Norfolk Southern Intermodal

[greyhounds]

I think it's best to make this a new topic rather than add it to the RoadRailer discussion.  The points made here have little or nothing to do with RoadRailers.

Fred Frailey has another excellent article in September Trains.  It deals with Norfolk Southern's development of their "Crescent Corridor"  between the New York City area and southern points such as Memphis, Atlanta, Birmingham, on to Dallas, etc.  Frailey touches some very important points about rail intermodal.  These include:

1) A reliable 33 MPH terminal to terminal rail intermodal train schedule is truck competitive.  40-45 MPH terminal to terminal would be better, but you do what you can with what is feasible.  Yes, a trucker can run at 65 MPH but he legally has to stop after 11 hours on duty and rest.   It's 965 miles from Croxton, NJ to Atlanta, GA and a trucker is going to have to stop and sleep.  (yes, I know a team could roll on)   Good rail marketing people will do very well putting freight on the 33 MPH schedule.  Give them 40-45 MPH and they'll own the lane.

2) Drayage cost are the death of intermodal profitability.  This cannot be emphasized enough.  (Drayage is the truck movement to and from the intermodal terminals.  And no, the railroads can't go back to carload.  Single carload shipments are inherently slow and unreliable.  Something that is virtually impossible to change.)   NS understands this, some other railroads seemingly have not developed the understanding at this point in time.

It does no good to apply the economic savings of moving a load on a fantastically efficient double stack train handling 280 containers and then give away the cost advantage by trying to tack on 250 miles of expensive trucking at each end.  The example in the article is the development of a new IM terminal at Birmingham, AL.  The NS could have just insisted that the freight be drayed to/from the Atlanta terminal. But they knew enough to put a new terminal fairly close by in Birmingham.  This puts the terminal closer to the customers, cuts dray costs, and directs revenue to the railroad instead of the trucking company that would otherwise do the highway drayage miles.

3)  "Triangulation" is a must.  You want the containers and IM railcars moving under revenue loads as much as possible.  Empty miles are unsold production.  You can never get the empty miles to 0.00%, but you do want to minimize them.  The only way to do this is through triangulation.  The example cited by Frailey is:  Birmingham to Croxton under load, empty Croxton to Harrisburg, PA, then load to Atlanta.  (I'll add empty to Birmingham to complete the circuit. )   An efficient truckload over the road operation will run about 13%-14% of its miles empty.  A railroad probably cannot get that low, but they do need to get as low as possible.  Triangulation is the way to do it and NS understands that.  Other railroads aren't there yet.

I'll add one thing Frailey didn't touch on.  The NS has adopted a sliding terminal to terminal freight charge system.  The rail portion of the charge to the customer varies with the dray expenses.  If the drayage costs are low, the railroad gets a higher amount,  If the drayage cost are higher the railroad takes a lower cut of the though rate because the pick up/delivery trucking is more expensive.  This makes great sense given the railroad's cost structure.  It was impossible under regulation.  Which is one thing that held back the development of an efficient intermodal network in the US.

Reading the article reaffirmed my conviction that NS has the best marketing people in the rail business.  They certainly seem to know what they need to do and they also seem to know how to do it.

[AgentKid]

greyhounds

It does no good to apply the economic savings of moving a load on a fantastically efficient double stack train handling 280 containers and then give away the cost advantage by trying to tack on 250 miles of expensive trucking at each end.

Great post. Excellent food for thought.

The CPR has been working on both sides of the formula. Back in mid-June, just before the major flooding in southern Alberta, CP announced a new faster schedule for intermodal from Toronto to Calgary. They went on about how Calgary was the transportation and redistribution hub of the Prairie Provinces.

And yet, just a couple of months earlier, they announced a brand new intermodal facility along with a logistics park at Regina, SK, about 450 miles east of Calgary, on the mainline. Had they not done this, those containers would have come west all the way to Calgary, and then been driven back east, and no one would have thought that odd. But at today's trucking operating costs, it is becoming less likely that a shortened delivery time to Calgary is going to offset those drayage costs to Regina. All RR's need to start looking at the idea of developing intermodal hubs in centres they would previously thought to small to warrant one.

