So sad to read about this.
Posted by an editor at the Journal of Commerce on LinkedIn
Remember last Friday, Union Pacific Railroad shut down its Cold Connect service from Washington and California to New York, interchanging with CSX in Chicago. But you've got Hunt, Hub Group investing in ThermoKing Slimlines, and a bunch of traditional players like KLLM, NFI, Marten, and others converting their TOFC to COFC.
"Infinity Intermodal launched its expedited, temp-controlled intermodal service from Salt Lake City to Chicago (with return service from Chicago to Salt Lake City) in May 2020. The new service is three days door-to-door and allows Infinity Intermodal to provide refrigerated intermodal service throughout the greater Salt Lake City market including areas of southern Idaho such as Pocatello, Twin Falls, Heyburn, Burley, American Falls, Jerome and Idaho Falls."
"“We are excited to offer shippers and receivers expanded coverage across the greater Pacific Northwest with our expedited refrigerated intermodal service focusing on full truckload quantities of temp-controlled products,” said Goss."
https://www.railwayage.com/intermodal/infinity-launches-slc-chicago-intermodal-service-shakes-up-exec-team/
greyhoundsI'll say the UP does not currently have the ability to do such research and analysis.
They appear to be claiming all over the Loup Logistics site that not only do they have it, it is world-buzzword class in a whole lotta ways. I thought I was pretty good at interpreting meaningless but seemingly portentous tracts of jargon, but that site has me beat.
Of course how they handled the shutdown completely disproves any of the stuff about planning or knowledge they were trying to indicate they had...
MarknLisaCould be an opportunity for folks like Tiger Cool and CR England's TempStack.
Well, it could be an opportunity, but it just ain't gonna' fall in their lap.
Aside from Portland and Seattle/Tacoma the UP doesn't seem to have any intermodal terminals in the Pacific Northwest. The area generates significant volumes of long haul freight (Idaho potatoes and Washington apples come to mind). But to get the freight they'd have to put IM terminals in places such as Boise and Wallula.
But to get those terminals, and the needed train service, it would take a full blown market study producing realistic volume, revenue, and cost projections. I'll say the UP does not currently have the ability to do such research and analysis. They need that ability, but they just don't have that ability.
They were fat and happy with the coal and international intermodal. Take those away and they are lost in the woods.
Could be an opportunity for folks like Tiger Cool and CR England's TempStack.
CatFoodFlambe jeffhergert I'm thinking it may be a casualty of the current panic of needing to cut to the bone anything possible to bolster the OR and stock price. This. If the rate of the return on a piece of business isn't substantial (I would guess 40% or more, there isn't much room for it in an environment requiring an OR in the high 50% range. Truckload rates from Central and Northern CA and the Pacific NW (in particular) have cratered, sometimes dipping to less than a dollar a mile (try even finding a load out of Seattle on a Monday in winter or spring), which doesn't cover fuel and the driver's pay, let alone the cost of the truck and maintanence. I suspect the net cost for CC was in the area of $2.00 per mile for an equivalent of single truckload (one rail reefer can handle about 3-4 truckloads) after the second warehousing and drayage costs were included. Add shorter transit times, the ability to quickly divert a load to a better market or to prevent a contractual violation, and ease of making multiple stops with highway transport to a lower rate, and CC is not going get much business for the next few months. Beyond the short term, the traffic will return, but current railroad marketing strategy views buying green bananas at Costco as a high-risk inventment.
jeffhergert I'm thinking it may be a casualty of the current panic of needing to cut to the bone anything possible to bolster the OR and stock price.
I'm thinking it may be a casualty of the current panic of needing to cut to the bone anything possible to bolster the OR and stock price.
This. If the rate of the return on a piece of business isn't substantial (I would guess 40% or more, there isn't much room for it in an environment requiring an OR in the high 50% range.
