Rail Service Has Become More Consistent, Analysts Say

The truckload business has gone from JIT to XOT as shipping demands have become more stringent, and rail intermodal is finding it difficult to keep up.

Intermodal rail enjoyed explosive growth through much of the 1990s, but the dawning of the new millennium brings with it questions — and conflicting views — about its future.

A survey of some of the financial world’s leading transportation analysts reveals a broad spectrum of opinions about that future, ranging from outright pessimism to guarded optimism. Even the top intermodal executives at railroads like CSX and Norfolk Southern acknowledge the challenge is a serious one.

The experts and executives agree that the environment for freight transportation has changed over the last four years. Truck service has gotten better and customer expectations have gotten higher.

As one analyst put it: “The truckload carriers have raised the bar, and we have gone from just in time — JIT — to exactly on time — XOT.”

The stakes are high for railroads.

Experts note that intermodal has represented the railroad industry’s best — perhaps its only — avenue for growth. The increasing business during the early 1990s — notably in 1994 when trailer and container loadings leaped more than 13% from the previous year — seemed to validate the industry’s expectations for the service, which had been once dismissed as little more than the preservation of the former boxcar traffic.

In recent years, however, trucking’s share of freight traffic has risen, leading to concerns of whether railroads can erase capacity constraints in terminals and on congested lines while improving their service enough to compete effectively.

Railroads will have to improve the consistency of their service to succeed, said James J. Valentine, an analyst at Morgan Stanley Dean Witter in New York. If they do, he said, “there is plenty of business to win.”

“Many shippers want to turn to railroads,” because their rates are lower, Valentine said. “But they just can’t live with the inconsistencies” regarding on-time delivery, he said.

For the full story, see the April 19 print edition of Transport Topics. Subscribe today.