As sustainability and environmental responsibility continue to take center stage in global business practices, industries around the world are adapting to regulatory changes and carbon pricing initiatives. In a recent announcement, the Canadian National (CN) revealed amendments to the carbon charges as part of their carbon surcharge program, a move that will impact anyone utilizing rail as part of their supply chain.

As a company that relies heavily on fuel for its operations, the cost of carbon emissions has long been a key consideration for the CN. For years, the railroad has implemented a carbon surcharge to cover the costs associated with carbon emissions and fuel consumption. The latest changes reflect evolving federal and provincial regulations as well as the company’s ongoing commitment to sustainability.

Table of Contents

• The Program and Carbon Charges
  • What is it?
  • Amendments to the Program
• What do These Changes Mean?
  1. Cost Adjustments
  2. Increased Focus on Sustainability
  3. Improved Customer Service

The Program and Carbon Charges

What is the CN’s Carbon Surcharge Program and Carbon Charges?

Before examining the changes, it is important to understand the purpose of the CN’s carbon surcharge program. The program was introduced as part of Canada’s broader efforts to reduce greenhouse gas emissions through carbon pricing. The surcharge is applied to freight rates to account for the carbon emissions associated with the fuel use that powers CN’s locomotives.

The surcharge is a carbon charge that serves as a mechanism for passing on the costs of carbon emissions to customers, helping offset the carbon tax imposed on the CN by the government of Canada. The tax ensures that the CN can continue to operate efficiently while complying with Canada’s climate policies.

Amendments to the Program

The CN has made several key amendments to its carbon surcharge program, largely in response to changes in Canada’s federal carbon pricing system and the company’s broader goals to align with sustainability practices.

Here’s what we know about the amendments:

1. Updated Surcharge Structure:
   • The company has adjusted its carbon surcharge structure, reflecting changes in the carbon pricing framework. This might include alterations in how the surcharge is calculated, how often it is updated, and which specific fuel types and emissions are being factored in.
2. Impact of Provincial Carbon Pricing:
   • While Canada’s federal carbon tax system is being phased out, provinces like British Columbia, Quebec, and Alberta continue to maintain their own carbon pricing systems. The CN’s amendments to the surcharge will likely account for these provincial differences, meaning the surcharge could vary depending on the location of shipments. This will allow the CN to remain compliant with provincial regulations while maintaining a fair and transparent pricing model for its customers.
3. Environmental Sustainability Focus:
   • In addition to addressing regulatory changes, CN’s revised carbon surcharge program reflects its commitment to sustainability. The company has outlined plans to continue investing in greener technologies. These amendments are designed to balance environmental objectives with the financial realities of running a large-scale transportation network.
4. Transparency and Communication:
   • One of the key elements of the changes is the improved transparency in the calculation process for the carbon charges. The CN has promised to provide more detailed and timely information about how the surcharge is applied, allowing you to better understand the costs associated with their shipments.

What do the Carbon Charge Changes Mean for CN Customers?

For customers of CN, the amendments to the carbon surcharge program may bring both challenges and opportunities:

1 Cost Adjustments:

Depending on the specific adjustments made to the carbon surcharge, customers may see changes in the cost of shipping goods by rail. These changes will reflect the fluctuating carbon pricing mechanisms at the federal and provincial levels, so customers should expect some variability in transportation costs.

• The BC carbon surcharge includes the provincial government’s carbon surcharge tax and the BC government’s Low Carbon Fuel Standard (BC LCFS). The carbon surcharge tax component will be set to $0.00 per mile or per unit, while the BC LCFS will remain unchanged per the tariffs issued effective April 1st, 2025. In the immediate term, you will continue to see Carbon Surcharge on your bill for the BC LCFS.
• The Quebec carbon surcharge remains unchanged as per the tariffs issued effective April 1st, 2025.
• The carbon surcharge for all other provinces (Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, and Nova Scotia) will be set to $0.00 per mile or per unit.

2 Increased Focus on Sustainability:

If your organization is committed to reducing your carbon footprint, these changes make it simpler to embrace cleaner technologies. Many businesses are now integrating sustainability goals into their overall business strategies, and working with a transportation partner that shares those values can be a competitive advantage.

3 Improved Customer Service:

With the increased transparency in the surcharge process, you will have better access to the data you need to assess and manage their logistics costs. This should improve overall customer satisfaction, making it easier for you to plan and manage your freight expenses.

The amendments to CN Railway’s carbon surcharge program and their carbon charges represent a significant shift in how the company is addressing carbon emissions and sustainability in the face of evolving regulatory environments. By revising its surcharge structure, the CN is not only complying with the latest government policies but also reinforcing its commitment to greener and more efficient operations.

The post How CN Railway’s New Carbon Charges Could Impact Rail Shippers appeared first on RSI Logistics.

In this blog we will explore the 2025 funds requested for the FRA and how they will be used to support rail infrastructure.

