their  obsession with achieving sub 60 operating ratios.  At the same time, they are also diverting large sums of cash to repurchase stock.  These two things alone account for the constant pressure on railroad pricing people to extract ever higher rates from shippers.

If you look at the operating ratios of trucking companies however; you’ll see a lot of 80’s and 90’s.  With the exception of second half 2017 / first half 2018, their markets are so price competitive they are essentially forced to accept lower margins to keep their trucks busy.

Railroads like to talk about the competitive environment in which they operate but; the latitude they have in pricing competitive traffic is handed to them by their ability to price captive traffic more or less as they wish.  And now; with the drive to achieve sub 60 OR’s; they are narrowing the scope of traffic they wish to compete for.  Truckers have not been blessed with captive traffic and are forced to price competitively.

Curt

Sometimes, however, if you do not invest wisely in your self, you might wind up producing a product or service with no customers.  Then you are a value to no one.  Go ask big "S", Sears. 

rattler21 posted:

Dominic Mazoch posted:

To me, we are looking for the Goldilocks solution:  enough stock, enough time, enough speed.

Just in time works best where supply chains are VERY close to each other.  Otherwise, you do need SOME items just in case manure hits the supply chain.

Has there been any stdies done in the REAL WORLD where just in tine actually works, and actually saves time and money.

Some items do need speed.  But there is a price to be paid.  Literally.

Dominic,  Kaiser Aluminum supplied many of the RV, camper trailer and cargo trailer manufacturers in northern Indiana.   102" wide coils of aluminum were stockpiled at a steel service center in Cincinnati.  As needed, that service center would slit to width, cut to length and arrange transportation to those manufacturers.  One truck line (CCM) had a dedicated driver on that run.  The manufacturer could place an order before 3PM and receive their 3500 pound coils the next day before noon.   John in Lansing, ILL

Now that is a thought.  A third party doing the part storage.

Dominic Mazoch posted:

Now that is a thought.  A third party doing the part storage.

Dominic, I do not know if they still offer this but for a long time the railroads offered Storage-In-Transit rates.  The tariffs had several restrictions, one of which the product could only be in storage for 365 days.  Let me cite an example what these rates allowed.  The canneries in California offer food chains canned fruits, vegetables and fish in one item truckload and car load quantities.  It is unreasonable to think any given store could accept a truckload much less a car load of canned string beans.  Or canned corn.  Or canned beets.  Food chains generally have a distribution center in each major market.  Atlanta, Dallas, Little Rock, Detroit, Roanoke, etc.  Even with the distribution centers, it would be unusual to ship a carload of canned corn to the Little Rock distribution center. The S-I-T rates allowed the final consignee to purchase a carload of canned corn and have it delivered to an en route storage facility which would act as a huge distribution center.  Some food chains used the caves at Bonner Springs, Kansas or Independence, Missouri.  A car load of corn, one of cut green beans, two of beets, one of Mandarin oranges, one of canned tuna, etc. would be unloaded.  Weekly that storage facility would get an order for one carload of items going to the food chain's distribution center. For example (depending on what will be On Sale in one week) the car to Little Rock may call for 200 cases of corn, 200 of tuna, 200 of corn, etc.  That car is then released for transit to the Little Rock distribution center.  Without an S-I-T rate, the receiver would pay the California to Bonner Springs rate and the Bonner Springs to Little Rock rate for those two carload movements, let's say $1.90 cwt.  The S-I-T rate shows a California to Little Rock rate with an S-I-T charge which could be as low as $1.50 + .10 = $1.60 cwt. 

John in Lansing, Ill

I am hearing a suggestion in tbe Houston area.  That there should be a lane and a breakdown shoulder along all freeeays and toll roads for big rigs.  That is, car and truck traffic should be segregated.  Now what happens at an intetchange would be interesting.  But such a lane could work with various AI controls.  Or we could get to road trains as in Down Under...

John; I’m not sure nostalgia would be the best way to describe it but; your mention of railroad transit applications brought back a wave of memories.

In the late ‘70’s; I was with a grain exporter along the Houston Ship Channel.  One of my tasks was the transit claims for grain that had moved by rail to say an elevator in Oklahoma, was unloaded and stored, then reloaded and shipped to Houston for export.  As you note in your post; the railroads had special transit tariffs that allowed us to apply freight paid inbound to the country elevator against the export rate from there to Houston.