Truckload rates from Central and Northern CA and the Pacific NW (in particular) have cratered, sometimes dipping to less than a dollar a mile (try even finding a load out of Seattle on a Monday in winter or spring), which doesn't cover fuel and the driver's pay, let alone the cost of the truck and maintanence. I suspect the net cost for CC was in the area of $2.00 per mile for an equivalent of single truckload (one rail reefer can handle about 3-4 truckloads) after the second warehousing and drayage costs were included. Add shorter transit times, the ability to quickly divert a load to a better market or to prevent a contractual violation, and ease of making multiple stops with highway transport to a lower rate, and CC is not going get much business for the next few months. Beyond the short term, the traffic will return, but current railroad marketing strategy views buying green bananas at Costco as a high-risk inventment.
Don't overlook - with cratered rates - Truckers are going broke too, probably going broke and losing their equipment faster than any decrease in rail traffic. Truckers have to make money of they go out of business. When you are losing money on every load you don't make a profit on increased volume.
Never too old to have a happy childhood!
greyhounds . . . It will take two things: 1) Leadership with brains and guts and, 2) An understanding and acceptance that it's the marginal cost/marginal revenue relationship that counts. I don't currently see the UP as having any of that. (emphasis added - PDN) We'll see if it changes.
We'll see if it changes.
(*For a laugh: https://despair.com/collections/posters?sort_by=title-ascending )
As to 2): Well said - finally someone put it into the right words. I'll spare everyone the details of the math, but OR is just the ratio between total revenue and total cost (all figures being operating figures). Get the operations right and the OR approach will leave a lot of money on the table.
Great comments, even the part I didn't quote. Not holding my breath, though.
One further thought when I looked up Rotterdam is that it's a long ways to anyplace important. Sure, the Capital Region of NY (greater Albany) is a good market, but the big 2 - NYC and Boston - are like 100 and 200 miles away, respectively, and that's too long of a dray. CSX has its own rails close to Boston, and into NYC. The operation should have been structured to put the reefers in with blocks or trains directly to those points.
- PDN.
While Cold Connect has been shut down, Loup Logistics still has locations for shipping/receiving refrigerated freight. Cold Connect was part of Loup Logistics which is part of UP.
https://www.louplogistics.com/sps/jas/index.html
As late as last December, Cold Connect seemed to be a rising star. I'm thinking it may be a casualty of the current panic of needing to cut to the bone anything possible to bolster the OR and stock price.
The Cold Connect/RailEx business hasn't been handled in separate dedicated z trains for quite a while. Even before UP jumped on the PSR bandwagon the reefers were starting to move in regular intermodal Z trains. The last salad shooter Z trains started filling out with unrefrigerated foodstuffs.
Jeff
greyhounds Use containers, not boxcars, and establish a hub operation in Chicago. Pick up the containers daily with an existing expedited schedule. Interchange the containers via rubber tire in Chicago. (Gasp! What I just wrote!) You'll get through Chicago in a few hours at low cost. You'll be able to get them on various expedited schedules to important destinations ranging from Montreal to New Orleans. And also serve Chicago, Milwaukee, Indianapolis, etc. economically by truck drayage without reloading the freight.
BNSF knows this. Hence they never purchased a large fleet of reefers. The reefers they do have run in small blocks within existing Z trains. It's worth noting if the competition is successful with their operation, learn from them, and cater it to your service philosophy. UP is so stubbron with handling traffic it essentially led to stupidty in how to handle that traffic..
There's lots of truckload capacity out of CA, and truck rates are way down (thanks in part to Covid19). UP's service had no sustainable advantage in the marketplace... not capacity, not speed of delivery, not on time pickup and delivery.. and most recently not even price. If you have a business that has NO advantage in the marketplace does it make sense to continue?
samfp1943The model railroaders in the crowd can run any combination of cars and power and it would be prototyical operatonally.
Watching pretty much any of the rail cams might leave you wondering exactly which railroad you are watching. The chat on the Deshler cam tends to reflect this.
