slotracer Lots of speculation on both sides of viewpoints, I'll try to provide some facts on the current state of the business, coming from someone who is now and has been in the rail/logisitcs business for 20 years (7 with UP marketing and 13 with a major shipper receiver with dozens of plants.) The rails got smart and aligned their business model to serve types of business they were best equipped to do.....bulk, long haul shipments. Lines and lanes were abandonned while others were upgraded, the merger process, strategic planning of terminals and building service plans around volumes of business in their lanes. A focused strategy on reducing cost and handling business that makes economic return for them. Manifest is still part of that picture but intermodal, unit grain coal and automotive have been planned and serviced to provide the railroad a return for their assetts and capacity while trying to please customer needs. The unit grain train may run at a lower margin but efficienies and cost have been rung out and the train is meant to keep running cycles and ringing the cash register. Intermodal is similar as they have consolidated into large terminals that they have squeezed about every dollar of cost out and build their schedules around that. If they didn't, direct over the road truck would beat them on a cost and service basis far more than they do. Facts of life is that not all traffic fits this efficiency model, they gear up to handle the JB hunts, UPS and Schnieders of the world, thousands of onesey twosey intermodal shipments would play havoc on lane and train capacity, position of assets (Intermodal cars and trailers) and managing efficient fluidity in the terminals. Also, since rates on intermodal are highly competitive vs truck margins are limited and service requirements are at a premium level, thus terminal capacity, assett availability and service lane performance is closely planned and stringently managed to maintain good business retention (happy customers) and viable economics (acceptable return on investment for the railroad.) There are monetary penalties for service failures in contracts with the major 3pl's of the world so service networks and lanes are designed around intermodal performance. It is far more complicated but what I described gives a brief view of the reality that drives the railroads business model on intermodal. This may not jive with some folks loyalty to railroads and refusal to understand railroad business realities but this is the playing field like it or not. Now Specifics..... Boxcar...Railroads have been killing the boxcar business for the past decade for the most part. We used to ship some oubound box business but rail rates trippled and quadruppled, boxcars became less available and when comparing the yield of a 53 ft van vs a 60ft plate f boxcar we were lucky if we could get a 2 to 1 ratio, the sky high boxcar rates made unit cost shipment unfavorable to intermodal and most truck lanes. Add to the slow transit times and high transit time variablity and higher susceptibility boxcars are to damage for lading, the probability of someone shipping boxcars is getting smaller and smaller. Truck or Intermodal on the lane specified in this thread.....The origin cited is basically the Duluth area. I just checked this with one of our folks who has been on outbound logisitcs for 20 years, we ship hundreds of millions a year in outbound freight and have favorable contract rates and excellent experience in truck and intermodal lanes....here are the facts on this move.... We could move this over the road for about 3 grand a truckload including current fuel surcharges, transit time is 2 and a half days considering hours of service laws, delivery, roughly, plus or minus 2 hours most of the time. Intemodal we cannot even obtain a rate, they don't want to bother to quote and if they did, would be well over 4 grand. The REALITY (not what railbuffs wish the situation was to suit some fantasy) is there is essentially no intermodal ramp at St Paul, surpisingly none at Houston Either. Long Dray from the Duluth area would have to go to ramp at Chicago. On the Southern End, deramp would occur at Ft Worth and Dray to Houston. These costs are what kills intermodal on this lane. Service figure AT BEST 2 days from pickup to loading on a trailer, 2 more days best case on the rails and deramp and deliver on the Southern end, 1 day AT BEST. Realistically you are looking at 6 and maybe 7 day door to door service intermodal at over 4 grand a load vs 3 day servie at worst at 3 grand for the over the road option. We can all dream and what if and brush aside reality if it doesn't suit our desires of what we would like things to be, but others in charge of running business based on economics and reality are teh ones making the decisions, thus, the original question on this move going truck OTR does so for very solid reasons for which Intermodal cannot hold a candle.
