Can the railroads get back into package delivery?

[Murphy Siding]

     Where would the railroads find the extra capacity to handle packages or LCL, both of which are presumed to move faster than standard freight?

[Ulrich]

That's true, but getting into LCL could also be accomplished by  purchasing an existing forwarder... profits that had accrued to the forwarding co. would then flow to the railroad instead. And LCL service standards fit in  with rail capabilities. As an added bonus, such an acquisition would be easier than puchasing or merging with another railroad.. less regulatory pushback. 

[tree68]

Ulrich

Now LCL FREIGHT is an altogether different story:

LCL faces the same major hurdle that packages do - the infrastructure is no longer in place to handle it.  Team tracks, freight houses, even stations with sidings, no longer exist.

[Ulrich]

Fedex and UPS (and some others) are already doing a great job with overnight package delivery. Aside from lower prices, railroads have nothing to offer this market that would be considered an added value to consumers. Now LCL FREIGHT is an altogether different story: railroads could get back into that maket, and IMHO they're leaving alot of money on the table that is currently going to freight forwarders and consolidators/distributors. 

[schlimm]

ROI is a major factor in investment decisions.  To use another analogy, if I want to purchase a preferred class stock for income purposes, and one yields 4% and another 6% (with equal risk) which one would you choose?

[Wizlish]

schlimm

... if you can invest in a business activity that returns ~33% more on the dollar, that would seem to be an easy choice.

The issue is whether you want to spend what may amount to a considerable multiple of the percentage gain in return, with non-trivial risk factors, and that may be far from an easy choice.

To use an analogy from another thread -- if you had to spend 3.9 billion for a World Trade Center PATH station, and then justify the investment in terms of farebox return, do you think a 33% increase in the farebox return would be adequate?

[chutton01]

blue streak 1

Actually  the RRs are in it by allowing the above  companies to do what they do best.  That is the RRs financial interest. The RRs do the intermediate haul for the aabove companys 

Actually, during the waning days of Nortn American LCL (say the 1950s-1960s - IIRC LCL had become merely an asterisk in the Railway Age monthly car-loadings stats by the early 1970s), weren't the railroads making heavy use of rail freight forwarders and aggregators, who would were the ones doing the work of getting the small package loads together for car-load shipments by the railroad - the railroads just hauled the loads from the forwarders docks in one city to the other other.

I've always been impressed, and slightly bemused, by the advance designs, equipment and automation implemented by the railroads in their larger urban freight terminals to handle LCL as efficently as possible by the mid 1950s, only to more or less scrap it all by the early 1970s...

[schlimm]

Wizlish

 

 

schlimm

Looks to me like package delivery is better by more than 2%.

 

 

Do your numbers for Federal Express include all divisions, including Ground?  If so, you could make the point somewhat better by breaking out Express and Custom Critical, and perhaps (if there is a clean way to do it) the two- and three-day package deliveries that often go by Ground but have premium pricing.

On the other hand, part of this discussion is the actual QoS that a railroad's package delivery service could provide.  If it's going to match FedEx and UPS it's going to have to have local delivery infrastructure... well, just about everywhere.  Amtrak Package Express was a cute idea, but driving to the station to drop packages off, and having the recipient drive to retrieve it... that's what truck freight companies do, and it's something of a mockery of what competing package services already do.

What I see when I look at the statistics provided is how LITTLE a margin over existing profitability there would be in a package delivery modality ... for a very, very large capital investment in all sorts of equipment, personnel, and training, and the need to carve out enough of a niche in an already-competitive package delivery market.

 

 

Unfortunately I do not have those numbers for the various subdivisions within FedEx and UPS. However, if you can invest in a business activity that returns ~33% more on the dollar, that would seem to be an easy choice.

[Wizlish]

schlimm

Looks to me like package delivery is better by more than 2%.

Do your numbers for Federal Express include all divisions, including Ground?  If so, you could make the point somewhat better by breaking out Express and Custom Critical, and perhaps (if there is a clean way to do it) the two- and three-day package deliveries that often go by Ground but have premium pricing.

On the other hand, part of this discussion is the actual QoS that a railroad's package delivery service could provide.  If it's going to match FedEx and UPS it's going to have to have local delivery infrastructure... well, just about everywhere.  Amtrak Package Express was a cute idea, but driving to the station to drop packages off, and having the recipient drive to retrieve it... that's what truck freight companies do, and it's something of a mockery of what competing package services already do.