In this article we’ll cover:

• The Federal Railroad Administration
  • The Consolidated Rail Infrastructure and Safety Improvements Program
  • Climate and Sustainability Program
• BNSF Rail Infrastructure
• Norfolk Southern Rail Infrastructure

The Federal Railroad Administration

The FRA is responsible for ensuring the safe, reliable, and efficient movement of people and goods along the rail networks. Unlike the Surface Transportation Board (STB), who regulates the economic aspects of freight rail (including mergers, rates, and disputes), the FRA focuses on rail safety and development. The FRA also administers a broad portfolio of grants aimed at improving the safety and condition of rail infrastructure while improving performance of operations.

In 2025 $3.20 billion has been requested for the FRA, including $2.50 billion for Amtrak grants, $350.00 million for discretionary rail grants, $293.97 million for the Safety and Operations account, and $52.00 million for the Research and Development account. This allocation aims to support various areas within the organization and builds on the investments initially made possible by the Infrastructure Investment and Jobs Act (IIJA).

The Consolidated Rail Infrastructure and Safety Improvements Program

The rail shipping industry has successfully pursued improvements in safety and over the course of decades of focused implementation has shown a drastic reduction in accidents. However, incidents such as the freight derailment in East Palestine, Ohio, serve as a reminder that the rail industry is not yet accident free. Safety can always continue to be a focus, no matter how much rail infrastructure has improved.

2025 funds addressed to the FRA include providing assistance to states, railroads, local communities, and rail infrastructure stakeholders. This includes $250 million requested for the Consolidated Rail Infrastructure and Safety Improvements (CRISI) program, which will fund grade crossing improvements, trespass prevention initiatives, and other projects to improve railroad safety.

The CRISI program will also play an important role in investing in rail infrastructure that strengthens the supply chains of American shippers. The United States’ rail transportation network is critical to the health of the economy, shipping around 1.5 billion tons of raw materials and finished goods in an average year. American businesses’ ability to compete in an increasingly competitive global marketplace depends on the investments into state and local governments, short line railroads, and other contributors to the American rail network.

Funding requested for the CRISI program will also prioritize addressing the critical safety and quality of life concerns that rail transportation can impose on communities of color and low-income neighborhoods. These communities have historically been marred by decades of failed land-use policies and under-investment. Personnel resources, programming funding, and policy proposals will all work to build a more equitable rail transportation system and workforce. As part of their 2025 measures, the FRA proposes to reduce statutory cost-sharing requirements for underserved and historically disadvantaged communities under their competitive grant programs.

Climate and Sustainability Program

The FRA has developed a multi-faceted Climate and Sustainability Program centered on three primary focus areas:

1. Reducing Emissions.
2. Building Resilient Rail Infrastructure.
3. Fostering a Sustainable Rail Network.

For 2025 and beyond, the FRA will focus on initiatives to progress each of these focus areas.

This includes funding grant programs that will help divert freight from more carbon-intensive transportation modes to rail, developing engineering standards to inform resilient infrastructure investments that can withstand the impacts of severe weather, and analyzing the environmental impacts of major investments being advanced through IIJA.

BNSF Rail Infrastructure

The BNSF railway has announced its $3.8 billion capital investment plan for 2025, aiming to maintain a safe and reliable network while meeting customer needs.
The largest component of the plan, amounting to $2.84 billion, is allocated for maintenance activities, focusing on track upkeep, signal system maintenance, and infrastructure enhancements for their network. This includes replacing and upgrading rail, track infrastructure, and rolling stock. The plan will cover 11,400 miles of track surfacing and undercutting work, as well as the replacement of 2.5 million rail ties and 410 miles of rail.

In addition, $535 million of the plan is designated for expansion and efficiency projects, adding to the over $2.6 billion invested in expansion projects over the past five years. Major facility projects include a multi-year intermodal facility expansion at BNSF’s Cicero Intermodal Facility in Chicago, property acquisitions for the Barstow International Gateway project in California and constructing approximately 20 miles of third main line track near Needles, California.

Norfolk Southern Rail Infrastructure

The NS has completed $1 billion worth of infrastructure improvements in 2024. The projects were completed throughout Norfolk Southern’s 22-state network, focusing on safety infrastructure, track, bridges, and structures.

The company completed an array of projects, including 5 Digital Train Inspection portals, 313 grade crossing protection warning systems, 130 hot box/bearing detectors, 17 acoustic bearing detectors, 29 hot wheel detectors, 140 public improvement projects, 558 track miles of rail replaced, 2.1 million cross ties installed, 4,202 miles of track surfaced, 30,480 bridge ties replaced, 553 panel turnouts installed, 43 bridges replaced, 78 bridges structurally rehabilitated, 104 culverts installed, 23 signal cut-ins completed, 180 switch machines replaced, 869 CTC to ITCMS cut-ins completed, 3 classification yard speed controllers replaced, and 3 moveable bridge PLC system upgrades.

The 2025 budget request for the Federal Railroad Administration (FRA) highlights significant federal investments aimed at enhancing the U.S. rail infrastructure, focusing on safety, sustainability, and community support. Additionally, major rail companies like BNSF and Norfolk Southern are also investing heavily in infrastructure.

