Overshadowed by all the hype surrounding the CN/CP - KCS merger proposal is NS's foray into LCL (almost front page news in the latest Trains issue). Finally someone gets it! As most manufacturers are small(ish) most don't pump out truckload or carload volumes.. most ship in 1 skid to 5 skid increments, a market that the railroads have all but ignored now for 50 plus years.
Maybe the next step is the purchase of a large LTL carrier. We've done it in Canada a couple of years back with CN's purchase of TransX. Imagine Norfolk Southern buying a well run and well managed LTL outfit like Old Dominion.. the sky would be the limit. And maybe that would be better and faster than attempting to grow that business organically.
Union Pacific tried it in the 80s with purchase of Overnite Express...a very well run LTL carrier. It didnt work out.
The NS LCL program really intrigues me. Would like to know more about it. I called NS and left a voice mail...no reply.
Ed
MP173 Union Pacific tried it in the 80s with purchase of Overnite Express...a very well run LTL carrier. It didnt work out. The NS LCL program really intrigues me. Would like to know more about it. I called NS and left a voice mail...no reply. Ed
I knew Overnite would come up as it always does in this type of discussion. But that was 40 years ago, and Overnite wasn't a top notch carrier . The Wright Brothers also crashed their Flyer numerous times before finally achieving a sustained flight..yet we fly today.
When UPS was young, that was how you sent stuff that had to be there in a couple of days - much faster that the post office could do it.
FedEx was for stuff that had to be there tomorrow.
Nowadays, they're all about the same.
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...
tree68When UPS was young, that was how you sent stuff that had to be there in a couple of days - much faster that the post office could do it. FedEx was for stuff that had to be there tomorrow. Nowadays, they're all about the same.
Post Office under DeJoy is slower by 3 days to a week.
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greyhounds LCL in boxcars is great. I’ve said it before, and I’ll say it again. The US railroads didn’t abandon LCL service, they were driven out of it by the idiot government regulators. Railroads such as the New York Central tried very hard to keep their LCL business but they were thwarted by the regulators. And that’s a fact that I can back up with all kinds of research and data. There are different ways to handle LCL/LTL. But in this case, they’re using local trucks to pick up several smaller shipments from several shippers and bring them to a consolidation center. At this center the shipments are sorted (“Cross Docked”) into a rail car going toward the destination on an expedited train. At the destination terminal the rail car is unloaded into local delivery trucks. This method works well. A boxcar used in this service is essentially an intermodal car. The truckers generally have to gather and cross dock too. A boxcar used this way has an advantage on an over the road truck because it can handle much more volume and weight. And hanging a boxcar or two on a train has very low marginal costs. If the railroad provides consistent, reasonably fast service they should have an advantage. The main problem I see is that they are going into competition with a major customer. FedEx is the largest LTL carrier in the US by revenue. They ship a lot by rail. You’ve got to think about it big time before you go into competition with a major customer.
That's a good point. But FedEx like the other true LTLs, becomes less competitive on the heavier LTL business... 5000 lbs and up, and also the ugly freight..longer than 20 ft..oddly shaped etc. And having a supplier who is also a competitor is pretty much par for the course in this industry..FedEx itself hires competitor carriers on a regular basis.
I think building up the needed infrastructure would be cost prohibitive. All the freight houses, team tracks and even sidings have been razed or pulled up. That's a lot of money that would need to be spent to figure out if "build it and they will come" will work in this case. Railroads biggest advantage over other types of transportation is in heavy and bulk items. They should concentrate on that.
Backshop I think building up the needed infrastructure would be cost prohibitive. All the freight houses, team tracks and even sidings have been razed or pulled up. That's a lot of money that would need to be spent to figure out if "build it and they will come" will work in this case. Railroads biggest advantage over other types of transportation is in heavy and bulk items. They should concentrate on that.
As common carriers they need to be open to serving a broad base of customers with diverse needs. The STB has recently made that very point..i.e. that railroads need to take their common carrier responsibilities more seriously or risk reregulation. Cherry picking bulk freight and refusing freight that doesn't yield a 58% OR is not an option.
There's no need for "build it and they will come"..best way to go about it would be to buy into it by purchasing an LTL carrier (or carriers). Instead of spending 33 billion on a railroad merger, buy one or more regional or even national LTL carriers.
I think NS is on the right path although they have to move faster. The pace of change has accelerated..Amazon and Tesla were nowhere a decade ago..that's the pace it needs to move at. They've got to make this happen in months not years or risk becoming completely irrelevant.