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
From Greyhounds post: His last paragraph. "...It will take two things: 1) Leadership with brains and guts and, 2) An understanding and acceptance that it's the marginal cost/marginal revenue relationship that counts. I don't currently see the UP as having any of that.
We'll see if it changes..."
I'd guess you could take that last part of his statement to the bank!
A couple of issues come to mind as pretrty much givens. "...People gotta eat..."
and the trucking industry, at the very least, is always looking for opportunity. Around here, [BNSF territory] a couple of things seem to already be happening...Reefers are moving in trains that they would not 'normally'(?) be placed;in. While their numbers and presence, are appearing to be in increasing numbers...
TOFC seems to be picking up, both in solid trains; and in cuts on 'other types of trains'. [ Note: purely subjective and observational] No actual knowledge of the actual numbers, but it sure seems that way.
Just like the solid moves of auto racks, that appeared several times a week; now they[auto racks], seem to move in cuts with in merchandisers; and mixed cuts with tank cars, even the coil trains seem to have them. Interesting times!
The model railroaders in the crowd can run any combination of cars and power, and it would be prototyical operatonally.
Coal is going away, oil will be going by the end of this decade, trade wars (ill advised) are reducing 'Chinese' unit trains, CN is competing ferociously US West Ports and unit trains, grain/soy exports will endure, trucks are about to get more competitive with electricity and safer (let's ignore autonomous). So what will be left? Will it be enough?
Paul_D_North_JrAs John Kneiling loved to observe, railroads can't market worth a damn. It will take an outside operator such as a 3PL to make this kind of service-intensive and more complex operation work.
I learned a whole lot reading Kneiling. And, as a former railroad marketing guy I fully agree that marketing and market development are major weak points for our railroads.
But... I was never a fan of the Railex/Cold Connect business model. I see it as coming from the now somewhat gone UP unit train fetish. They tried to shove anything and everything in to unit trains. So the Railex/Cold Connect operation was made in to a once or twice a week unit train system. You don't hold perishables to aggregate a unit train of volume. You move them--NOW.
Taking everything in a unit train to one destination to serve the east didn't seem too bright. It was going to be expensive to move freight that way. Lots of unneeded handling and drayage. But what they knew was unit trains, even if the market didn't fit unit trains. Hell, they weren't even serving major populations along the way such as Chicago. That significantly cut their potential market but it did fit their unit train fetish.
Use containers, not boxcars, and establish a hub operation in Chicago. Pick up the containers daily with an existing expedited schedule. Interchange the containers via rubber tire in Chicago. (Gasp! What I just wrote!) You'll get through Chicago in a few hours at low cost. You'll be able to get them on various expedited schedules to important destinations ranging from Montreal to New Orleans. And also serve Chicago, Milwaukee, Indianapolis, etc. economically by truck drayage without reloading the freight.
Right now, the UP seems to be like a boxer who has just taken a hard right cross to his face. Back on their heels but not out. Their coal franchise cratered faster than anyone believed it would and they just don't know what to do.
It will take two things: 1) Leadership with brains and guts and, 2) An understanding and acceptance that it's the marginal cost/marginal revenue relationship that counts. I don't currently see the UP as having any of that.
Ain't that the way of it. When it comes down to it, the transportation-related can think only from a commodity mindset, I guess. Greener pastures.
Ironically, within the last day or two someone here (Gramp, in the "April 09, 2048: A Railroading Vision" thread at http://cs.trains.com/trn/f/111/t/282296.aspx?page=1 , May 8, 2020 post, about 2/3 of the way down Page 1) linked to Cold Connect as an example of the railroads going after refrigerated business. (I looked up the Rotterdam facility on Google Maps and saw a small end-cab switcher at the northern end - N 42.7827 W 73.9908 - of what may be the main building for this operation, and a caboose in faded boxcar red on a nearby siding - N 42.7846 W 73.9920 - just to the north, with 3 locomotives - look like UP - a few feet further north on that track.)