Ready to streamline your rail logistics operations? Discover how our cutting-edge Rail Logistics Transportation Management System (TMS), Rail Command^®, can revolutionize the way you manage your rail shipments. Enhance efficiency, reduce costs, and gain unprecedented visibility into your supply chain. Take the first step towards optimizing your rail logistics – Explore Rail Command today!

The post Rail Infrastructure Investments in 2025 and Beyond appeared first on RSI Logistics.

Table of Contents

• Conventional Methods of Managing Rail Logistics
• Rail Software – Efficient Technology and Interconnection
• Key Benefits of a Rail Transportation Management System
  • Integrated Logistics Network
  • Comprehensive Automation
  • Empowered Data Insights

Conventional Methods of Managing Rail Logistics

The traditional approach to rail logistics long relied on manual processes that are inefficient and overly complicated. Rail shippers are all too familiar with the rote work of carefully monitoring railcar locations, combing through data to find insights, and managing databases based out of disconnected systems. As you can imagine, this usually results in significant time and financial investments. In an era where every second and penny counts, these manual methods are not just a challenge – they’re slowing down your ability to optimize and grow your business.

Inefficiencies appear in various forms: delays in communication lead to slower response times, human errors can find their way into processes, the inability to adapt swiftly to changing scenarios can mean missed opportunities, and an incorrect conclusion pulled from manual data can have drastic reproductions. This leaves you struggling to keep up with the demanding responsibilities of managing rail logistics while trying to find what went wrong and where. Often this means sacrificing the time you could be spending optimizing operations, finding opportunities to save, or disputing charges.

Rail Software – What is a Rail TMS?

Enter the Rail TMS, system solutions that offer a seamless integration of logistics operations through sophisticated technology. A Rail TMS isn’t only about replacing paperwork with digital records (though that is an aspect); it’s a comprehensive management tool designed to interconnect every element of the rail shipping process.

This technology offers a more intelligent approach to rail shipping logistics. With a Rail TMS, you can access an integrated platform that provides visibility over your entire rail shipment lifecycle. From automating routine tasks and optimizing tracking to generating comprehensive data visualizations, a Rail TMS streamlines the complexities of rail logistics into manageable components, allowing you to focus on what you do best – moving your business forward.

In our forthcoming exploration, we’ll delve into the benefits that Rail TMS offers and talk about why these systems are having such a significant impact on the rail shipping world. For our examples we’ll use Rail Command^®, our Rail TMS that our rail shipping team built specifically for anyone who ships by rail.

Key Benefits of the Rail Software Rail TMS

Though the benefits of a Rail TMS like Rail Command are many, we’ll break them down into roughly three pillars: Integrated, Automated, and Empowered.

Integrated refers to the comprehensive nature of a tool like Rail Command. All the information you need for your rail supply chain is in one place and talks to each other. That’s where Automated comes in; when the system talks to itself, or other systems, it does so in a way that reduces the amount of manual work you have to do on your end, saving time and money while reducing the likelihood of errors. And Rail Command Empowers you to optimize your rail shipping with automated data visualizations that help you, at a glance, manage your logistics while also finding areas for improvement.

Integrated Logistics Network

At the heart of a Rail TMS lies its ability to create an integrated logistics network. For example, Rail Command contains features for managing your rail rates, demurrage, railcar tracking, patterns and execution, railcar maintenance, and more. Having all of these capabilities in one place provides more opportunities for you to focus on managing your logistics rather than traveling from system to system manually.

However, it’s not enough just to have everything in one place; it also needs to talk to itself. Rail Command achieves this integration by weaving together data that is relevant to one another within the system. For example, as long as you’ve uploaded your equipment into the Rail Command equipment feature, that information will be used when you are developing shipments. If you input a capacity above a saved railcar’s maximum capacity, Rail Command will flag that for you. Or if you want to ship a hazardous commodity, Rail Command alerts you if the equipment you’ve selected is not able to handle the commodity.

This level of integration ensures that data—historically siloed and prone to discrepancies—is now a cohesive, reliable foundation for decision-making.

The real power of this integrated network becomes apparent when we think about data and information being presented in near real-time. Accessibility to up-to-the-minute information empowers you to move from reactive to proactive. Whether it’s finding out about an unexpected delay so you can reach out to a client or work with the rail carrier to facilitate movement, the immediacy of data at your fingertips means decisions are timely and informed.

Comprehensive Automation

Next, we’ll take a look at the power of automation in a Rail TMS. As we’ve discussed, manual methods bring with them the danger of human error and significant time spent. Automation capabilities minimize human error while boosting the overall operational efficiency of your rail logistics. By automating critical activities, a Rail TMS like Rail Command ensures your logistics stay on track and reserves the need for manual attentions for critical interventions.

For instance, Rail Command is built so that exception logs are automated and automatically identify potentially delayed or problematic railcars. This allows for more immediate corrective measures than if you were monitoring that rail car manually. Rail Command’s automation provides a dual benefit: they reduce the scope for errors that can happen with manual operations and enable a more agile response to potential logistic challenges. This means that you can maintain a smooth, efficient flow of goods, ultimately leading to enhanced service reliability and customer satisfaction.

