Both the railroad and trucking industries have kept cold-chain food shippers on their toes over the last several years. Constantly tracking the most cost-efficient and reliable transportation modes, food producers have been switching to and from rail and truck, depending on which mode offered the most attractive pricing, guaranteed capacity and guaranteed delivery schedules.
Despite the ongoing challenges inherent in either mode, shippers today are taking a closer look at boxcar. The days of setting your pocket watch to the local rumbling boxcar train may no longer be a part of Americana, but this is good news for cold-train boxcar shippers. We caught up with boxcar providers offering reliable transcontinental transit times that compete handily with truck offerings. We also found food producers who couldn't be more pleased with their refrigerated boxcar component.
Although rail and truck have had their share of sibling-like jealous competition throughout the years, it remains a fact that either couldn't exist without the other in getting food products on local supermarket shelves in a timely fashion. Even the most notably advanced rail program providers acknowledge the trucking industry's prominence in their respective supply chains.
However, it's no secret rail providers are attracting more customers these days. "The pendulum is definitely swinging back to where rail is back in fashion," notes Don Newton, recently retired manager of rail operations for J.R. Simplot, with over 25 years' experience in the rail industry. "The demand for rail continues to increase because of trucking's problems with things like fuel surcharges, driver shortages and the latest HOS (Hours of Service) regulations."
Despite the new interest in boxcar, challenges still persist. "With the pendulum favoring rail, there's more demand than the four U.S. and two Canadian Class I railroads can service and they say the only way to curb demand is to raise prices, ostensibly because of fuel prices and rail upgrades," continues Newton.
As more food shippers embrace the benefits of boxcar transport, railroads are getting picky in choosing their customers. "This trend will probably last several more years," notes Newton. "If you are doing rail now and have done rail for some time, you are kind of grandfathered in. However, if you are a new shipper thinking boxcar looks good, you might face hurdle rates. They are in a very high-profit mode now into the foreseeable future."
In an attempt to redefine which customers rail wanted to serve--and the marginal customers they wanted to price out of the market-double-digit increases were common throughout 2004 through 2006, Newton reports. Things are now back to "normal" single-digit rate increases and railroads are hiring personnel and purchasing engines. But they don't have enough refrigerated boxcars and have placed the responsibility of providing them on the shoulders of shippers.
"The industry believes it can increase the service velocity of its trains by increasing the overall physical plant," explains Newton. This means upgrading rails and implementing double or triple tracks in some areas. "The model over the last two years has been to increase velocity-or the speed of their actions-meaning they free up equipment without having to buy new equipment, which makes a lot of sense."
It works like this. Say a company has a boxcar it needs to ship to the Midwest and it takes 30 days to ship and return it. This is meeting demand for that company.
However, if the company ships it to the same place and brings it back in 15 or 20 days, it can make twice as many trips. In addition, it has covered its demand while having its equipment available for future demand.
Newton reports although this approach is working, the demand for refrigerated equipment has not yet stabilized. "Shippers overall are not really having severe shortages at the moment, but this year's fall crop is not in yet, so we will have to wait and see what happens."