Bruce

[blue streak 1]

Fred's and you have good points.   The expansion IMHO will have to follow the rules of network theory.   The moe lanes sold the more large terminals will need lots of space to store containers.   NS may have to store containers up to 24 -48 Hrs to allow a dedicated train to travel to a specific small terminal & return trip.  .  ie

Run a 9000ft to ATL.  daily  Fro XYZ

Run a 6000 ft to birmingham daily

Dray to Meridian.  

Sell enough traffic now to Meridian to allow a 3000 ft Meridian block to run 3 times a week.

either hold Meridian traffic from out from XYZ or store it at XYZ and add the traffic 3 times a week on the Birmingham trip.

MNO sends traffic to XYZ to be sorted to ATL, BHM, Meridian, etc twice a week.   Those containers arriving at XYZ for other locations may need to be stored until train to Meridian, JAX MIA, etc are scheduled to go.  

It appears that CSX's North Baltimore may be the first of mega intermodal classification yards ? p now  

[Ulrich]

So lets talk numbers, dollars and cents, the only thing besides service that really matters. Triangulation, drayage, sliding charges, empty miles  etc.  are irrelevant.  I have a 46000 lbs.  load to ship from Harrisburg, PA to Memphis, TN, what is my rate, door to door?

[twcenterprises]

Ulrich

So lets talk numbers, dollars and cents, the only thing besides service that really matters. Triangulation, drayage, sliding charges, empty miles  etc.  are irrelevant.  I have a 46000 lbs.  load to ship from Harrisburg, PA to Memphis, TN, what is my rate, door to door?

Working in the industry, and having some knowledge of rates, I'd say in the $2/mile range in an OTR truck, and in the $1.25-$1.50/mile range by container.

Brad

[greyhounds]

Ulrich

So lets talk numbers, dollars and cents, the only thing besides service that really matters. Triangulation, drayage, sliding charges, empty miles  etc.  are irrelevant.  I have a 46000 lbs.  load to ship from Harrisburg, PA to Memphis, TN, what is my rate, door to door?

I'll agree that triangulation, empty miles etc. are irrelevant to the customer.  All the transportation customer cares about is, as you say, price and service.  But such things are very relevant to the transportation producer, in this case the NS.  Triangulation, dray costs, empty miles, etc. greatly effect the marginal costs of providing the service.  This is relevant to the price NS must charge to remain whole after the transaction and therefor it determines the competitive situation of the railroad vs. the trucking competitors.

Doing things such as triangulation and dray cost minimization increases the competitiveness of rail intermodal.  That is why they are in no way irrelevant. 

As for what the door to door rate is from Harrisburg to Memphis, I have no idea.  You could contact them and ask.  You can get a long term rate with a volume commitment or a one time spot price.   I'd imagine that you'd get a pretty good deal seeing that they need freight originating in the New York City area to balance the lanes.

http://www.ns-direct.com/

[Ulrich]

My door to door  truck rate in that lane is $1500.00 all in, westbound. That gets you an air ride 53 ft. box trailer and next day delivery if loaded by noon, time definite pickup and delivery.  

Since competitive pricing is at the root of their success in this corridor they should publicize one rate that works for most people in that lane. Sure, shippers who ship in large volumes might get a discount and pricing will vary with the length of dray at each end. But they would do well to get the ball rolling with "a number". Maybe their benchmark rate for a Harrisburg to Memphis is $900.00. In that case everything they do from a marketing perspective should be built around that $900.00 figure. Shippers will understand if their rate deviates from that  a little based on their particular circumstances.

The Crescent Corridor has no clear position statement that might motivate a shipper to change what they're currently doing. Clearly they're not going to outperform trucking. So they need to really focus on showing how much cheaper their service is verses trucking.