Empowered Data Insights

With rail software like a Rail TMS, the power of comprehensive integration and automation come together to provide powerful data insights. Solutions like Rail Command are equipped with sophisticated data visualization tools, giving you the ability to more easily interpret complex data sets, which leads to faster and more informed decisions. Rail Command comes standard with a plethora of data visualization Key Performance Indicator reporting and a grid view customer report builder.

By automating processes and reducing the necessity for manual analysis, these tools in Rail Command contribute to the ability to find areas of your supply chain you can optimize. Rail Command includes data visualizations for dwell, fleet turns, historical shipment volumes, lane performance, and more. These actionable insights take data that you would have had to interpret manually and give you a quick glance to judge your rail logistics performance.

For instance, in Rail Command’s equipment feature, you can input the expiration dates of your leased equipment. Once inputted, a lease expiration data visualization is created; this timetable warns you of upcoming lease expirations so you can be proactive with your equipment. Another example is the demurrage dashboard, which uses reports from your logistics to power a filterable data visualization that shows cars in actual placement, cars accruing demurrage or charges, and more.

A Rail TMS like Rail Command is designed to bring you Integrated Automation that Empowers your rail logistics. By adopting a Rail TMS, you can save time and money on your rail shipping operations, all while finding new areas that you can optimize. And as the industry continues to move more towards efficiency and optimization, it’s time to consider a comprehensive Rail TMS.
Interested in learning more about our Rail TMS, Rail Command? Explore more now and command your rail shipping.

The post Rail Transportation Management Systems (Rail TMS) – The Rail Software that Empowers Your Rail Logistics appeared first on RSI Logistics.

Table of Contents

1. Benefits of International Rail Shipping
   1. Efficiency at the Border
   2. Infrastructure and Safety
   3. Cost Savings
   4. Modernized Rail Systems
2. International Rail Carriers and Connections
3. Customs Brokers and Documentation
   1. Key Customs Documentation
   2. Finding a Customs Broker
4. International Rail Freight Forwarders
   1. When and How to Engage a Freight Forwarder
5. Understanding Border Permits

Benefits of Shipping Rail for U.S. Shippers to Canada and Mexico

When shipping freight between the United States, Canada, and Mexico, rail as a modal choice possess advantages that can address international border challenges. Compared to truck as a modal choice for freight, rail is more efficient and timelier, and in more rural areas with less infrastructure, safer as well. Rail also offers cost savings in the form of optimized networks from first to last mile, while consistently receiving modernized expansions and improvements.

Efficiency at the Border

One of the most significant challenges with truck transport is the extensive border delays. Every truck entering the United States from Mexico undergoes a thorough inspection, which leads to an average delay of up to three hours per trailer. Rail shipments, in contrast, avoid these extensive wait times. The streamlined processes at rail border crossings greatly reduce downtime, as railcars are typically pre-cleared and grouped for fewer inspections.

Infrastructure and Safety

Mexico’s infrastructure poses another logistical challenge, particularly outside the major trade corridors. In those more rural areas, the road conditions can be suboptimal, and the risk of collisions with livestock is high. Approximately 40% of transportation accidents in rural Mexico involve livestock collisions due to unfenced farming areas. Rail transport makes these risks less substantial with safer and more reliable tracks that bypass the less developed roadways.

Cost Savings

Shipping via rail through Canada offers a particular advantage for reaching U.S. markets. Often, the combination of ocean and rail through the Canadian Gateway costs considerably less than other routes, allowing you to reduce expenses while maintaining efficient transit times. This is mostly due to the nature of duties and a shipment’s country of origin and provides a possibility for managing fees from incoming international shipments.

Modernized Rail Systems

Over the past decade, international rail networks, particularly in Mexico, have seen significant modernization efforts to make them not only safer but faster. Enhanced rail services such as those provided by Class I railroads like the Union Pacific (UP) and Canadian Pacific Kansas City (CPKC), who consistently upgrade and expand their networks into and out of Mexico, means that by switching to rail from truck, you could potentially save on transportation costs and lower your carbon footprint by 75%.

International Rail Carriers: Cross-Border Connections

North America’s major railroads, including the Canadian National (CN), Canadian Pacific Kansas City Limited (CPKC), and Union Pacific Railroad (UP), play pivotal roles in facilitating seamless cross-border trade across the continent.

CN boasts an extensive network that reaches from the eastern shores of Canada across to Vancouver and stretches further into key U.S. midwestern and southern states. This vast spread not only ensures smooth transportation of goods across North America but also connects effortlessly with other U.S. Class 1 rail carriers, enabling connections and distribution possibilities through critical trade corridors.

Emerging from the merger of Canadian Pacific (CP) and Kansas City Southern (KCS), CPKC offers a unique and comprehensive rail link stretching from Canada directly into the heart of Mexico. This network serves as a direct thoroughfare for goods traveling between the manufacturing sectors in Mexico and the consumption and distribution centers in the United States, extending up into Canadian ports and agricultural regions. The former KCS’s exclusive Mexican cross-border route is part of a critical role in this integrated rail system.

