As systemic driver shortages and electronic logging data requirements result in the tightening of trucking supply and therefore trucking price increases, domestic and international cargo owners are starting to look more closely at rail options. This is the case not only for shipments travelling more than 500 miles, but even for shorter distances where rail was once viewed as uncompetitive. Except in high density, long haul rail corridors, ex. Los Angeles to Chicago, there are both opportunities and challenges that require intense logistics management in order to create rail competitiveness, particularly along shorter distances and in less dense corridors.
One, more traditional, rail operating method is the assembly of multi-block intermodal trains, consisting of the same type of conveyance, ex. either domestic or international containers, but with different origins and destinations along a main rail corridor. The smaller blocks of containers destined for Albuquerque, for example, could take advantage of the transit time and schedule frequency afforded by the larger train volumes moving on to Chicago. Of course, the key to making this multi-block system work competitively is to be able to peel off the Albuquerque block to its destination without rendering either block of trains non-competitive. The Class 1 railroads manage this type of challenge on a daily basis, both on their line haul and also in their intermodal terminal operations, to optimize final mile truck delivery.
A less frequent or popular business model, at least with some Class 1 railroads, is the notion of deploying mixed trains, defined as trains consisting of different types of rail cars, carrying different types of cargo. An example of a mixed train is one that might consist of boxcars, containers, and hopper cars. An advantage in considering greater deployment of mixed trains is that schedule frequency can be increased by combining smaller volumes of different types of cargo into one train, rather than having each cargo type wait for enough volume to accumulate in a particular location, so as to allow for a full unit train of containers, or of boxcar traffic, or of hopper cars. One railroad that does regularly manage mixed trains is Florida East Coast Railroad, a Class 2 railroad that often runs mixed trains consisting of containers, boxcars, and autocars on their system between Miami and Jacksonville. Florida East Coast does this simply because they need to in order to manage schedule frequency and space-constrained terminal options with smaller block volumes over shorter distances, and therefore to compete with trucking.
However, some of the Class 1 railroads view the mixed train business model skeptically, for organizational and operational reasons. Organizationally, most of the Class 1 railroads maintain not only different business lines for intermodal and manifest traffic, but within intermodal, for international vs. domestic traffic. They often use different terminals and classification yards for different types of cargo, so they can view the mixed train concept as more difficult to manage as each line of business looks to optimize performance for its own cargo type. With all of this being said , there are very likely unexplored opportunities in certain markets where creating the mixed train model could create more frequency and service consistency across cargo types, as well as developing a critical mass of rail traffic to further drive local and regional economic development.
As the problems associated with trucking persist in the US and become more challenging for shippers, we’re confident that expanded rail route/products will be offered to meet the need. In California for example, with the added complication of the State’s increasing focus on environmental stewardship and reduction in greenhouse gases, we foresee expanded opportunities for market-to-seaport rail logistics. Our 2,000 acre Mid-California International Trade District project is designed to act as a multimodal inland port asset to seaports in Los Angeles – handling inbound cargo for inbound distribution and industrial supply chains, and outbound cargo from the massive agribusiness base and from manufacturing. We believe that there are similar opportunities in other strategic settings.
GLDPartners is an international investment and advisory firm that specializes in revenue and infrastructure development projects at and around high-opportunity airports, seaports and strategic trade and logistics hubs. The firm supports global manufacturers and companies with retail distribution operations with network design strategy and facility location analytics. GLDPartners’ clients and market perspective is global and the firm is headquartered in Scottsdale, Arizona, with offices in New York, Washington DC, Wisconsin and in the UK.