Lots of speculation on both sides of viewpoints, I'll try to provide some facts on the current state of the business, coming from someone who is now and has been in the rail/logisitcs business for 20 years (7 with UP marketing and 13 with a major shipper receiver with dozens of plants.)
The rails got smart and aligned their business model to serve types of business they were best equipped to do.....bulk, long haul shipments. Lines and lanes were abandonned while others were upgraded, the merger process, strategic planning of terminals and building service plans around volumes of business in their lanes. A focused strategy on reducing cost and handling business that makes economic return for them. Manifest is still part of that picture but intermodal, unit grain coal and automotive have been planned and serviced to provide the railroad a return for their assetts and capacity while trying to please customer needs. The unit grain train may run at a lower margin but efficienies and cost have been rung out and the train is meant to keep running cycles and ringing the cash register. Intermodal is similar as they have consolidated into large terminals that they have squeezed about every dollar of cost out and build their schedules around that. If they didn't, direct over the road truck would beat them on a cost and service basis far more than they do. Facts of life is that not all traffic fits this efficiency model, they gear up to handle the JB hunts, UPS and Schnieders of the world, thousands of onesey twosey intermodal shipments would play havoc on lane and train capacity, position of assets (Intermodal cars and trailers) and managing efficient fluidity in the terminals. Also, since rates on intermodal are highly competitive vs truck margins are limited and service requirements are at a premium level, thus terminal capacity, assett availability and service lane performance is closely planned and stringently managed to maintain good business retention (happy customers) and viable economics (acceptable return on investment for the railroad.) There are monetary penalties for service failures in contracts with the major 3pl's of the world so service networks and lanes are designed around intermodal performance.
It is far more complicated but what I described gives a brief view of the reality that drives the railroads business model on intermodal. This may not jive with some folks loyalty to railroads and refusal to understand railroad business realities but this is the playing field like it or not.
Now Specifics.....
Boxcar...Railroads have been killing the boxcar business for the past decade for the most part. We used to ship some oubound box business but rail rates trippled and quadruppled, boxcars became less available and when comparing the yield of a 53 ft van vs a 60ft plate f boxcar we were lucky if we could get a 2 to 1 ratio, the sky high boxcar rates made unit cost shipment unfavorable to intermodal and most truck lanes. Add to the slow transit times and high transit time variablity and higher susceptibility boxcars are to damage for lading, the probability of someone shipping boxcars is getting smaller and smaller.
Truck or Intermodal on the lane specified in this thread.....The origin cited is basically the Duluth area. I just checked this with one of our folks who has been on outbound logisitcs for 20 years, we ship hundreds of millions a year in outbound freight and have favorable contract rates and excellent experience in truck and intermodal lanes....here are the facts on this move....
We could move this over the road for about 3 grand a truckload including current fuel surcharges, transit time is 2 and a half days considering hours of service laws, delivery, roughly, plus or minus 2 hours most of the time.
Intemodal we cannot even obtain a rate, they don't want to bother to quote and if they did, would be well over 4 grand. The REALITY (not what railbuffs wish the situation was to suit some fantasy) is there is essentially no intermodal ramp at St Paul, surpisingly none at Houston Either. Long Dray from the Duluth area would have to go to ramp at Chicago. On the Southern End, deramp would occur at Ft Worth and Dray to Houston. These costs are what kills intermodal on this lane. Service figure AT BEST 2 days from pickup to loading on a trailer, 2 more days best case on the rails and deramp and deliver on the Southern end, 1 day AT BEST. Realistically you are looking at 6 and maybe 7 day door to door service intermodal at over 4 grand a load vs 3 day servie at worst at 3 grand for the over the road option.
We can all dream and what if and brush aside reality if it doesn't suit our desires of what we would like things to be, but others in charge of running business based on economics and reality are teh ones making the decisions, thus, the original question on this move going truck OTR does so for very solid reasons for which Intermodal cannot hold a candle.