 

 

[narig01]

If you are going to offer door to door service and on a truck competitive schedule why acccept a lower rare just because you are a railroad? Rail has a lot of capacity and would be in a position to expand much faster if they were competing time wise.
IMHO some lanes they could do a lot better. Best example New York - Chicago could have some overnight schedules by rail. Minneapolis-St Paul Chicago same. Both these lanes during the winter can be impacted by weather that effects road more then rail. Another that comes to mind Denver Salt Lake City. Several from Salt Lake City(Portland, Los Angeles come to mind).
Generally speaking most truck companies quote 500 miles a day. With a little bit of work rail can do 700 miles overnite on some lanes without wrecking their schedules.
Another thought for a private operator. Run single stack COFC Boston-Washington DC on an overnite schedule. Not a big train just reliably. As crowded as this lane is on the highways rail should have be there. This corridor is one that would have a number of foul weather customers(ie those shipping to keep a schedule in bad weather).
Thx IGN

[narig01]

PS on Boston New York. What I refer to is run an overnite train on the corridor.
Thx IGN

[narig01]

One other question.
What kind of load factor do railroads get with their equipment? Specifically when a train is run how many boxes are on the train compared with how many spaces are available?
Thx IGN

[greyhounds]

narig01

If you are going to offer door to door service and on a truck competitive schedule why acccept a lower rare just because you are a railroad? Rail has a lot of capacity and would be in a position to expand much faster if they were competing time wise.
IMHO some lanes they could do a lot better. Best example New York - Chicago could have some overnight schedules by rail. Minneapolis-St Paul Chicago same. Both these lanes during the winter can be impacted by weather that effects road more then rail. Another that comes to mind Denver Salt Lake City. Several from Salt Lake City(Portland, Los Angeles come to mind).
Generally speaking most truck companies quote 500 miles a day. With a little bit of work rail can do 700 miles overnite on some lanes without wrecking their schedules.
Another thought for a private operator. Run single stack COFC Boston-Washington DC on an overnite schedule. Not a big train just reliably. As crowded as this lane is on the highways rail should have be there. This corridor is one that would have a number of foul weather customers(ie those shipping to keep a schedule in bad weather).
Thx IGN

I like your enthusiasm.  But there's a lot more to it than "Hey, let's run some fast freight trains here."

I've worked on establishing new intermodal services.  It's a lot of work.  You have to do the market research.  Identify the freight you can reasonably acquire and the revenue you'll reasonably capture. Then develop a service plan that will meet, as best possible, the needs of the overall market.  This plan has to be realistic, with operating department buy in and commitment.  They're focused on cost, not revenue.  So they'll probably resist added train miles.  But if you don't get their buy in, it is doomed.

Overnight Chicago-New York?  Why?  What net benefits would result?  How much extra revenue, how much extra cost?  You have to realistically (with a lot of documentation) project a positive return on every dollar you propose to spend.  And there are no guarantees of success.    You/re not gambling with house money here.  So any projected returns must include a "risk factor" .   That means you'd better be projecting high returns, such as $1.30 back for every $1.00 spent.  (Don't even think of fudging the numbers.  You will be held accountable.)

That's what I like about Norfolk Southern's marketing people.   They seem to be able to do all this.  And they seem to be willing to take the personal career risks necessary to do this.   Ability and courage will win.  Most of the time.

From my experience, Chicago-New York should be 2nd morning, not overnight.  Ship it anytime on Monday and deliver it early Wednesday.   You'll own the lane with a 40 MPH terminal to terminal schedule.  I don't see anything faster as justifiable.  Boston-New York is just too short for an IM haul.

[narig01]

