BaltACD Ulrich Yes, I agree, but my point was that the railroads could make that 25% to 75% margin (that the freight forwarders and consolidators now make) by doing that themselves, in house, much like WP did all those years ago. Today's railroads do not have the infrastructure to support that operation without regard to the margin. Organizations that are hell bent on reducing corporate head count will not add heads for a 'shot in the dark'.
Ulrich Yes, I agree, but my point was that the railroads could make that 25% to 75% margin (that the freight forwarders and consolidators now make) by doing that themselves, in house, much like WP did all those years ago.
Today's railroads do not have the infrastructure to support that operation without regard to the margin. Organizations that are hell bent on reducing corporate head count will not add heads for a 'shot in the dark'.
I wouldn't call it a shot in the dark. Cutting out the middlemen where possible and offering transportation services directly to the customer would enhance profitability even with a higher head count. The money is in retail not in the conveyor belt wholesale. Given that they've already picked the low hanging cost fruit, now would be the time to bring on more business at higher margins. WP was on the right path..
UlrichYes, I agree, but my point was that the railroads could make that 25% to 75% margin (that the freight forwarders and consolidators now make) by doing that themselves, in house, much like WP did all those years ago.
Never too old to have a happy childhood!
Yes, I agree, but my point was that the railroads could make that 25% to 75% margin (that the freight forwarders and consolidators now make) by doing that themselves, in house, much like WP did all those years ago.
Ulrich I've always said that the railroads are missing opportunities by not going after LTL more aggressively. And then someone invariably brings up how UP's purchase of Overnite didn't work out 40 plus years ago, and that this one example proves that the idea itself is bad. Here in Canada alot of LTL does in fact move by rail; however, the railroads are not working with the end customers.. they simply move the containers from the freight forwarders instead of going after the smaller shippers directly. End result is that the freight forwarders make 25% to 75% margins as they own the relationship with the end customers. The railroads get paid a much lower rate to move containers from one terminal to another. I don't know why they wouldn't try to capture that 25% to 75% for themselves. It's not as if they'd have to grow that business organically.. they could buy an existing freight forwarder (like CN did with TransX a few years ago).. Same could be done in the US.. pick a large LTL regional like Pitt Ohio or Old Dominion.. make an offer, and go from there..
I've always said that the railroads are missing opportunities by not going after LTL more aggressively. And then someone invariably brings up how UP's purchase of Overnite didn't work out 40 plus years ago, and that this one example proves that the idea itself is bad.
Here in Canada alot of LTL does in fact move by rail; however, the railroads are not working with the end customers.. they simply move the containers from the freight forwarders instead of going after the smaller shippers directly. End result is that the freight forwarders make 25% to 75% margins as they own the relationship with the end customers. The railroads get paid a much lower rate to move containers from one terminal to another. I don't know why they wouldn't try to capture that 25% to 75% for themselves. It's not as if they'd have to grow that business organically.. they could buy an existing freight forwarder (like CN did with TransX a few years ago)..
Same could be done in the US.. pick a large LTL regional like Pitt Ohio or Old Dominion.. make an offer, and go from there..
The Class 1's do move quite a bit of LTL IM by rail. It's wholesale, and BNSF moves many more units than UP. Some of the major customers: UPS, FedEx, Estes, ABF, Yellow, and R+L Carriers..
Now NS runs a limited LCL service in the same vein as LTL from their Calumet Terminal in Chicago to destinations in the south, and east. These boxcars ride in existing IM trains. Most of the product moved is industrial. As LTL handles much more industrial product than TL. Which handles more of the consumer side products, and construction material.
Overnite was a weak carrier to begin with, and a poor one for UP to acquire. It didn't have an efficient network and it's operational expenses were much higher than its peers. Take note UPS Freight which was the former Overnite was sold back in 2020 to TFI International. Which has now labeled the division T-Force Freight.
Thamks for this informative topic and discussion.
UlrichI've always said that the railroads are missing opportunities by not going after LTL more aggressively. And then someone invariably brings up how UP's purchase of Overnite didn't work out 40 plus years ago, and that this one example proves that the idea itself is bad. Here in Canada alot of LTL does in fact move by rail; however, the railroads are not working with the end customers.. they simply move the containers from the freight forwarders instead of going after the smaller shippers directly. End result is that the freight forwarders make 25% to 75% margins as they own the relationship with the end customers. The railroads get paid a much lower rate to move containers from one terminal to another. I don't know why they wouldn't try to capture that 25% to 75% for themselves. It's not as if they'd have to grow that business organically.. they could buy an existing freight forwarder (like CN did with TransX a few years ago).. Same could be done in the US.. pick a large LTL regional like Pitt Ohio or Old Dominion.. make an offer, and go from there..