I worked in the grain industry for only 3 years before shifting to mining and then chemicals.  In my 38 years in the latter two industries; I’ve not seen any transit applications and I’m pretty sure the railroads did away with them.

Curt

Curt,

As most people know, one of the largest considerations when setting rates is Direction of Traffic.  Because of the large Proctor & Gamble production facility in Cincinnati, a lot of highway trailers are needed.  So many that truck lines used to dead head trailers to the Cincinnati area.  Kansas City was the opposite, not enough outbound loads to fill all trailers unloaded in their metropolitan area.  Therefore, any commodity moving from Kansas City (commercial zone) to Cincinnati could move at an artificially low rate.  One such movement was the regular movement of flour from KC to Cincinnati.  Pla-Doh was manufactured in a rather dated building not on a rail siding. The inbound flour requirement was about 120,000 pounds per month and the transcontinental truck lines were knocking themselves out cutting the rate to attract those three monthly loads.

Those same truck lines (many are no longer operating (Time-DC CF, Trans-Con, for example) may have taken over the movement of canned goods from the caves at Bonner Springs to Indianapolis, Columbus, Louisville and Cincinnati.

If my memory serves me right, at one time only trucks were used for transporting grain from Iowa elevators to the barges on the Mississippi.  I think the IC had a service using one engine and a skeleton crew to move three or four cars at a time from one elevator to the river on a daily basis.  This would have been similar to the Australian road trains and kept a few trucks off the highways.  Yes, the American railroads can be competitive in certain lanes with certain traffic. 

Along with deleting S-I-T tariffs and service, I doubt if Trap-Car service is still offered.  REA is dead.  Many changes.  And some of the container trains moving from one coast to the other could be in Land Bridge service which is from one port to another, from one ship to another ship, Asia to Europe via part of the way on US railroads.  The railroads do good work.

John

Totally enjoying this thread, guys. Keep it coming!

So much better than reading the never-ending nonsense on the UP steam thread. At least here I'm learning something.  

juniata guy posted:

Bigkid; I’ll offer this concerning the way truckers price. 

If you’ve followed the Class 1’s in recent years, doubtless you are aware of their  obsession with achieving sub 60 operating ratios.  At the same time, they are also diverting large sums of cash to repurchase stock.  These two things alone account for the constant pressure on railroad pricing people to extract ever higher rates from shippers.

If you look at the operating ratios of trucking companies however; you’ll see a lot of 80’s and 90’s.  With the exception of second half 2017 / first half 2018, their markets are so price competitive they are essentially forced to accept lower margins to keep their trucks busy.

Railroads like to talk about the competitive environment in which they operate but; the latitude they have in pricing competitive traffic is handed to them by their ability to price captive traffic more or less as they wish.  And now; with the drive to achieve sub 60 OR’s; they are narrowing the scope of traffic they wish to compete for.  Truckers have not been blessed with captive traffic and are forced to price competitively.

Curt

I can't argue with what you wrote. Truckers face a lot more competition, there is no doubt, the trucking business has relatively low impediments to getting into the business, the capital requirements are relatively low (though having just seen a you tube video with this trucker and his rig, the sleeper alone was like wow *lol*) comparatively to other forms of transport. And as far as the railroads and the way they are run, you aren't going to get much argument about the bottom line and things like taking cash and instead of investing it in capital improvements, buying back stock (trucking companies at least as far as I know are generally privately owned, though these days for all I know big corporations have bought into the fleets), this is a problem across the board with public companies, where money that could be spent on capital improvements, was supposed to be, has been used to buy back stock and increase dividends..(and I'll leave it at that).

My point about being competitive was more about shipping efficiency then price, and trains should be as efficient if not more so, given the kind of technology available to trains and for example, being less affected by things like traffic or weather that trucks face. Fuel wise, trains are superior to what big rigs can haul in terms of fuel used per ton mile or any other measure, and also trucks do have some advantages (ie the cost of maintaining and running their own rail network, trucks run on subsidized roads) that if they had to pay let's say the true cost of the roads they use, they wouldn't be as price efficient as they are today.  If trains are that expensive, for whatever reasons, then people will ship via truck, unless trains offer them something trucks don't, and this will show up in how much cargo each ships, if trains are overpriced for the service they offer, then trucks will ship more and more and the railroads will lose business.