Do you believe this? I mean literally, do you believe this?
There is "essentially" no intermodal terminal at St. Paul? In a pig's eye. There is "surprisingly" no intermodal terminal in Houston? In the pig's other eye. BNSF has full service 24/7 IM terminals in both locations. The load would have to be trucked from Dallas/Ft. Worth? - nonsense, utter nonsense.
http://www.bnsf.com/customers/where-can-i-ship/facility-hours-directions/st-paul.html
http://www.bnsf.com/customers/where-can-i-ship/facility-hours-directions/houston.html
When someone presents an idea that person has to be ready to accept informed criticism and correction. No one is right all the time and no idea is perfectly refined, ever. Especially at its onset. However, the quoted post is not informed criticism. Falsely claiming there are no intermodal terminals at St. Paul or Houston is pure ignorance. I mean come on, Houston is a major league city and a major port. It has IM terminals for both the BNSF and the UP.
I have been very consistent in saying that business such as this would have to move through a 3rd party such as JB Hunt. No, the railroads aren't any good at handling shipments that are "onesies - twosies". That's why they market those shipments through middlemen who aggregate the loads into larger lots that the railroads can efficiently deal with. UPS is kind of the ultimate here. The take five pound packages and present them in an aggregated volume that the railroads can quite well deal with. Hunt, and others, do the same thing except they tend to deal with individual truckload shipments instead of packages.
"They won't quote us a rate." Well, I don't know who "They" is. I know the BNSF won't quote such a rate (maybe BNSF Logistics would) as the railroad wants such business to go through their retailers. (Similar to the way Ford sells cars through retailer dealers. Ford won't sell you a car directly either.)
Have you tried getting a rate from JB Hunt intermodal? They'll give you a door to door rate.
Here's the Hunt intermodal network:
https://www.jbhunt.com/solutions/intermodal/rail_network/
Put the cursor over the St. Paul (SPL) location and you'll see they have service from St. Paul to Chicago and from Chicago to Houston. Despite the fact that you falsely claim that these services do not exist, it doesn't take a genius to put the two together.
Folks, this is a movement of ceiling tile from Cloquet, MN to Pearland, TX. To suggest that the railroads cannot, in any way, compete successfully for this business is utter nonsense.
hats off to you!
But there is more to be said. The question could be asked: "Is it not then the 3rd party's fault for not marketing?" Large ttucking companies may not wish to solicite business from customers already using small companies. Their drivers eat at the same truck stops and sleep in the same hostels. If a customer came to them to find out if a better rate or service could be quoted, well that is a different matter.
The shipper, not the railroad nor the big truckers may be at fault. BNSF or UP logistics migh not quote a rate, but might givfe an estimate and at least direct the shipper to the two or three of the big truck companies that would give a rate. And the shipper could discuss the posibility with his existing trucker, who might have enough business in the lane to enter the intermodal market and save some drivers costs.
It might not work out. The existing arrangement may involve a truck company that gets a profitable back-haul, and an intermodel back-haul may not work out. Possibly it has been tried already. But if not, it is certainly worth a try.
Much of the shipping in the United States is done by owner operators NOT by big trucking companies. Just how do you compete with owner operators? The owner operator owns his rig, buys his fuel, buys his insurance, does his own driving, pays for his food. It is a hard lot life, the romance is gone from trucking. UPS and Fedex cherry pick, so do the big trucking companies. The owner operators get what they don't want which is a lot of business others don't want and where the profits are thin. The owner operator will deadhead 150 miles to Cloquet from St Paul and arrive at a shipper's dock at a specified time to be loaded. He loses money on that deadhead. He will sit in the breakroom while the shipper's employees loads his truck. He receives no compensation for sitting in the breakroom. He only begins to make money when he leaves the dock.
BIg rigs are not fuel efficient vehicles; it takes a lot of fuel to get them between Minnesota and Texas; fuel the owner operator pays for himself. He can and does undercut the big trucking companies and others who go after this business. The interstates are jammed with owner operators from Maine to California.