I believe there is already a lot of LTL moving over the railroads - 3rd party logistic companies are aggregating the LTL shipments and moving them in containers or trailers over the railroad. Railroads are just moving the boxes, not being involved in the background of loading or billing the containers/trailers.
I always get a kick out of how the ICC told NYC. That since Erie couldn't "afford" to use the container system. That it would cause harm to the industry?
I'd like to know how they arrived at that conclusion?....I thought we were doing free market here? Not corporate victimization?....
Here's a excerpt from Robert Leachman, who had at one time worked in Union Pacific's marketing department. I have inlcuded a link to the full report on the topic of the recently announced Utah Inland Port.
Western Pacific Transport
"With the notable exception of the appliances and farm implements handled through Freeport Center, over the course of the 1970s most westbound merchandise freight moving via rail converted from movement in boxcars to TOFC (trailer on flat car, the early name for rail intermodal). Westbound merchandise traffic was generally “cube freight” (if stackable) or “floor freight” (if not) that ran out of space in a boxcar or a trailer before the weight capacity of the vehicle was reached. On the other hand, eastbound freight traffic on the railroads included considerable “weight freight” such as lumber, paper, plywood, and canned goods. Two or three truckloads of such commodities could be accommodated in one boxcar, and so such eastbound rail traffic was resistant to shift to trailers. This put the western US railroads in the awkward position of running trainloads of empty trailers eastbound while running trainloads of empty boxcars westbound.
John J. Gray joined the management of Western Pacific Railroad in 1972 and sought to address this problem. Western Pacific operated from various Northern California points to connections with Union Pacific and Rio Grande railroads in Salt Lake City. It seemed to Gray that a continuing transition of rail traffic into intermodal movement was inevitable, and so to improve profitability, something had to be found to fill the eastbound empty trailers. Ideally, this should be done without cannibalizing the profitable movement of canned goods, plywood, lumber, etc. in boxcars.
Gray discovered that there was a significant volume of LTL (less-than-truckload) freight moving from Northern California producers and distributors to retailers located in the Intermountain region. LTL rates were (and are) higher than truckload rates, but the typical Intermountain retailer did not have enough sales to warrant truckload-sized replenishments of inventory.
Gray organized the Western Pacific Transport Company, an LTL carrier, as a subsidiary of the railroad. Trans-load centers were developed at Oakland, CA, and Salt Lake City, UT, and WPT invested in a fleet of small pick-up and delivery trucks. Gathering small shipments originating in the greater San Francisco Bay Area, the shipments would be consolidated into trailers at the Oakland trans-load center.
The loaded trailers were handled in a dedicated intermodal train operating from Oakland to Salt Lake City symbolled as the TOF (short for trailers on flat cars). At Salt Lake City, the trailers were drayed to the WPT trans-load center where the shipments were de-consolidated and loaded into WPT delivery trucks. In this way, WP Transport, later renamed WPX, offered merchandise shippers door-to-door service while using the railroad for most of the line haul. The trailers emptied at the Salt Lake City trans-load center were delivered to Union Pacific or Rio Grande for continued movement east as empties."
"Taking advantage of the economies of rail movement Oakland – Salt Lake City, WPT undercut other LTL trucking companies and captured the largest share of Northern California-Intermountain LTL freight traffic. The nightly TOF train grew to a train of 100 trailers, about 20 of which contained WPT LTL traffic. About 12 trailers per day were de-vanned at the Salt Lake City trans-load center for local delivery in the Intermountain region. Another 8 trailers per day were hauled to Denver by the connecting Denver, Rio Grande and Western Railroad, whose LTL subsidiary Rio Grande Motorways operated a trans-loading facility in Denver. Gray was promoted to positions of President of WPX and Senior Vice President – Intermodal of the railroad.
When Union Pacific acquired Western Pacific at the end of 1982, Gray proposed expanding his LTL service network further east. However, UP rejected the WPX door-to-door, “retail” business model.
UP management feared that the WPX business model offended the railroad’s LTL trucking company customers and its traditional, wholesale intermodal customers, as well as potentially displacing more profitable boxcar movement of eastbound freight traffic. Gray did not join UP management. Shortly after the merger, WPX was dissolved and the trans-load centers were sold off and repurposed."
https://acrobat.adobe.com/link/review?uri=urn:aaid:scds:US:0deffc0e-36bc-3522-a2dc-1d92f2f09707
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