Any sort of LCL service on the old Railway Express Agency model is DOA for railroads; the valid point Backshop made being only one reason. Even some of the LTL 'specialists' restrict service to the relatively 'granular' endpoints of 'terminals' or crossdock facilities (the latter effectively being used as 'cross dock' from LTL provider to the client picking up).
What NS is doing is, to me, little different from what UP stopped doing with the cold service to Rotterdam: getting enough aggregate LTL loading from various originating points to make up economic carload moves, then releasing the carload at one or more established crossdock facilities to whatever LTL or other providers will do 'last mile' (which of course may be considerable actual 'miles') most cost-effectively.
While it's complicated to figure out exactly what service reliability and 'precision scheduled' timing is necessary for various carloads in transit, and there's some fun looking at Amazon-style ways to decrease cost and to automate handling in the necessary transloading operations, I don't think it is rocket science to determine potentially profitable niches or to design services to fulfil them. More specifically I can see how even assigning multiple dock stops to single cars might be practical in assisting 'local' LTL providers at either end of an overall trip, especially if more and more emphasis on day drayage trips and 'home every night' becomes observed.
OvermodAny sort of LCL service on the old Railway Express Agency model is DOA for railroads; the valid point Backshop made being only one reason. Even some of the LTL 'specialists' restrict service to the relatively 'granular' endpoints of 'terminals' or crossdock facilities (the latter effectively being used as 'cross dock' from LTL provider to the client picking up). What NS is doing is, to me, little different from what UP stopped doing with the cold service to Rotterdam: getting enough aggregate LTL loading from various originating points to make up economic carload moves, then releasing the carload at one or more established crossdock facilities to whatever LTL or other providers will do 'last mile' (which of course may be considerable actual 'miles') most cost-effectively.
What would be the value added by actually purchasing an LTL carrier vs just hauling LTL trailers for others? It adds a business, that while similar, is different. While FX made Freight work, UPS failed, and their business model is a lot closer to freight trucking than a railroad's is.
Backshop What would be the value added by actually purchasing an LTL carrier vs just hauling LTL trailers for others? It adds a business, that while similar, is different. While FX made Freight work, UPS failed, and their business model is a lot closer to freight trucking than a railroad's is.
The value would be in the ability to combine both for maximum benefit. And from a customer's standpoint, they would be dealing with an asset based carrier than can provide transportation using both truck or rail. You would have a transportation provider verses a trucker or a railroad. By purchasing an existing LTL carrier, a railroad would in effect be buying its way into the market verses growing it organically, which takes a much longer time.
I have tried to answer a couple of dubious-logic points multiple times, but with the increased speed of the site now come increased resets of posting without warning, so I see I have to be even quicker about posting sentence by sentence.
Making some nominal distinction between express and freight in response to Backshop's points is a red herring at best, even if we make allowance that he was probably referring to named divisions of FedEx in shorthand; I'm sure you're well aware that the reference to REA was operational and not historical, relating to widely duplicated ground facilities as necessary to transloading between truck and fixed-body railcars.
Even very limited facilities for superior forms of intermodal transfer have failed to thrive -- massively and consistently in my view -- when inadequate volume is involved. Any of the small ramp facilities built with the advent of piggyback haven't contributed anything cost-effectively salable to shippers, and that would likely be true even if they didn't involve expensive switching and dwell time to use. Concentrating the rail move into the right number of transload or crossdock facilities in the right 'area' locations -- which of course is why I brought up Rotterdam as an example, not so you could show off your knowledge of failure -- is going to be essential, and starting with a minimal number of fixed bases to prove the concept is likely preferable to trying to 'open nationally' before you can prove your execution works.
greyhoundsI am very tired of this “It won’t work, don’t even try, attitude.” The railroad needs to do the market research and analysis as much as is reasonable. If that shows promise, then try it. If you never fail, you’re not trying hard enough.
Make this work. Of course you won't get any extra jobs, crews, or engines, and if it fails you'll be lucky if we keep you around to to be the thrid trick relief terminal trainmaster in an armpit city, but hey - give it a go!
Besides, that popular operating plan strategy that's so the rage can barely serve half of what it has now.
It's been fun. But it isn't much fun anymore. Signing off for now.
The opinions expressed here represent my own and not those of my employer, any other railroad, company, or person.t fun any
To the comments above between Greyhounds and Backshop. Greyhounds is correct about the difference. Freight and Express are not the same. One difference. Express is handled by a single asset provider (prime example FedEx express moves goods entirely within FedEx distribution channels from origin to destination. REA did the same with its own assets). While freight moves amongst various logistic providers.