Air freight forwarders use owner operators to pick up business in many cities and they offer direct competition to UPS and Fedex among others. Railroads could use owner operators to pick up loads at customers docks and drive them to an intermodal terminal and pick up at another intermodal terminal just as well as soliciting business from the big boys like JB Hunt. There is nothing wrong with thinking outside the box. Railroads could own the trailers and contract work to owner operators to pick up or locally deliver business they usually couldn't tap.
I also use owner-operators for about 50% of my biz. Couldn't agree more. As in any other line of work, there are good and bad, but most who I've encountered typify the working class hero, someone who works hard and can think on his/her feet to solve almost any problem that arises. Railroads have gone to hiring owner-operators too for their drayage... One has to respect an individual who takes a 200 thousand dollar capital risk and then generally accepts commission payment along with days, weeks, and even months away from home at times.
But if BNSF started going after the owner-operator business in a big way (Look, you don't have to spend so much time away from home when you perform drayage for us!) , would not the big trucking companies switch their business from BNSF to UP? And visa-versa?
Here is one way it would work: Owner-driver-truckers should form a national cooperative, which would do marketing, pairing of drivers at opposite ends of intermodal lanes, handle relationships with the railroads, the major trucking companies and the governments, water transportation, airlines, etc., and possibly arrange for economies of pooled buying, even with regard to fuel. A four-man office with the latest communications equipment would be the total expense.
You've pretty much described Landstar, Universal Am Can and a few others. These outfits operate much as you've described, with a skeleton back office staff. Even so, many owner-operators prefer to work on their own as even these owner operator companies take a big chunk off the top of the rate. Cooperatives like OOIDA allow even these totally independent operators to take advantage of pooled buying.
Are any of these specific outfits involved in intermodal? Paring driver-members at opposite ends of intermodal lanes? If not, why not? Have they even thought of this?
I have been a lifelong railfan, from about age 3, when I was fightened at the Hartford, CT, station by the Pacific at the head of the train to GCT we were to board, and Dad then took me to the front of the train and put my hand on the main rod of what was surely an I4 Pcific. But my first paying job, age 17-1/2, was as a Freshman at MIT when the student office got me a job at an E. Cambridge dairy, routing ice cream delivary trucks as dispatcher!
Not sure about Universal Am Can, but I know Landstar does. Here in Canada that type of arrangement is quite common. Take a common lane like Toronto-Montreal. Anyone with a bit of drive and sales acumen can hire an owner-operator to pickup locally in either city. The next step is to buy three or four used box trailers. The third and hardest step is coming up with the business to fill those trailers in both directions, but it has been done.
Anyone know of arrangemens like that in the USA? Would any of you shipper readers like to suggest this approach to your own owner-driver carriers?
I would think widespread use of this approach would give the railroads more business, make owner-drovers' lives easier and more pleasant, give some kids more time with fathers, make driving the interstates a bit more pleasant, improve highway safety, reduce transportation costs and thus benefit the economy, and reduce costs of highway maintenance and repair. Negative: less highway taxes for governments to play with, but compensated by reduced costs of highway maintenace and repair.
All of that sounds like a win-win, except for the large trucking companies. And you suggested if any one rail thought of trying that, the threat of one of the big trucking companies pulling their business would prevent it.
C&NW, CA&E, MILW, CGW and IC fan
But if the truckers initiated it, the railroad would not turn it down, and a large trucking firm would not retaliate.
daveklepper But if the truckers initiated it, the railroad would not turn it down, and a large trucking firm would not retaliate.
The large trucking carriers wouldn't be able to do much. Pull their business and take it where? There are only so many class one rail carriers around, and generally only one or two serve any given area. Moreover, railroads don't divulge who they do business with. I may, for example, deal with a railroad, but they're not going to tell me who their other carrier customers are (and vice versa).
