Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
Rail intermodal folk don't know if these are the best of times or the worst of times.
Judging by the numbers, the outlook appears bright. Total annual volumes—domestic and
international—are expected to grow somewhere between 3.6 and a little over 5 percent through 2017, according to
an analysis from FTR Associates, a consultancy. Domestic intermodal volumes rose 8 percent in May, 7 percent in June,
and 5 percent in July over the comparable periods in 2013, according to the Association of American Railroads.
Intermodal has much going for it compared to truck: superior economies of scale, better fuel economy, and a cleaner
environmental footprint. As a result, a good portion of intermodal's growth has come at the expense of over-the-road truckers
that confront a myriad of operational challenges that could render them uncompetitive on many lanes.
But as events of the past nine months have shown, what intermodal doesn't currently have are the consistent service levels
that shippers had come to expect from motor carriers, albeit at a higher price.
Perhaps that was never clearer than in August, when Cold Train—a double-stack service moving fresh and frozen produce
from Quincy, Wash. and Portland, Ore., to 20 U.S. markets and Toronto—suspended operations after a little more than four
years. Overland Park, Kan.-based Cold Train, which ran on BNSF Railway's northern corridor, said its customers couldn't tolerate
the poor reliability, slower-than-normal transit times, and chronic absence of BNSF locomotives. Miserable congestion on BNSF's
lines turned normal four-day transit times from the Pacific Northwest to Chicago into seven days, wreaking havoc on deliveries
of perishable cargo. On-time deliveries last November fell to 5 percent from 90 percent. BNSF, hammered by a terrible winter in
its northern geographies and inundated with record crude oil and grain volumes, couldn't free up enough equipment to give Cold
Train the service it needed. At this point, it is uncertain when, or if, the service will resume.
Ironically, the suspension came just five months after Cold Train's new owner, Michigan-based Federated Railways Inc., said
it planned to add at least 1,000 53-foot containers to the Cold Train fleet during the next five years, bringing its container
fleet to about 1,400. Despite the suspension, other temperature-controlled intermodal shippers continue to use rail. However,
they, too, are experiencing service issues, especially along the Pacific Northwest-Chicago corridor. As a result, some perishable
users who had converted to rail have migrated back to truck, though that evidence is anecdotal and not empirical.
SERVICE WOES
The Cold Train experience may have been the most visible setback for rail interests, but the service issues have been more
widespread than with just one user. Ever since last year's fourth quarter, service metrics have deteriorated. Train speeds have
slowed and terminal dwell times increased. Average dwell times for the seven U.S. class I rails (including the U.S. operations
of Canadian National Inc. and Canadian Pacific Railway) remain high at 24 hours as of mid-September, according to investment
firm Morgan Stanley & Co. Perhaps unsurprisingly, the overall numbers are skewed by BNSF's 30-hour dwell times, according to
the data. BNSF's train velocity, which slowed precipitously during the weather-addled first quarter, has not recovered to levels
of a year ago.
Nor, it seems, has the rest of the industry. Eastern railroad Norfolk Southern Corp. has told its shippers not to expect
tangible network improvements until late November. For some railroads, that timetable may be too optimistic. Thom Albrecht,
transport analyst at BB&T Capital Markets, said rail networks might not return to 2013 levels until the fall of 2015. That could
be pushed back into 2016 if another bad winter hits the nation early next year, Albrecht warned in a mid-September research note.
Larry Gross, an intermodal analyst for FTR, told attendees at the Intermodal Association of North America's (IANA) annual
Intermodal Expo yesterday in Long Beach, Calif., that train speeds, on average, have declined 8 to 9 percent year-over-year and
that there are "no real signs" of improvement. Service remains "stable at unsatisfactory levels," Gross said.
The challenges for intermodal service are well known. Bad winter weather paralyzed large portions of the rail network. A surge
in peak-holiday season volume that would normally have hit the U.S. in early fall came early this year; the reason being that
retailers wanted to speed deliveries of goods to avoid possible labor disruptions along the West Coast as the International
Longshore Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) remain at loggerheads over a new contract to replace
the pact that expired Sept. 30. Through it all, demand for intermodal services has remained strong.
Railroads have allocated record amounts in capital investment to solve their operational problems and position themselves for
growth. BNSF is slated to spend more than $5 billion on capital improvements, a decent chunk of which is earmarked to widening
and modernizing capacity along its northern corridor. While the projects should yield significant long-term benefits, for now the
mess accompanying the construction is having the perverse effect of compounding the slowdown. "The infrastructure work is causing
its own congestion," said Jim Filter, senior vice president, intermodal commercial management for Schneider National Inc., the
truckload and logistics giant.
Top rail executives are confident that the problems are fixable. However, they are loath to commit to sending an all-clear
signal. "We are making modest, incremental improvement every week," Lance M. Fritz, president and chief operating officer of
Union Pacific Railroad Co. (UP), the main unit of Union Pacific Corp., told the IANA gathering. Yet Fritz refused to be pinned
down to a specific time frame as to when service would be restored to normal levels.
UP has allocated $4.1 billion in capital investment during 2014, $2 billion of which Fritz described as "replacement capital."
Fritz said UP has been adding crews, a shortage of which contributed to its service issues. UP, the nation's largest railroad, has
adequate resources to overcome the problems, Fritz said, adding that he doesn't see any obstacles standing in its way.
At the same time that railroads are coping with service problems, intermodal rates continue to climb. Intermodal rates in July
rose 3.4 percent from year-earlier levels, according to a monthly index published by investment firm Avondale Partners LLC and
Cass Information Systems, a freight-auditing firm. Avondale said it expects intermodal rates in 2014 to rise at a low single-digit
pace as tighter truckload capacity creates cover for intermodal price hikes. The recent significant decline in diesel fuel prices
might help moderate future intermodal rate increases because the index takes diesel prices into account when calculating "all-in"
intermodal prices.
The concern, according to one long-time intermodal executive who asked not to be identified, is that railroads will be
perceived as acting with impunity by raising rates while their service remains sub-par. The rails' image will not be helped if
shippers think they are capitalizing on challenges facing the trucking industry to gouge intermodal users.
"Intermodal rates are going up everywhere, and the service continues to be terrible," the executive said. "I don't know what
the rail mindset is right now."
For some with long memories, the 2014 service issues harken back to an era when intermodal reliability was the exception and
not the norm. That era lasted for many years, and it won't take much to wipe out many of the industry's hard-won gains. The last
time rail service took such a hard hit was in 2004, when an avalanche of Asian imports entering the West Coast overwhelmed their
networks. Before that, one would have to go back to 1996 to find a period when service was this poor for this long, according to
the executive.
The predicament may have been summed up best in a comment made by an executive of a privately held intermodal marketing
company (IMC), which sells intermodal service on behalf of the rails, to Albrecht, the BB&T analyst: "Except for a shortage of
locomotives, railcars, crews, and track, the railroads are doing fine."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.