The UP enhances the U.S.-Mexico trade landscape with robust cross-border capabilities, particularly through its strategic Eagle Pass, Texas, gateway. This pivotal point enhances the link between UP’s network and Ferromex (Ferrocarril Mexicano), streamlining the cargo movement through one of the most crucial conduits for bilateral trade.

Rail Freight Customs Brokers and Documentation for Cross-Border Rail

When transporting goods across North American borders by rail, the documentation and customs clearance process is crucial. Collaborating with a customs broker that aligns with your shipment destination—whether it’s the U.S., Mexico, or Canada—is essential. These brokers assist in securing all necessary customs paperwork, pivotal for a smooth transition through border checkpoints.

Key Customs Documentation Needed for Mexico:

If you’re shipping freight by rail to Mexico, some documentation may be required:

• Bill of Lading: A legally binding agreement that lists goods details, origin, and quantity. Signatures from both the buyer and carrier are required.
• Commercial Invoice: Must be provided in Spanish, detailing the transaction for the freight forwarder and Mexican broker.
• Packing List: Specifies cargo contents, including weight and material type.
• Commodity Permit and Material Safety Data Sheet: The Commodity Permit may be necessary for specific goods; additionally, the Material Safety Data Sheet (MSDS) is crucial for hazardous materials, outlining storage, handling, and safety instructions.

Additional documents may include: the United States–Mexico–Canada Agreement (USMCA) Certificate of Origin, sales contract, customs declaration, and insurance policy, among others. Your customs broker should be able to advise you if there are additional paperwork needed; or a Third-Party Logistics companies like RSI Logistics can coordinate with customs brokers on your behalf.

Finding a Customs Broker:

It’s important to ensure you do your research when searching for a reliable, licensed, and knowledgeable broker who can handle import and expert details. If you’re beginning your search for a customs broker, the below resources may offer some assistance.

• U.S. Customs & Border Protection (CBP): Offers a list of licensed brokers, accessible on their website under the Permitted Customs Broker List.
• Tax Administration Service (SAT) and Confederation of Associations of Customs Agents of the Mexican Republic (CAAAREM): Both organizations offer options; the SAT through a verified list of Mexican customs brokers, and CAAREM through a directory of Customs Agents.
• Cross-border Freight Providers: These providers may work with multiple brokers and can help you refine your search. For instance, Coyote, part of UPS Supply Chain Solutions, can offer connections to their customs brokerage solutions.

Role and Selection of Freight Forwarders in North American Cross-Border Rail

For seamless international exchange of freight across borders, freight forwarders often become an important point of contact. These entities are engaged in not only the physical transport of commodities but also in ensuring that all export compliance requirements are met. Working in conjunction with customs brokers—who are responsible for navigating governmental import and export regulations—freight forwarders facilitate the end-to-end logistics of international shipping.

Freight forwarders may take charge particularly when goods need to go beyond the rail endpoint, coordinating the onward journey by road to the final destination. This may involve transloading—the transfer of goods from one mode of transportation to another.

When and How to Engage a Freight Forwarder:

Freight forwarders come into play when shipments need integration with other transportation modes, typically at border crossings where rail services end. To identify a reliable freight forwarder experienced in navigating the country’s export landscape, consider these factors:

1. Reliability: Ensure the company you choose has a track record of dependable service in cross-border logistics.
2. Experience: An established forwarder with experience in international shipping is likely to have existing relationships with trusted customs brokers.
3. Customs clearance expertise: Select companies that have specialized knowledge in customs procedures can steer shipments through border controls without delays.

Understanding Border Permits for North American Cross-Border Rail

Cross-border rail shipping requires an understanding of border permits and their various requirements. The need for such permits often depends on the specific nature of the commodities being shipped, as well as any additional embargoes that might affect the movement of specific commodities or movements. It’s important to be aware that, alongside the essential customs documentation, certain shipments might also require additional border permits, as well as the settlement of relevant duties and fees,

Coordinating with a rail logistics provider can significantly make securing these permits simpler. For instance, at RSI Logistics, our rail experts leverage our rail management solution Rail Command^®, which is designed to accommodate the intricacies of cross-border shipping intricacies. This includes specific regulatory requirements, such as Carta Porte for shipments destined for Mexico.

The post Cross-Border Rail: Shipping Rail Freight Across North America appeared first on RSI Logistics.

Welcome to our comprehensive guide on demurrage, the often overlooked yet significant cost associated with shipping freight. Whether you’re new to logistics or a seasoned professional, understanding demurrage is crucial for optimizing your operations and keeping costs under control. This blog serves as an ultimate resource, diving deep into every aspect of demurrage – from its fundamental principles to advanced management strategies.

In this blog, we’ll start by demystifying what demurrage actually is and why it matters to your business. We’ll explore the key factors that contribute to detention charges and provide a detailed breakdown of how these fees are calculated. Recognizing the common pitfalls is only the beginning; the core of our guide focuses on effective strategies and tools for managing, disputing, and reducing detention costs.

You’ll also find insights into leveraging rail logistics management technology, including a look at specialized services. Furthermore, we’ll share expert advice on negotiating terms with rail carriers and practical tips to improve your operation’s efficiency and minimize demurrage fees.