Ulrich, I think you are correct, and I stand corrected. Also, the large trucking companies will still have a rate advantage, in that most have converted to containers, for domestic as well as international business. This means their loads traval mosly double-stack configuration, while the independent truckers will still be using highway trailers, which means somewhat higher costs. Still, if I were a large volume shipper using a number of owner-drivers, I certainly would be making the suggestion to them, urging them both with cooperation of other truckers and individually to find an "other-end" partner to implement the idea.
I think its a good idea. The owner-operators' biggest advantage is also their biggest disadvantage, namely that they're independent contractors. They can't be force dispatched. They maintain the right to turn down loads which means that a hot container might sit because the only owner-operator available wants to be home to watch the football game. It is quite challenging to manage a group of people who by law need to be managed at arm's length and who are allowed to turn down work at will without repercussion. That's why most fleets run a good mix of company owned trucks and owner-operators. Some fleets have tried to run owner-operators like employees only to run afoul of the IRS.
Managing a fleet of owner-operators is akin to herding cats.
Never too old to have a happy childhood!
And, of course, the owner operator who has paired with another must have a good sense of self-disciplin. He has to show up at the ramp on-time. One missed connection and the railroad won't want his business. Those that are up to it and make the effort will have a far better life, and so will their children.
Owner operators, are first of all, are independent businessmen and not employees. The are men and women who the railroad would have a business relationship with including a contract. The railroad will provide him with what he needs to run his business; work and customers. This is what any self employed person needs to run a business.
Many truckers much prefer to be company drivers with a steady paycheck and benefits including health insurance and a pension. Owner operators have none of these and and would still provide for these on the open market for themselves. If they are employees of the railroad, the railroad provides these benefits. Contracting with owner operators is cheaper for the railroad.
I would envision a system of independent contractors who would not be driving long distances like most owner operators due now; but those who would be confined to a service area where the owner operator will pick up a load at a customer's dock and drive it to an intermodal terminal. Yes these owner operators would be reliable, it goes without saying. Any business knows that its products must reach their customers when the customer needs it not when you want to ship it. In a perfect world the truck will be loaded quickly with minimal wait time for the driver. Delays on the shipping dock happens for a variety of reasons. This is where the railroad and the customer have to work together along with their independent contractor.
When I was a young child, I saw the GN freights haul a lot of things; but not coal. A decade later BN was carrying a lot of coal. Someone, I understand, took a considerable risk including maybe losing his job to get BN into the coal business. There is money to be made for the railroads for a man or woman who can figure out how you get the truck trailers off the interstates and on to the railroads and make money doing it.
A good summary. Will the initiative come from a savy railroad marketing man, from owner-drivers themselves, from shippers? Interesting to see how this plays out!
Yes, sounds interesting Dave. One thing about the transportation industry that hasn't changed is that there's still plenty of opportunity for anyone with some get up and go and a good idea.
If I were not already 81, shortly to be 82, and had not assumed important and worthwhile responsibilities where I am, I would try to get involved myself. It is a real opportunity, no question about that. Even a 20% reduction in truck traffic on the interstates would make those who continue to use them a lot happier.
Well, Dave, methinks you have a lot more "get up and go" and vision than many of the younger folks in the business who seem to want to stand pat with the status quo.
Here is how intermodal marketing in one of the big seven could implemenet the idea:nt:
1. Determiine which intermodal lanes have additional capacity at low cost, without adding trains.
2. Determine car supply. Should not be difficult because the new traffic is all trailers, and the big boys have switched largely to containers. Sould be plenty of flats that cannot hanlde containers available.
3. For lanes that make the most sense, publish rates for hauling trailers on a six month or year committed basis, once a week, twice a week, three times a week, daily, and at the same time offer to set up a "dating service" to match truckers with similar equipment at both ends.
Through the whole process, keep the big boyys informed. Their contract rates will still be lower because of their volume.
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