Greyhounds : I guess coming from trucking and freight forwarding end of transportation I tend to forget about the cost of getting into new businesses(as a driver for the first and as a clerk/courier for an air courier operation) .
Several years ago the company I was driving for had a major revision with what had been a major customer, they had been bought out by another firm that expanded into a new area. The first thing they did was to look at transportation costs compared to what the larger firm was used to paying. The accountants only saw the costs and did not understand the service we'd been providing.
It was painful for the trucking company as they readjusted to finding new customers and business. I learned who a lot of brokers were(you should see my broker contact list). Eventually things settled out. The company found new business and was able to start expanding again. On the plus side the company had a lot of cash and assets going into this cycle. Added to that a very good and adaptable operation. With a lot of good dependable people.
Now the trucking company has expanded back into rail (they were using rail in the 80's & 90's) and still had staff familiar with that and had hired others from elsewhere.
Being a freight forwarder means your sales people hustle the business and one has to hustle to get whatever wherever. And you use the airlines multimillion dollar airplanes. The courier company's aircraft where mostly in Europe and Australia. Trucks well $80k for a tractor and another $40k for a trailer new. Or on the used market you can get decent equipment for under $70k . Compared to what 2 mil for a locomotive now. Not to mention cars and the cost of ROW. YES I see the difference in operations.
I guess one of the things I see is the middle ground between what can be done with a truck, a lot of trucks, and a rail operation. Best example I'll cite is RJ Corman's haulage of aluminum ingots. In Kentucky I think. The customer was using a lot of trucks. Tearing up roads in a state that does not have a lot of money. Replaced with one 50 car train (I think) every other day.
Thank you for the soap box. J know at times this is kind of like preaching to the choir.
Thx IGN

[narig01]

Re Chicago New York(açtually NYC metro area) there is a lot of expedite business. I suspect a lot of it does not show up in reports as a lot of 'truckload' is 4-20 drums. You are right about 2nd morning being what rail should be doing. I could not understand why Conrail did not press harder there. However I think it would be worthwhile to run an expedited overnight train here if you can get the volume to fill out the train with 2nd day.
Boston New York (north NJ) Washington DC just a thought here. Right now Amtrak is looking to replace AEM - 7's with newer equipment. I can see someone buying some used for a decent price and using them to haul intermodal. Trailers in well cars and single level containers. Possibly Roadrailers. Not a big train but something that makes some money at nite when passenger trains are not running. It would have the ability to take a little traffic off I 95. Amtrak used to run a mail train here.
Thx IGN

[oltmannd]

A few comments:

1. With the slow, painful death of coal, NS needs to figure out how to squeeze more profitability out of intermodal.  The problem with the Crescent Corridor, more than it's 28-30 mph end to end speeds is the number of crew changes that engenders.  It takes 7 crews to move from Harrisburg to Memphis and 5 for NJ to Atlanta versus only four from NJ to Chicago.  Fred mentioned trying to form some "long pools" on the route but reliable long pools on single track railroad are dicey.

2. There are a couple more terminals being planned for the route that can only help.  One near Knoxville and one near Roanoke.  The Roanoke one got hammered down by NIMBYs for a while and the Knoxville one is just waiting for capital.

3. The need for large, expensive terminals to make double stacking happen and be cost efficient, and the need for short drays to be able to hang onto the bulk of the revenue for the move work against each other.  Thankfully, there is appears to be a fairly large sweet spot.

4. Carload is increasingly becoming a "boutique" product.  The RRs spend huge amounts of energy planning, arranging and delivering car load service.  I've often wondered what would happen if there was a concerted effort to move as much of it as possible to intermodal, leaving only larger volume "botique" moves that are easier to plan, handle and move.  Would it provide enough additional volume in lanes that currently too small to serve to start service, sucking in more highway traffic in the process?

4a. RRs in general and NS in particular are currently carload oriented operations that also move intermodal and bulk commodity trains.  In the long run, can they become intermodal oriented operations that also move some carload and bulk?

4b.  There is often disdain among traditional railroad mangers for intermodal for a variety of reasons I've never been able to completely understand.  Moving to a world where intermodal drives the operations is going to take some "true believers" at the top to make the change happen.

5. Conrailers used to look down their nose at NS and say, "how hard is it to make money moving coal downhill" - which was true - it was easy.  NSers used to look down their nose at CR and say, "How hard it is to operate a flat, double track RR that is really just a big "X"? - which was true - CR's network was simple and a smooth, fast, double track railroad covers a multitude of sins.  The Crescent Corridor is something neither side of the house has any experience with - trying to run a high volume, high performance intermodal network on a hilly, curvy, single track railroad.  So far, so good!

