All Aboard the Road-to-Rail Conversion

North America's rail carriers offer a compelling value proposition for the food supply chain.


The trend to convert truck freight to rail shows no signs of slowing down, with rising fuel prices, capacity concerns and sustainability initiatives putting more pressure on companies to look for alternative transportation options.

While trains played a significant role in the domestic food supply chain decades ago, especially for refrigerated shipments, that business segment withered during the 1970’s and 80’s when railroads ceded to the trucking sector.

However, there are dramatic changes underway.

 

Competing against OTR

“We’re seeing a bit of a renaissance,” observes Dave Howland, vice president for land transport services at APL Logistics. “The rail carriers are realizing that if they go back to the concept of running unit train operations, they can compete very nicely with the truckload world and in some cases even beat them.”

He offers an example: “If you can load a unit train out of California and the next stop is Chicago, with that service the rail carriers are now ‘highway competitive.’” And because it’s a much faster service, the railroads are getting a much higher utilization on those rail cars, he points out.

“Instead of the usual four- to six-week turn on their assets, now they’re looking at a two-week turnaround on that L.A. to Chicago route,” and it’s forcing the railroads to view their business model differently, says Howland. The result is that railroads are recapturing some of their lost market share, which in turn supports their willingness to make capital investments in new equipment, including refrigerated cars, making rail even more attractive to food shippers.

Meanwhile, it’s not just the railroads that are investing in new refrigerated services and equipment, but other intermodal transportation providers too, including major players like Alliance Shippers, Stevens Transport and J.B. Hunt, to name a few.

“It’s a fairly easy conversion for [the OTR carriers] in the markets that make sense,” says Howland, and it’s opening up and expanding intermodal services for markets like Kansas City, Dallas, Atlanta and Memphis.

Howland expects this trend will “move down from the long haul lanes to the short haul lanes just like dry freight did before.” He says that just as recent as three years ago, nobody would have considered offering a refrigerated intermodal service from Chicago to Atlanta to move beef, pork and dairy products out of the upper Midwest to the Southeast, “yet now it’s definitely a viable option.”

In general, it’s the eastern railroads that are moving more aggressively to open up these tier-two markets, says Howland.

“Both NS and CSX have opened a lot of new service lanes east of the Mississippi, while Kansas City Southern has opened up new market capabilities in conjunction with those rail carriers. As for the western railroads, they’re still relying on their long haul transcontinental service, at least for the time being.”

Better equipment, better tracking

It’s not just new service lanes that are attracting food shippers and others to rail, more sophisticated refrigeration equipment and real time tracking and monitoring are sweetening the value proposition.

Veteran rail industry executive and consultant Tom Finkbiner says technology advancements in several key areas are worth watching, starting with the refrigeration units, which will continue to become more fuel efficient.

“Next are advances in telemetrics that provide information such as remote temperature monitoring and data on the fuel level in the reefer tank,” he adds.

Thirdly, Finkbiner sees improved GPS monitoring as another technology advancement that is helping sell refrigerated intermodal.

Even packaging is playing a role in driving more food to rail, he notes. “Years ago, lettuce was shipped in full heads. But today, about one-quarter of it is shipped pre-packaged and ready to eat, just like a lot of other fruits and vegetables, which extends the shelf life and presents more options when it comes to transportation.”

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