As John Kneiling loved to observe, railroads can't market worth a damn. It will take an outside operator such as a 3PL to make this kind of service-intensive and more complex operation work.
Hardly reassuring.
Overmod Perhaps the thing that grinds the worst is that word 'permanently' in the release, combined with the evident very short notice to customers. A temporary suspension of Cold Connect bridge traffic, combined with strategic conventional forwarding with reasonable QoS guarantee, would have served equally well without telegraphing failure to all the wrong places. In a sense this is another example of the ridiculous failure of railroad PR people to connect to audiences with any perceivable sympathy.
Perhaps the thing that grinds the worst is that word 'permanently' in the release, combined with the evident very short notice to customers. A temporary suspension of Cold Connect bridge traffic, combined with strategic conventional forwarding with reasonable QoS guarantee, would have served equally well without telegraphing failure to all the wrong places. In a sense this is another example of the ridiculous failure of railroad PR people to connect to audiences with any perceivable sympathy.
Classic PSR.
Greetings from Alberta
-an Articulate Malcontent
caldreamerHow will UP move perishable products from the west coast to the east coast now that the Cold Connect service has been abolished?
Probably by default.
Note they have made no attempt either to sell the east end of the business as any kind of going concern or to market the Rotterdam operation as a distribution hub. Reading between the lines, the chronic drop in demand combined with (as they note) willingness by some truckers to slash prices based in part on depressed fuel cost has made the operation unprofitable, beyond reasonable recovery even at the prospective rate of 'economic reopening'.
How much of the decision was premised on current Union Pacific infatuation with precepts of conventional PSR remains to be seen. When and if demand recovers, there will be an attractive opportunity for someone with adequate capital and access to resources to run a gateway out of Rotterdam. This is far less a disproof of the operating paradigm than it's a recognition that adequate reliable traffic in lanes is a necessity for a practical long-term rail operation (the same, mutatis mutandis, is true for long-term passenger operation) and that cheap ad hoc undercutting, if there are sufficient numbers of the desperate to serve diminished demand, can be an effective block to even a successful capital-intensive logistics effort.
The astounding thing to me, at this point, is one piece of the deafening silence since the 8th -- where are the logical East Coast railroads that could pick up the assets and the handover from the West and run this service as part of their offerings? Evidently the financiers 'in control' are looking at this and saying 'well, if UP thinks it's time to sell, there must be reasons' ... perhaps thinking that when the uncertainties are out of the fix for COVID-19 and the wrecked economy they'll think about picking up some of the pieces to reassemble. Who am I to say their analysis based on three-month priority is wrong?
How will UP move perishable products from the west coast to the east coast now that the Cold connect service has been abolished?
https://www.railwayage.com/freight/class-i/up-shuts-down-cold-connect/
Union Pacific on May 8, 2020 shut down its Cold Connect service for perishables traffic from the West Coast to the East Coast. Cold Connect began in January 2017 with the acquisition from Railex of three cold storage and distribution facilities in Delano, Calif.; Wallula, Wash.; and Rotterdam, N.Y.
UP spokesperson Kristen South provided this statement to Railway Age:
“Friday, May 8, we notified employees that Cold Connect, a Loup Logistics service that moves refrigerated products from the West Coast to Union Pacific’s warehouse in Rotterdam, N.Y., will permanently close. Most Cold Connect-related positions have been eliminated. This decision was not made lightly. Since acquiring the Railex assets in 2017, employees diligently worked to grow volumes and create a platform for the future; however, with COVID-19 impacting volume and truck prices, it is no longer sustainable to continue operations. Customers also were notified that Friday was the last day we accepted inbound orders. Our intention is to deliver on all product in transit, until it meets its final destination. A reduced staff will temporarily remain in position to execute these final commitments.”
Well, more business for the highways I suppose. It really is a shame. I guess those reefers UP bought a couple of years ago were a waste of money.
Our community is FREE to join. To participate you must either login or register for an account.