[Rader Sidetrack]

Ulrich

My door to door  truck rate in that lane is $1500.00 all in, westbound. That gets you an air ride 53 ft. box trailer and next day delivery if loaded by noon, time definite pickup and delivery.  

Note that Harrisburg PA to Memphis TN via I-81 is 935 miles (Google Maps estimated travel time is 13 hrs 30 min).  It is not possible for a truck to legally make this delivery in one driver "day". Either a team operation is required, or the single driver must sleep somewhere along the route, and then complete the trip the next "day".

[MP173]

Regarding Chicago - NYC...

 

CSX currently runs their Q010 from Chicago to NYC.  I am showing it leaves Chicago at 6am (3rd hand info) with arrival in North Bergen at 1030 am the following day (again, 3rd hand info).  Why 6am departure?  No doubt because UPS dictates that time...and not 11pm or midnight.  Anyway that train contains a number of UPS trailers plus other interdmodals but not so many stacks.  This is a premium train.  It is always running thru NW Indiana around 8am and always has 3 motors.  The seas part when Q010 is in the picture.

 

CSX also runs a Q009 which shows a 0045 departure from North Bergen with a 0415 arrival in Bedford Park.  That timing makes sense.  Pickup UPS parcels in the afternoon, sort that evening and run the trailer to North Bergen by 1130 and load n go.  Delivery to UPS in Chicago 2nd day with a sort and on the street that morning.  Not bad - Monday to Wednesday service. 

 

Q010 is a direct decendent of the Conrail Mail 8 train which left Englewood at 530am and arrived in North Bergen at 10am.  So, what worked for UPS in 1998 still works today. 

If one is at Porter, In around 8 am one will see an EB NS intermodal.  Last week I got stopped and counted about 125 intermodal units powered by 3 motors...with a large number of UPS vans.  A few stacks, but mainly trailers.

So, UPS has increased competition in the east with CSX and NS vying for it's hot trailer traffic and running neck and neck at 8am across NW Indiana.  One will see quite a few JBH containers on the NS train, plus LTL carriers such as Yellow, ABF, and other TL carriers such as Swift, etc.

So, for some reason CHI - NYC is a late departure (2nd morning) while NYC - CHI is same night, thus shaving a day off of delivery.  Not sure why, but hopefully someone can explain it.

I still believe Fred needs to expand his coverage of intermodal and go behind the UPS curtain.  That might explain quite a bit...if he gets out to tell the story.

Ed

 

[poneykeg]

No way can you make 935 mi in 131/2 hrs at legal speed limits [n a 4 wheeler let alone an 18 wheeler. There`s 5 chicken houses to cross and at least 60 mi of 55mph so I would say total driving time would be close to 17 hrs.

[MarknLisa]

Another issue is capacity.   Few people want the OTR lifestyle anymore. Fewer drivers, fewer trucks to load.   New gov't hours of service rules have reduced truck efficiency.  Trucks don't complete their loads as often resulting in fewer available empties.  So what if a truck can get there faster when it takes 3 days to cover your load?  Book it intermodal the first day the load is available & get it off your dock!

[Ulrich]

Rader Sidetrack

Ulrich

My door to door  truck rate in that lane is $1500.00 all in, westbound. That gets you an air ride 53 ft. box trailer and next day delivery if loaded by noon, time definite pickup and delivery.  

Note that Harrisburg PA to Memphis TN via I-81 is 935 miles (Google Maps estimated travel time is 13 hrs 30 min).  It is not possible for a truck to legally make this delivery in one driver "day". Either a team operation is required, or the single driver must sleep somewhere along the route, and then complete the trip the next "day".

 

It is possible. Note that I stated loaded by noon.  A fresh driver can then legally drive 9 hours for a total mileage of 450 miles before booking off. He sleeps his eight hours and resumes his trip at 5:00 am. By 3:00 pm EDT he is at the receiver. Taking into account that Memphis is on central time, he arrives at 2:00 pm in Memphis, with time and hours in his log to spare. We do it all the time.

