Trucking or Rail: What's More Practical for Shippers in 2016?

Rail transport played a large role in the development of the U.S. during the industrial revolution. But, with the introduction of the gas-powered combustion engine in 1910 and construction of the Interstate Highway System several decades later, the trucking industry flourished as the main mode of freight transportation. These days, while it’s a viable option for many shippers, less than 20 percent of freight is moved by rail.

So, what makes rail and trucking so different?  Freight transportation by rail is obviously limited to routes that include railroads, which are far fewer in numbers than routes that are accessible by trucks. Intermodal freight services are used to bridge the gap between rail and truck routes. In rail transportation this is called drayage: the transportation of freight from its starting destination to the rail station and from the rail station to its final destination using a truck.

In 2015, intermodal volumes and prices dropped drastically due to lower fuel costs that helped competing truck carriers. Now that oil prices have climbed 70 percent since February 2016 when it hit a 13-year low, intermodal rail is regaining popularity as a more cost-effective freight transportation solution when compared to trucking alone – at least for long-haul truckload shipments.

“For truckload shipments that are moving over 1,000 miles (especially if it’s from East to West or vice-versa), are less than 150 miles from a rail head and weigh less than 4,250 pounds, rail is a viable option,” says FreightCenter truckload expert, Allen Shifflet. 

“That’s assuming it’s not a time-sensitive shipment considering it usually takes 2-3 days longer to ship by rail than truck.”

Shifflet also explains that “a rail ride is a rough ride;” therefore, it is not a viable option for moving household goods, objects with wheels or other fragile freight.

When contemplating whether or not your company can benefit from transitioning from 100 percent truck transportation to a combination of intermodal rail and truck it’s best to talk to an expert.

Third-party logistics providers partner with various carriers across all modes of transportation and are often a great place to start when you have questions. FreightCenter works with rail companies like CSX and Streamline and can easily compare trucking versus rail rates online using Cirrus TMS, our transportation management system.

For example, when Conquest Manufacturing contacted Allen Shifflet in 2012 they were working on a large multi-year project that required shipping their HVAC materials from their manufacturing plant in Michigan to California and Florida. Shifflet was able to provide them with quotes for both truck and rail transportation. Conquest Manufacturing saved $1,760 by choosing rail to transport their freight over 2,500 miles from Michigan to California and was similar savings in the 21 rail shipments they organized with FreightCenter over the following two years..

What does the new CSX Terminal mean for Florida shippers?

The latest news out this week is the grand opening of the CSX intermodal freight terminal in Winter Haven, Florida. The centrally-located rail hub will make one-day freight deliveries by

truck possible throughout the entire state of Florida. Normally, a trip across the northern border to Miami could take seven to 10 hours by truck. Without a backhaul, entering the state of Florida is sometimes a sour note for some drivers. As a result, shippers face tightened capacity and increased transportation costs to areas like Florida.


That is until this new intermodal hub makes it possible to reduce costs and transport higher volumes of freight to Florida by rail. Intermodal transport is a hot topic in the industry and in society where trucks on the road are seen nuisances, environmentally dirty, and inefficient. Intermodal transportation has been ushered in to offset the negative impacts of trucking, and shippers - especially those in Florida - should benefit.


Do you ship in or out of Florida? You could soon be benefiting from the perks of utilizing rail instead of long haul trucking, like:

• Tout yourself as an environment-friendly supply chain
• The longer the haul, the greater the savings
• More reliable service - avoid trucking capacity issues

Rail and Truck Post Widely Different 3Q Outcomes

By SAMANTHA BOMKAMP

NEW YORK

Railroads and trucking companies told very different stories in their third-quarter earnings reports, as rails continued fetch higher prices and truckers dealt with weak pricing and slumping demand.

But both were helped by a drop-off in the price of fuel. Many companies have fuel surcharges -- the extra cost it tacks on to a customer's bill -- that are delayed by two months or more. And as diesel prices dropped toward the end of the quarter, many truckers and railroad operators were paying less for fuel than they were collecting from shippers. Overall though, rails continued to hold the upper hand as more freight moved to the tracks and off the highways.

The four largest U.S. railroads -- Union Pacific Corp. and Burlington Northern Santa Fe Corp. in the West and CSX Corp. and Norfolk Southern Corp. in the East -- all posted third-quarter results that beat Wall Street's expectations.

And except for CSX, every railroad grew earnings by more than 30 percent in the period. Excluding a one-time gain in the prior-year period, however, the Jacksonville, Fla.-based company's earnings from continuing operations rose 29 percent.

Besides higher prices, railroads are benefiting from their ability to improve productivity through initiatives that cut the time a train spends in a station or that improve its speed. These factors allowed the major railroads to offset lower volumes compared with a year ago.

Although some trucking companies buoyed earnings in the June to September period by racking up fuel surcharges or cutting costs, the group largely painted a bleak picture of an impending or current recession.

YRC Worldwide Inc. reported a 10 percent drop in third-quarter profit, but excluding some hefty one-time items, the Overland Park, Kan.-based company said it would have posted a loss much wider than analysts were expecting. The company did not give a prediction for the fourth quarter, citing economic uncertainty.

Werner Enterprises Inc. managed to grow its profits by 3 percent as it offered a wider array of services for customers, countering "lackluster" freight demand.

Miami-based Ryder System Inc. said its third-quarter earnings rose from a year ago but still fell short of Wall Street's expectations. The company also lowered its outlook for the year and put its share buyback plans on hold.

The trucking industry's leading trade group underscored carrier's fears when it reported that goods shipped by truck fell for the third month in a row in September.

The American Trucking Associations said Monday its seasonally adjusted tonnage index, which measures the weight of freight hauled by U.S. truckers based on membership surveys, fell 0.9 percent in September.

And the ATA's chief economist Bob Costello predicts freight demand will continue to get worse before it gets better.

"It is a tough freight market, and there is nothing on the horizon that says this will change anytime soon," Costello said.

Costello said he believes a recession began in the third quarter and will continue through the first quarter of 2009.

And as less freight is moved by truck, Wolfe Research analyst Edward Wolfe suggested that more freight will continue to shift to rail freight. This trend will be accelerated, he predicted, when fuel prices turn higher -- creating a bigger pricing disparity between the two methods of transportation.

Hurricane Ike Shipping Updates

UPS Freight Houston Terminals Reopened
UPS has restored service in most ZIP Codes impacted by Hurricane Ike, and UPS Freight terminals serving Houston, Beaumont and Victoria, Texas, have been reopened.

Some deliveries may be limited or delayed due to business closings, damage to roads and other transportation infrastructure, or restrictions by local authorities. UPS anticipates that service and transit times will be back to normal in most areas by the beginning of next week.

Pickup, delivery, and On-Call Pickup services are currently suspended in the following ZIP Codes: 77550 - 77555, 77611, 77617, 77650.

Diverted Trains To Cause Increase In Local Railroad Traffic

Jones County will see up to 72 rail freight trains traveling through the area per day over the next few days.

The huge increase in traffic, from about 10 freight trains on average per day, is due to damaged tracks in Texas and Louisiana after Hurricane Ike Sheriff Alex Hodge said. “It’s probably seven times what we normally have,” 

Hodge said.Hodge said the increase in rail traffic won’t have much of an impact here other than an increase in danger to motorists.“We ask the public to be vigilant and obey the railroad signs,” Hodge said. “We have an increased threat there.”The sheriff said officials aren’t sure how long the increase in trains will last. He said it could be a few days or even weeks.“CSX alone lost 21 miles of tracks during the hurricane,” Hodge said.