Trains and Trucks

Posted by George Hamlin
on Saturday, July 01, 2017

Mortal enemies, right? Maybe so, especially in the eyes of some railroad executives, but there have been signs in recent times, particularly in the form of the massive number of domestic containers from trucking companies such as J.B. Hunt; Schneider; and Swift, among others, found on intermodal trains that cooperation can be a very good thing, indeed.

In reality, both modes have had to become more cost competitive and more service-oriented in today’s competitive economic world.  Focus on those concepts, and it will become clear that, in cost terms, they are essentially in opposition to each other.  Either that, or the transportation company that can produce lower costs and improve service simultaneously might just want to hang on to the individuals capable of pulling this off. 

The photo above, showing CSX’s short-lived Q192 operation between Atlanta, Georgia, and Valleyfield, Quebec (just west of Montreal) at St. Denis, Maryland, provides graphic evidence of at least some of the ways that both modes have addressed the cost piece of the equation.  In short, they both produce greater productivity by hauling more freight in a single movement, whether it be a train or truck departure. 

For the trucks, double trailers (and triple, in some locations) provide an answer to the need for productivity: one driver is now responsible for more than a single truckload.  On the rail side of the equation, there is both the shedding of tare weight afforded by containerization and the ability to stack the containers two-high, although as this photo illustrates, not all major rail routes are able to make use of this benefit, since in this case, the CSX’s tunnel under Howard Street in downtown Baltimore, a few miles north of this location, won’t permit the use of double-stacks, hence the single-level use of the intermodal platforms shown here.

From a purely cost-oriented perspective, rail has had a significant advantage.  Even in the days of piggyback, a two-person train crew could move many trailers; double-stacking literally doubled this advantage, for all practical purposes.  Trucks, on the other hand, have the upper hand when a moderately-sized shipment needs to be moved expeditiously from A to B.

No waiting for hundreds of other containers to be loaded onto intermodal platforms, and for the train to be assembled.  Multiply this times two when the stack train reaches its (rail) destination.  Yes, trucking costs more, but from a service perspective, it delivers, in a very real sense, from a service perspective.  And, cost notwithstanding, apparently many shippers are happy to make use of this alternative. 

In short, this is the definition of a differentiated product rather than a commodity.  And it’s well known that the former can command a revenue premium, in many cases, while the latter is all about achieving the lowest cost in order for the producer to survive, much less prosper.  I’ve heard rail workers refer to the intermodal trains that move significant amounts of UPS traffic as “money trains”; this suggests both that railroads can provide premium service to a demanding shipper, and that the lower cost associated with chassis-less containers is not always the winner.

Recognizing that each mode has inherent advantages, what is being done to capitalize on them, so that traffic is allocated by the market appropriately?  At the risk of a heretical statement, it might make economic sense for railroads to shed even more individual carload business to trucks than they have to date.  Since this would reduce a portion of the current traffic base that typically requires multiple handlings (think of the recent trend towards reducing the number of hump yards), rail costs might decline, as well.

Of course, the revenue that would be lost in this exchange needs to be replaced, lest the financial world have railroad management for their next meal.  Rail has much to offer in the context of moving huge volumes of commodity freight in a resource-constrained world; think the supply of truck drivers, at least until automated motor vehicles take over, or the need to build billions of dollars of new/additional highway capacity needed for growth in trucking.

“Out of the box” thinking might be useful here.  In many areas, main lines have had multiple tracks reduced; the rights of way are still there.  Could some of this property be utilized for truck-only tollways that would produce revenues for the railroad owner?  Similarly, there are still locations where there are railroad rights of way in urban areas that might be useful in providing exclusive transportation corridors for local (pick-up and delivery) within cities.  In either case, this might also provide a venue for early adoption of “driverless” vehicles.

What about those no-longer-needed hump yards?  Couldn’t some of this real estate be re-purposed for something along the lines of intermodal/rail-to-truck transfer facilities and/or co-located warehousing and distribution enterprises?  The logistics business is increasingly located well outside (although within a night’s out and back truck run) major metropolitan areas.  West of Harrisburg, Pennsylvania, the Norfolk Southern has a new intermodal facility adjacent to corn fields near Greencastle, and the CSX has another a few miles down the road (I-81, in this case) at Chambersburg.

There’s an awful lot of non-air/waterborne freight out there in the North American market; making sure that both the rail and trucking businesses maximize what they each do best might in fact be good for both of them.

(Photo by George W. Hamlin)

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