Viewpoint: Rail/intermodal investment is paying off

Even casual observers of the freight transportation market are finding it difficult to avoid the success that the rail intermodal sector is experiencing. In fact, most of America is catching sporadic television advertising showcasing the sustainability and productivity benefits the mode offers U.S. business—Union Pacific’s well-produced spot caught my eye during a recent broadcast of a baseball game.

Those of us who live in freight transportation on a daily basis don’t need to be reminded of what can happen to a logistics operation—and a bottom line—once rail intermodal is integrated into our networks and successfully optimized.

In fact, the recession triggered a wake up call: More and more shippers were under pressure to keep costs down while also being charged to improve their transportation operations. After ushering in more advanced shipment planning and deeper discussions with carriers, rail intermodal, they discovered, was just the ticket.

All the recent numbers from the Association of American Railroads (AAR) and the Intermodal Association of North America (IANA) certainly validate that U.S. shippers are putting the mode to work. According to a recent AAR report, U.S. rail intermodal volume hit a record 13.5 million containers and trailers in 2014, representing the largest single source of U.S. freight rail revenue.

And as we rolled into the first quarter of 2015—complete with the West Coast port labor disruption and markedly extreme winter weather—intermodal volumes showed continued growth according to IANA’s Trends & Statistics Report. During that relatively tumultuous period, container and trailer volumes were up 2 percent over 2014, a number that the association said was better than expected and mostly driven by domestic container movements.

Just how long will this momentum on the nation’s rails continue? That’s just one of the questions posed by Group News Editor Jeff Berman in his annual Rail/Intermodal Roundtable. As he has for the past five years, Berman has gathered three of the rail and intermodal sector’s top thought leaders to put the current and future state of this now mission critical mode into perspective.

“While there’s been momentum, the current environment hasn’t been without its challenges,” says Berman. “There were certainly service performance issues over the winter, severe missteps in transporting crude oil by rail, as well as the fact that shippers are still clamoring for regulatory changes in order to get what they say is needed rate relief. So it’s not necessarily the smoothest sailing.”

However, as Berman and our panel discuss, the rail sector is addressing its most pressing issues one at a time while it continues to pump massive amounts of capital into its own equipment and infrastructure—numbers that would make any mode green with envy.

“The AAR reports that the U.S. freight railroads are set to spend $29 billion on the U.S. rail network this year and hire more than 15,000 new employees,” says Berman. “So, as long as these investments continue to go toward shipper objectives, such as improved transit time and better efficiency, it would be safe to forecast that the sector will gain even more momentum.”