What I see when I look at the statistics provided is how LITTLE a margin over existing profitability there would be in a package delivery modality ... for a very, very large capital investment in all sorts of equipment, personnel, and training, and the need to carve out enough of a niche in an already-competitive package delivery market.

[schlimm]

UPS 5-year average ROI = 10.43%

FedEx "            "       "   =   7.22%

NS (#3 in the industry)   =  5.88%

UP  (#1 in the industry)   =  7.61%

CSX (#2)                        =  6.09%

Average of those 3          =   6.53% vs 8.82% for UPS and FedEx.

 

Looks to me like package delivery is better by more than 2%.  

 

[Wizlish]

ChuckCobleigh

 

erikem

 

 

ChuckCobleigh

They probably could do that.  It would take a tunneling electron microscope to find any motivation for them to do so.

 

 

Now, now, top overestimating the amount of motivation the RR's have for package delivery.

Reminds me of an old Punch cartoon from the '70s -- picture of scientist intently peering into complex apparatus, with caption like "analyst inspects 197x British defense budget..."

  

[blue streak 1]

BaltACD

UPS, FedEx, DHL and USPS have the market and railroads have no financial incentive to enter it.

 

Actually  the RRs are in it by allowing the above  companies to do what they do best.  That is the RRs financial interest. The RRs do the intermediae haul for the aabove companys 

[ChuckCobleigh]

erikem

 

 

ChuckCobleigh

They probably could do that.  It would take a tunneling electron microscope to find any motivation for them to do so.

 

 

 

Now, now, top overestimating the amount of motivation the RR's have for package delivery. I think something like a particle accelerator would be more appropriate - the motivation would make a quark seem huge by comparison.

Yeah, Amy Farrah Fowler keeps mentioning a two-photon microscope on "The Big Bang Theory."  I guess I need to keep up-to-date, as the TEB microscope reference was used in a "Frasier" episode more than 10 years ago.  In either case, you are right in suggesting I may be overstating the interest level.

[erikem]

ChuckCobleigh

They probably could do that.  It would take a tunneling electron microscope to find any motivation for them to do so.

 

Now, now, stop overestimating the amount of motivation the RR's have for package delivery. I think something like a particle accelerator would be more appropriate - the motivation would make a quark seem huge by comparison.

[MP173]

Take a look at the web rail cams and pay attention to the intermodal trains.  If one knows trucking, then it is pretty easy to determine what is being handled on the trains.  The really hot intermodal trains still handle quite a bit of trailers and UPS, Fed Ex, YRC, and ABF are well represented.  

If you are going to enter a market, there must be a compelling reason to do so and to use the capital necessary to go all in.  LTL and parcel delivery is very expensive to operate with considerable fixed costs and traditionally operating ratios in the mid 80s - mid 90s.  Rails have plenty of opportunity to allocate their capital on other projects which will yield a higher return.

Ed

[BaltACD]

UPS, FedEx, DHL and USPS have the market and railroads have no financial incentive to enter it.

[ChuckCobleigh]

They probably could do that.  It would take a tunneling electron microscope to find any motivation for them to do so.

[cacole]

I don't think the railroads will ever get back into the business of stopping at every small town they go through.  Too many of the small passenger depots that used to house the Railway Express office have been torn down, sidings have been removed, and trains no longer even slow down at those locations.

 

[oltmannd]

Railroad intermodal already hauls for UPS, Fedex and a myriad of LTL carriers.  You're thinking the RRs should set up shop and compete for this business? 

[railtrail]

As far as I know what may be the problem of what is a railroad worker. If RR get into LTL would those workers fall under RR retirement and be more expensive so what UPS is outsourcing what REA used to do

[railtrail]

The railroads want to get back with the public would station to station LTL and package delivery.Back to the 1940s. I know that Railway Express Agency was rife with corruption and was very sick in its last see-Turtles to Tucumcari: A Personal History of the Railway Express Agency. But now UPS and and the Post Office trys its best to avoid rail. Nothing under 500 miles. But railway express was very efficant and even had same day service. The rements of the warehouses had pull tracks and a small army of workers. No town was not served by them. However I have noticed in Europe and Canada rail mail has gone too.