Table of Contents

1. 1. Section 1: Definition of Demurrage and Related Terms
      1. Demurrage versus Detention versus Storage
      2. Rail Owned versus Private Cars
      3. The Demurrage Clock
      4. Key Measurements and Events
   2. Section 2: Demurrage Operational Context
      1. Open versus Closed Gate Customers
      2. Understanding Specific Railroad’s Demurrage Rules
      3. Events That Impact Demurrage
   3. Section 3: Financial Aspects of Demurrage
      1. Understanding Credit/Debit Days
      2. Financial Strategies to Minimize Charges
   4. Section 4: Managing Demurrage Charges
      1. Submitting a Demurrage Dispute
      2. Identification of Bunching and Its Impact
      3. Proactive Measures to Avoid Charges
      4. Tips and Tricks for Efficient Demurrage Management
   5. Section 5: Leveraging RSI’s Experts for Demurrage Management
      1. Comprehensive Reporting Tools
      2. Demurrage and Storage Charge Audit
      3. Enhanced Visibility
      4. Regular Performance Reviews
      5. Proactive Consulting

Section 1: Definition of Demurrage and Related Terms

The terms used in demurrage can be confusing and not easily comprehensible. Furthermore, sometimes terms are used interchangeably; for instance, we often hear ‘demurrage’ and ‘detention’ used to describe charges that are one or the other, and vice versa.

However, it is important to have an understanding of how each term is used, why, and when. When it comes to disputing charges and lowering costs, a necessary foundation is the knowledge of how demurrage works and what goes into producing your charges.

Demurrage vs. Detention vs. Storage

Demurrage is sometimes used as a catch all term for storage, detention, and demurrage, but there are differences depending on who is holding onto cars, and who owns the cars.

Demurrage in Shipping

The definition of demurrage is a charge that compensates rail carriers when railroad owned railcars are detained by rail shippers. It serves as a penalty for undue railcar detention to encourage the efficient use of railcars in the rail network.

Private Car Storage

A private car storage fee is for privately owned railcars that have excessive use of railroad owned tracks.

Customer Detention Fees

Also known as customer holding, detention charges occur when a customer detains a shipper’s cars for a longer period than agreed.

Rail Owned vs. Private Cars

No matter your product or cargo, if you are shipping via a rail mode of transportation, you will require rail cars. There are a wide range of rail cars utilized in North America for a diverse range of materials, but all of them are either rail owned, or privately owned.

Rail Owned Cars

Rail owned cars are the property of the railroad companies. The railroads are responsible for the maintenance, insurance, and regulatory compliance of these cars.

• Usage: These cars are used to provide service to shippers who do not own their own cars. Railroads maintain a variety of cars to cater to different types of cargo and shipping requirements.
• Demurrage: Shippers using rail-owned cars are subject to the railroad’s standard rules and rates. Railroads typically enforce these rules to ensure the efficient use of their fleet and to incentivize the quick turnover of cars.
• Flexibility: Using rail-owned cars offers flexibility in that shippers do not need to invest in a fleet, manage logistics, or handle maintenance. However, they have less control over the specific cars they get and may face availability issues during peak times.
• Cost: Shippers do not need to make a direct investment in equipment, but they may face higher charges and less favorable terms compared to those with private rail cars, especially if they frequently ship goods that require specific types of cars.

Private Cars

Private rail cars are owned by corporations, leasing companies, or individuals rather than by the railroad companies. Owners typically bear the responsibility for the maintenance and insurance of these cars.

• Usage: These cars are often specialized to meet the specific needs of their owners, such as custom configurations for transporting particular types of freight or enhanced features for sensitive cargo.
• Demurrage: The demurrage rules for private cars can vary, sometimes offering more favorable terms or reduced rates because the railroads do not have to provide, maintain, or insure the equipment.
• Flexibility: Owners have more control over their rail cars’ movements and usage, potentially optimizing logistics and reducing operational costs. However, they also need to manage the logistics, maintenance, and any regulatory compliance of these cars.
• Cost: While owning or leasing a private car requires upfront investment and ongoing maintenance costs, it can offer cost savings and operational advantages for frequent shippers with specialized needs.

The Demurrage Clock

The “demurrage clock” refers to the period during which charges accumulate. Understanding how the demurrage clock operates is essential for shipping and receiving entities to minimize additional charges. The mechanism of the clock involves several key components and processes:

1. Free Time: This is the allotted period given to load, unload, or store a railcar without incurring any charges. Free time is defined by the rail carrier’s tariff or the contractual agreement and can vary depending on the type of cargo, destination, and specific rail carrier policies.
2. Start of the Clock: The clock starts ticking immediately after the free time expires. The initiation of the clock is usually triggered by specific events such as the arrival of a railcar at a designated interchange, placement of the railcar at the customer’s facility for loading or unloading, or notification to the customer that the car is available.
3. Accrual of Demurrage Charges: Once the free time is exceeded, demurrage charges begin to accrue. These fees are generally calculated on a per car, per day basis. The rates and calculation methods are specified by the railroad’s tariff and can significantly affect the overall cost of rail logistics.
4. Stopping the Clock: The clock stops when the condition causing the charge is resolved. For loading or unloading scenarios, this is typically when the railcar is fully loaded or emptied and is released back to the railroad. For storage scenarios, it stops when the railcar is moved out of the storage area.
5. Exceptions and Adjustments: Certain conditions, such as weekends, holidays, force majeure events, or railroad-caused delays, may influence how the demurrage clock is calculated. Railroads may offer specific exemptions or adjustments in these cases, detailed in their tariff or service terms.