Ulrich best way to go about it would be to buy into it by purchasing an LTL carrier (or carriers).
best way to go about it would be to buy into it by purchasing an LTL carrier (or carriers).
No need to take on the cost of buying and operating an LTL Carrier. Along with their associated networks. The margins are better by rail using boxcars. As stated above the cost are marginal adding a few boxcars to a premium IM serivce lane. You'd be better off vertically integrating an existing FM/LM provider. It would be cheapr to buy an operate FM/LM LP.
Constructing brand new rail served warehouses specifically for this type of service probably wouldn't be a profitable venture at this point, certainly not for a couple cars each day.
But there are still a lot of older buildings with rail loading docks in existence. Some are very close to current intermodal terminals. If it's already there why not try to use it?
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SD60MAC9500 To the comments above between Greyhounds and Backshop. Greyhounds is correct about the difference. Freight and Express are not the same. One difference. Express is handled by a single asset provider (prime example FedEx express moves goods entirely within FedEx distribution channels from origin to destination. REA did the same with its own assets). While freight moves amongst various logistic providers. Ulrich best way to go about it would be to buy into it by purchasing an LTL carrier (or carriers). No need to take on the cost of buying and operating an LTL Carrier. Along with their associated networks. The margins are better by rail using boxcars. As stated above the cost are marginal adding a few boxcars to a premium IM serivce lane. You'd be better off vertically integrating an existing FM/LM provider. It would be cheapr to buy an operate FM/LM LP.
Transloading LTL cargo from a truck to a boxcar just adds an unnecessary step. That's why I said it would be better to just make it a TOFC or COFC load. Transloading takes labor, which is a major cost.
UlrichThe value would be in the ability to combine both for maximum benefit.
The question is whether the railroad is capable of operating the subsidiary (or allowing it to operate) effectively, rather than imposing micromanagement or wacky PSR ideas on them or performing the usual Chainsaw-Al kind of control over expenses and fear-based employee control to "minimize expenses" to improve the trucking equivalent of OR.
Personally, I think the idea of NS 'accepting' LTL brought to a purpose-designed crossdock facility and then 'providing' carload to be reloaded as LTL to whatever range of subdistribution or customers is a model that makes greatest sense for a railroad designing a service using fixed railcars. A system that used TOFC instead would have a very different operating model, and very different criteria for either acquiring or creating LTL 'partner' organizations to handle traffic at any transfer point of a rail lane...
It might be interesting for someone like greyhounds who has done this for a living to compare the economics of a carload LTL transfer with its equivalent in TOFC... the latter with the further assumption that the "LTL" comprising the individual "TOFC" trailer loads would be aggregated for a particular stop's distribution area, and that one-stop hookon would then produce full "LTL" service to all customers for the freight in that particular trailer.
Such a model would require LTL providers to do careful truck loading, and presumably any prep for the rail link, and either to serve the origin/destination pair area with sufficient volume or to make arrangements with destination drayage providers {probably including O/Os and small contract providers) to handle all the area deliveries at suitable cost and performance. On the other hand, it would provide nearly identical opportunities for low dwell and quick intermodal transfer with controlled on-site storage conditions that a full railroad-owned TOFC operation would, and could be nearly seamlessly co-conducted with one.
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I see that with increased speed and increased blanking of posts in progress, we also have accelerated doubling of posts...
greyhounds I have to say that I’m flummoxed by some of the posts on this topic. The NS is trying to develop new business in a new market and some people are upset about it. Why?
Why do I get the feeling that this LCL 'program' is being 'developed' by some senior excecutive's progeny or progeny in law that graduated with 'high honors' from some Ivy League college and he/she has been given this 'project' as their 'Doctors Thesis' in being the newest 'Wiz Kid' attempting to get the 'priority groove' to the NS Board Room.
BaltACD Why do I get the feeling that this LCL 'program' is being 'developed' by some senior excecutive's progeny or progeny in law that graduated with 'high honors' from some Ivy League college and he/she has been given this 'project' as their 'Doctors Thesis' in being the newest 'Wiz Kid' attempting to get the 'priority groove' to the NS Board Room.
It's possible that someone or a group of people with personal ambitions is behind this. Good for NS if they're able to attract Princeton/Harvard/Yale people..
BackshopThis is rich! You of all people. You're forever complaining that companies are doing stuff wrong and they should listen to you. Now, that some others have doubts about something, you don't understand it.