[Rader Sidetrack]

Ulrich

He sleeps his eight hours and resumes his trip at 5:00 am. By 3:00 pm EDT he is at the receiver. Taking into account that Memphis is on central time, he arrives at 2:00 pm in Memphis, with time and hours in his log to spare. We do it all the time.

Perhaps you would like to review the Hours of Service rules that Commercial drivers must follow:

http://www.fmcsa.dot.gov/rules-regulations/topics/hos/index.htm

In particular, that 8 hours of sleep you reference must include an additional 2 hours of non-driving. To wit:

Drivers using the sleeper berth provision must take at least 8 consecutive hours in the sleeper berth, plus a separate 2 consecutive hours either in the sleeper berth, off duty, or any combination of the two.

Note that I am not disputing that it may be possible for a single driver to deliver within  the next calendar day, of course depending on how early he starts, and possible complications  along the way. However, the single driver must spend a minimum of 10 hours of non-driving time in between the two driving sessions required to get from  Harrisburg PA to Memphis TN.

[Caseys Brakeman]

2) Drayage cost

What about RR's owning and operating the trucking companies at both ends?  Has anyone done this?  Is it legal?

[PNWRMNM]

Been done by several RRs. Is legal today. Is cheaper to hire local draymen who work much cheaper than anyone associated with the railroad would.

[MP173]

Regarding owning trucking company at the terminals...CN has a trucking operation in Chicago.  I asked why would a company with an operating ratio in the 60's want an operation with operating ratio in the 90's?

For CN, they indicated it was about service to the customer.

Not sure if I believe them or not, but it sounded good.

 

Ed

[greyhounds]

MP173

Regarding owning trucking company at the terminals...CN has a trucking operation in Chicago.  I asked why would a company with an operating ratio in the 60's want an operation with operating ratio in the 90's?

For CN, they indicated it was about service to the customer.

Not sure if I believe them or not, but it sounded good.

 

Ed

The railroad has to be involved with the trucking in order to maximize the profitability of their intermodal service.  A rail intermodal  terminal to terminal rate, or any rate based on an inflexible terminal to terminal component, is automatically wrong.  It will under price some business and leave money on the table.  The same rate will also simultaneously over price some business that the railroad could make a buck handling.  This over priced business will be driven to competitors, such as motor carriers.  

Terminal to terminal charges are a legacy of misguided government regulation.

There are several ways to deal with the issue.  One is for the railroad to operate its own motor freight pick up and delivery service beyond its IM terminals.  (As CN does.)  Another way is to enter into an agreement with a trucker under which the trucker bills the customer and then pays the railroad a flexible amount for terminal to terminal rail movement.  The amount due to the railroad is based on the trucker's drayage cost.  One reason JB Hunt has been so successful with intermodal is that they have such agreements with some rail carriers. 

[V.Payne]

http://www.nears.org/public_html/Nears_oct/oct_pdfs/Ed_Elkins_NS_Corp.pdf

"Shippers seeking cost savings vs. OTR in shorter-haul markets"

"•Greater freight density (containers per car per train) is good
•Longer length of haul (per unit per train) is good
•Higher freight density can compensate for shorter length of haul
•Longer length of haul can compensate for lower freight density

•Density
•Productive (non-regressive) train routes
•Short ultimate dray length
•Efficient terminal processes
•Service quality (reliability)"

A lot of nice charts...

[BaltACD]

PNWRMNM

Been done by several RRs. Is legal today. Is cheaper to hire local draymen who work much cheaper than anyone associated with the railroad would.

When railroads (or at least my carrier) set up trucking organizations - they are set up outside the railroad and the employees ARE NOT covered by Railroad Retirement and the expense that brings to the carrier.  Employees are paid the going rate for what they do as measured by the trucking industry standards, not the railroad industry.

Railroads have pared down Railroad Retirement covered employees to the bare minimum that are actually involved with the operation and maintencance of the railroad.  All the support organizations (Information Technology, Real Estate etc.) have been removed from Railroad Retirement and placed under Social Security - they have been doing this for the past 25 years or more.

[PNWRMNM]

Balt,

All true.

Mac