Key Measurements and Events

To manage and potentially minimize charges, it is important to understand several key measurements and events, along with the terminology used in rail transportation and, more specifically, demurrage. Here’s an overview of some of these terms:

Free Time

As we just saw with the clock, free time is the period during which a railcar can be used for loading, unloading, or storage without incurring any demurrage charges. This period is predefined by the rail carrier’s policies or contractual agreements.

Importance: Free time is used to provide a buffer period for shippers and receivers to handle railcars without accruing additional costs. Pay attention to your allotted free time with your carrier, as they do vary.

Notification Time

Notification time refers to when the railroad notifies you that your railcar has arrived and is ready for pick-up or unloading.

Importance: The accuracy and timeliness of this notification can significantly impact your ability to manage your railcar’s movement efficiently. If the carrier’s notification is not timely, that will make it more difficult to avoid charges.

Placement

Placement occurs when a railcar is moved to a specific spot designated by the receiver or shipper for loading or unloading.

Importance: The clock for free time often starts when your car is placed, not when it arrives, making the timing of placement critical.

Actual Placement vs. Constructive Placement

Actual Placement is what happens when your railcar is physically placed in a spot where it can be loaded or unloaded directly. Constructive Placement is used if your railcar cannot be placed because of reasons such as lack of space or preparedness on the part of the receiver. Even though it’s not in its final spot, for demurrage purposes, the clock may start.

Importance: Because constructive placement can still start the demurrage clock despite not being capable of being unloaded, it is important to pay attention to what placement your car is received.

Release

Release marks the end of the demurrage clock for a specific railcar. It occurs when your car is fully loaded or unloaded and the organization with the car notifies the railroad that the car is ready for pickup or has vacated the spot.

Importance: The time of release is critical; delays in notification can extend the demurrage period unnecessarily.

Credits and Billing

In some cases, railroads may offer credits for demurrage, and these can be applied to offset charges under certain conditions. Demurrage charges are typically billed after the event occurs.

Importance: Understanding if you’re receiving credits, and what conditions they can be used for, can help you overcome expensive charges.

Section 2: Demurrage Operational Context

The operational context of demurrage is critical since effective handling of demurrage charges can significantly influence cost management. Since demurrages charges can rapidly escalate, managing these requires understanding the intricacies of logistical operations that affect demurrage.

Open versus Closed Gate Customers

In the context of rail demurrage, the terms ‘Open Gate’ and ‘Closed Gate’ customers refer to the type of facility that is receiving or shipping railcars and the procedures these facilities use to manage rail traffic. The choice between Open or Closed Gate can have significant implications for how your demurrage charges are incurred and managed.

In both scenarios, the key to managing charges is efficient management of railcar movement and turnover. And though both types of facilities have unique methods of improving rail logistics, for both it is helpful to have clear communication channel with the rail carriers and to understand all terms of your service agreements.

Open Gate Customers

An Open Gate customer operates a facility where railcars can come and go without the need for an appointment. There are no gate restrictions, and railcars are typically moved in and out of the facility as they arrive.

Implications:

• Pros: The facility may handle railcars more quickly because there’s no waiting time for appointments, potentially reducing the likelihood of demurrage charges.
• Cons: Without a structured system for managing incoming and outgoing railcars, there might be less control over railcar movement, which could lead to congestion or delays if not managed properly, potentially increasing demurrage exposure.

For Open Gate customers, having a robust system for monitoring railcar traffic and quickly processing cars as they arrive, and leave can help to minimize charges. Since cars can be processed on arrival without waiting, quick turns are advantageous but require coordination.

Closed Gate Customers

A Closed Gate customer operates a facility that requires an appointment for a railcar to enter or exit. There are specific gate procedures, and railcars are often scheduled and managed more tightly in terms of their movement in and out of the facility.

Implications:

• Pros: The appointment system provides a more controlled environment, potentially leading to better planning and management of railcars, which can decrease the likelihood of incurring demurrage charges.
• Cons: If appointments are not scheduled efficiently or if there are delays outside the customer’s control, there could be higher risk of demurrage if cars are sitting idle waiting for their appointment slot.

For Closed Gate customers, advanced scheduling software and strong logistic planning are essential. They need to align railcar arrivals with available unloading/loading slots to avoid railcars sitting idle waiting for an available slot, which leads to demurrage.

Understanding Specific Railroad’s Demurrage Rules

The nuances of demurrage rules can significantly impact the charges you receive, and each railroad’s rules may differ. Here’s a deeper look into the components that govern demurrage rules:

The Length of ‘Free Time’

The duration of this period can vary significantly from one carrier to another and may also depend on the type of cargo or specific agreements. Shorter free times require faster turnaround, which can challenge operational capacities, especially during peak times or unexpected delays.

