November 2005 | Commentary | Supply Chain Technology

Working on the Railroads

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The recent fuel crisis emphasizes just how much we need our national rail system. The rails, with their efficient fuel usage, are a vital link in most supply chains; the only link in others. Rail hubs and intermodal transportation connect shippers to truckers, and to ocean and air carriers.

But the fuel crisis has also increased pressure on the rail system to expand and upgrade infrastructure, and modernize its technology. Our basic rail system was in place 100 years ago, and much work needs to be done now to bring it up to speed.

For an update on the status of the current and future state of the U.S. rail system, Inbound Logistics met with two experts: Phillip C. Yeager, chairman, Hub Group Inc., a transportation management services company based in Downers Grove, Ill., and Gilbert E. Carmichael, senior chairman, Intermodal Transportation Institute Board of Directors, University of Denver.

Malone: What specifically needs to be done to improve our nation's rail hubs? How and where should they be expanded and upgraded?

Yeager: The railroads need money to improve their infrastructures. The Staggers Act of 1980 allowed railroads to deregulate pricing, and to evolve into a streamlined system. Once that happened, the rails reduced their trackage because they needed to cut costs dramatically.

Unfortunately, these reductions created "chokepoints" where intermodal trains could not bypass slower freight trains. The result is slower service between major cities.

The Burlington Northern Santa Fe Railway has double-tracked all but 90 miles between Chicago and Los Angeles. The Union Pacific has invested millions in its infrastructure over the past few years, and CSX and Norfolk Southern are in the process of double-tracking between numerous north/south points—between Chicago and Atlanta, for example. But these railroads have not had the revenue they need to complete this work quickly.

In addition, Chicago requires approximately $600 million to complete a huge interchange project. The government's Transportation Equity Act for the 21st Century (TEA 21) has allotted approximately $100 million for the project, but that's not enough to do the job.

Carmichael: Some traditional freight rail hubs in urban areas should be downsized or eliminated because they no longer reflect the realities of traffic connections and commodity flows. Additional intermodal hubs are necessary, but their type and location should be determined by the modes that will use them, based upon anticipated trends and the need for specific commodity flows and interchanges.

Malone: Should new technologies be applied to these rail hubs? Or do we merely need to add to and extend existing technology or services?

Yeager: The railroads have spent millions of dollars on gate entrances, and trailer and container handling to reduce drayage costs for customers. Despite the investment, they have not improved their services sufficiently in this area.

The most effective service and cost reduction feature are stack trains, which came into use in the early 1980s. They have been enabling railroads to dominate the extremely long-haul market. But the railroads still lack the ability to control the chassis. No one seems to have found the solution to this problem.

In addition, the railroads need to improve their ability to locate their trailers and containers instantly.

Carmichael: Rail carriers and their major customers understand very well their technology requirements. One example is train controls using Global Positioning Systems instead of wayside signaling. Transportation security is another area where the rails need additional technology. Technologies can be designed from the start with safety and security in mind.

The rails will apply these technologies as they become cost effective.

Malone: Do we need particular additions to tracks or systems?

Carmichael: My vision involves what I call "Interstate II"—a high-capacity, multiple-track, high-speed inter-city rail network of about 20,000 miles—utilizing existing rights of way. It would be augmented by another 10,000 miles of high-quality conventional routes, much like the 40,000-mile Interstate Highway System of the last century.

Yeager: I don't believe the railroads are seeking money from the government, but I do believe the government should provide some sort of low-cost bonds to assist them, particularly where infrastructure needs are great. Despite its problems, the United States operates the greatest rail system in the world. We must improve this system to handle the enormous growth in freight transportation that is now occurring.

Carmichael: Freight railroads will finance the majority of infrastructure improvements. They should, however, have access to state-issued, tax-exempt bonds in instances where the improvements will deliver public benefits.

Government plays a major role in financing improved highway access to intermodal terminals. It also is involved in improving train operating speeds in urban areas by eliminating highway grade crossings. And, in some cases, the government finances specific rail line improvements that reduce urban congestion.

No doubt, there are situations in which government financing of freight intermodal terminals is warranted.

Yeager: Infrastructure improvement needs constant attention. With double-tracking and new sidings, railroads can provide exceptionally fast and reliable service. Solid intermodal trains move at 70 mph, and can provide a service that trucks cannot possibly compete with over long distances.

If railroads provided the service so many shippers require today, we could save millions of gallons of fuel, improve the environment, and reduce transport costs substantially.

Carmichael: My priority would be to accelerate multiple-tracking, and to improve operating conditions in urban areas. Port authorities spend megabucks to increase cargo handling speed, but containers on landside move at 10 mph through urban neighborhoods because highway grade crossings are located at every city block.

Malone: Do the rails have the right software to provide visibility of goods quickly and securely?

Yeager: The railroads have lagged in developing software to make their services more visible. These software products are available, but are prohibitively expensive to put in place over the entire railroad system. Here again, the lack of substantial profit has held back this progress.

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