Ulrich BaltACD Why do I get the feeling that this LCL 'program' is being 'developed' by some senior excecutive's progeny or progeny in law that graduated with 'high honors' from some Ivy League college and he/she has been given this 'project' as their 'Doctors Thesis' in being the newest 'Wiz Kid' attempting to get the 'priority groove' to the NS Board Room. It's possible that someone or a group of people with personal ambitions is behind this. Good for NS if they're able to attract Princeton/Harvard/Yale people..
All large organizations work to attract 'superstars' from the educational community. Some that they attract have sufficient chutzpah to propose 'out of the box' projects and the follow through to get given a small budget to attempt to bring it to reality. Railroads attempt to attrack more than just Community College drop outs.
Over the course of time - some projects succed by failing and other projects fail by succeding. Superstars, can sometimes develop their own solar systems and other times they explode into super novas and collapse into black holes.
I have been away for a few days and am glad to see this conversation is drawing healthy discussion, from mainly people with transportation / railroad backgrounds.
My first 13 years of my adult life was in LTL in the Chicago / NW Indiana market. This stage of my worklife ended in 1990 as I moved into a far more lucrative and enjoyable sales career (often selling to LTL and TL carriers). Therefore, while I do not have diesel fuel running thru my veins, I know a little bit about the LTL industry.
Balt hit on what I was thinking....someone at NS told a summer intern, perhaps from Northwestern or another Transportation or Supply Chain school to investigate possible LTL movements within the NS system. That information is out there.
Here is where I think NS is going with this, or where I would take it. Contact the the leading Local and regional LTL carriers in Chicago and Atlanta, not YRC, FedXFreight, Holland, and others but companies such as Moran, Double D, or Monroe...that service that Chicago area like a glove. These carriers often have relationships with other similar LTL carriers in areas such as Twin Cities, Kansas city, St. Louis, etc. They market those areas as direct service and run a line haul unit(s) to each market and swap loads. Thus, ABC in St. Louis meets XYZ from Chicago nightly somewhere near Lincoln, Il and swaps out trailers. Next day freight is delivered. These carriers do not necessarily compete with the major LTL carriers, but provide great service to their customers...who do not want to deal with a number of LTL carriers.
So, NS should contact these LTL carriers in both markets and offer the line haul service. Let these carriers use their sales and marketing forces to reach out and find the freight....and they will. Cross dock at the LTL carrier terminal and send a trailer to Calumet Yard in Chicago where it is loaded on a boxcar. Same thing in Atlanta. Probably drop and switch trailers, so driver time in minimized. Split the revenue with originating and delivering carrier picking up 30% each and NS getting 40% for the line haul.
Meanwhile NS turns that portion of Calumet Yard into sort of a transload facility. Yes, there is plenty of room there. This LTL program is perhaps the first seed planted into that concept. As it develops, then add more regional LTL carriers, such as LaPorte Transit from Indiana and perhaps a Wisconsin based carrier. Grow the LCL business by partnering with those folks who understand teh LTL markets....BTW, lots of Chicago business crossed the borders into Indiana and Wisconsin to escape.
No way NS can go head to head against ABF, XPO, Saia, Old Dominion, et al. Their sales and marketing is based on wholesale...LTL carrier reps are in front of customers (given COVID restrictions) frequently. BTW, those carriers are at capacity now anyway. The timing is perfect for NS to dive into this. LTL service is running slower as capacity issues are a factor. The market is disruptive and can use capacity. Interesting that NS is startign with Chicago - Atlanta lane. I would expect, if they have patience...and they should as carload and coal are on the decline and new business is required.
Ulrich...BTW Overnite Transportation was a beast in LTL prior to selling to Union Pacific. They had the lowest operating ratio and premier service blanketing the Southeast, Eastern Middle Atlantic, and into the Midwest. Everything changed when UP purchase them, then continued with UPS. I not only worked with OVNT but also owned shares.
If this works, what would be next? Probably Chicago - Pittsburgh (NS 22W drops off TOFC en route to Rutherford). The key would be to merge the LCL with existing movements with premium UPS or LTL TOFC drops. The Chicago - Harrisburg would be another candidate, as would Chicago - Baltimore. Perhaps even Kansas City/Decatur, Il to Harrisburg with perhaps a drop in Cleveland. And what about the New Jersey carriers? Chicago to Jersey would be attractive.
MP173Balt hit on what I was thinking....someone at NS told a summer intern, perhaps from Northwestern or another Transportation or Supply Chain school to investigate possible LTL movements within the NS system. That information is out there.
greyhounds That would be great. If an intern or a young rookie new hire from a good business school did come up with this plan, he/she should be rewarded with praise and adulation. Along with a nice monetary bonus. In fact, anyone who developed the concept and backed it up with research and analysis should be so rewarded.
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