How to Improve Rail Velocity
Improving rail velocity, which entails expediting rail car turnsand making better use of equipment to create a more fluid railroad, is a growing priority for shippers of all stripes. It promises to keep existing rail customers happy while luring non-traditional shippers to the tracks - especially as traffic-choked highways and high fuel prices make the cost advantage of moving product via rail versus truck significant.
But the rail industry is not without its obstacles. On the carrier side, networks are strapped for capacity; terminals are crowded; well-trained, highly skilled labor is increasingly scarce; and locomotives and equipment are becoming obsolete. All these factors contribute to inefficiency and congestion while further stressing the importance of rail velocity.
Rail shippers, for their part, face their own challenges - many borne by rail carriers' legacy of passive service management. Unlike the trucking and airfreight industries, where guaranteed delivery services are commonplace, allowing shippers to manage shipments in transit, the railroad industry still works on expected delivery times. Railroads typically give shippers a delivery window, and will only issue alerts when deliveries fall outside these parameters. As a result, until recently, many rail transport buyers have been reluctant to take a more active role in managing their freight.
Shippers can increase rail velocity in three ways: first, getting better access to equipment and shipment data; second, understanding what to do with this information; and finally, being able to properly disseminate this information across the supply chain. Technology, inevitably, is key.
The Association of American Railroads (AAR) is a good example of this dynamic. AAR subsidiary, Railinc, provides information technology and related services to North America's railroads including extensive databases that capture rail freight equipment inventory across North America. Its Steelroads.com portal also gives shippers an online interface to track shipments, receive estimated ETAs, order equipment, and compare pricing.
Supply chain visibility allows shippers and carriers to marry relevant information and make informative decisions about lane and equipment usage as well as track shipments in transit. All these factors contribute to an efficient, smooth railroad. As shippers, intermediaries, and carriers operate in a more proactive way, the railroad will become a more reliable and accountable part of the global supply chain.
On a macro level, congestion, cost, and capacity constraints have compelled shippers to take an active role in improving railroad velocity. Drill down a little deeper, and several other reasons emerge for improving rail throughput:
- Intermodal shipments continue to grow at a rapid clip. Total rail intermodal traffic increased 5.6 percent between 2004 and 2005, according to The Intermodal Association of North America, and it expects an even greater surge through 2006. Intermodal shippers are also challenged to streamline the transloading process and bring more accountability to all phases of the move.
- Improving rail velocity allows shippers to benchmark supply chain inventory and better align inventory needs with equipment to create greater efficiency. Shippers that have visibility and access to important data, and the ability to communicate this information to partners across the supply chain, can more accurately predict varying freight patterns and scale fleet sizes and equipment accordingly. Often a decision to use intermodal is predicated by the type of product being moved. Increasing the amount of inventory in a specific lane may not always be a good idea. But where it makes sense to do so, ensuring more predictable and reliable car turns, and more consistent velocity, is imperative for shippers.
- The technology and infrastructure to drive better visibility and information sharing are becoming more economical and easy to use.
- Third-party logistics service providers are bolstering their service portfolios to facilitate technology integration and help new shippers make the transition to rail/intermodal.