The Rate of Demurrage Charges

After the free time expires, charges begin to accrue at a rate specified by the carrier. These rates can be fixed or variable, and sometimes escalate the longer a railcar remains unutilized. Understanding these rates is essential for forecasting potential costs and for making informed decisions about the timing of cargo movements. It influences not just budget planning but also operational strategies for avoiding or minimizing demurrage fees.

Tiered Charging Structures

Many carriers implement a tiered system where the daily rate increases after certain thresholds are reached. This is designed to discourage prolonged use of railcars as storage and encourages more efficient cargo handling. This system makes it crucial for you to prioritize the movement of railcars within or shortly after the free time to avoid escalating charges that can significantly inflate costs.

Exemptions

Carriers may offer exemptions or waivers for demurrage charges under specific conditions, such as natural disasters, operational disruptions not within the control of the shipper, or when railcars are misrouted by the railroad. Awareness of potential exemptions allows you to negotiate waivers or reductions in charges when unforeseen circumstances affect your ability to load or unload in a timely manner.

Dispute Process

Rail carriers have established procedures for disputing demurrage charges. This might involve submitting evidence of timely loading/unloading, proof of extenuating circumstances, or errors in billing. Knowing how to navigate the dispute process is crucial for rectifying unjust charges and can help maintain financial planning integrity. It requires meticulous record-keeping and an understanding of the carrier’s documentation requirements.

Events That Impact Demurrage

Rail demurrage charges are triggered when railcars are not loaded, unloaded, or moved from the railroad’s property within the allowed free time. Various events and scenarios can lead to the accumulation of these charges. Understanding these common situations can help shippers and receivers plan better and take preventive measures to avoid or minimize demurrage costs. Here are several events that frequently impact rail demurrage:

Delays in Loading or Unloading

Insufficient staffing, equipment failures, or inadequate preparation for the railcar’s arrival can delay the loading or unloading process. Once the free time expires, demurrage charges start accruing until the railcar is freed up for movement.

Congestion at Facilities

Overcapacity at loading, unloading, or storage facilities can lead to congestion, preventing timely access to railcars. Railcars remaining stationary due to inability to proceed with loading or unloading procedures due to congestion start accumulating charges after free time.

Inaccurate Scheduling or Planning

Miscommunication or poor scheduling could result in rail cars arriving when the receiver is not ready or when space is not available. Misalignment in scheduling leads to railcars sitting idle, thereby incurring demurrage.

Documentation or Customs Delays

Incorrect, incomplete, or delayed paperwork can halt the movement of goods, particularly for international shipments undergoing customs clearance. Any hold-up related to paperwork can cause your rail car to be detained beyond the free time.

Equipment Availability

Lack of necessary equipment to load or unload cargo, such as cranes for heavy lifts, can delay operations. The absence or failure of essential loading/unloading equipment precipitates demurrage charges.

Weather or Natural Disasters

Extreme weather conditions or natural disasters (floods, earthquakes, severe storms) can disrupt rail operations and facilities. Although these are uncontrollable events, they can still lead to railcars being detained beyond their free time, initiating demurrage charges, though some railroads might offer waivers in these situations.

Operational Inefficiencies

Inefficient internal processes, poor yard management, or lack of coordination with the railroad can cause delays. Inefficiencies within the shipper’s or receiver’s operations that result in railcar detention beyond allocated free time lead to demurrage.

Section 3: Financial Aspects of Demurrage

Understanding Credit/Debit Days

Credit/Debit Days is the time frame that railcars are utilized for loading and unloading versus the time they are allowed to be used as per the rail carrier’s policy. Credit days refer to the days when demurrage credits (non-chargeable days) are applied to your account with the carrier, versus debits (chargeable days).

The concept of credit days refers to the days for which no demurrage charges are applied if the loading/unloading of a railcar is completed within the specified free time. This free period varies by carrier but typically ranges from 24 to 48 hours after the railcar’s arrival. If the loading/unloading exceeds the free time, each additional day (or part of a day) that the railcar is held is counted as a debit day.

Demurrage fees are then calculated based on the number of debit days—the days when the railcar is occupying space beyond the free allowance—multiplied by the applicable demurrage rate set by the carrier.

The basic calculation for demurrage charges can be expressed as follows:

Demurrage Charge = Number of Debit Days * Daily Demurrage Rate

To apply this with a practical example, if you hold onto a railcar for three days beyond the free time, and the daily demurrage rate is $100, then the demurrage charges would be:

Demurrage Charge = 3 Debit Days * $100/Day = $300

Credit Days would simply be the days within the free period where no demurrage was incurred and would not usually need to be calculated unless they are part of a more complex credit accrual system with the rail carrier.

Financial Strategies to Minimize Charges

Here are some financial practices that can help you reduce both the likelihood and the magnitude of demurrage charges:

• Accrue Strategically: Set aside a budget for potential demurrage charges based on historical data and future estimates. This helps in managing cash flow effectively and avoids surprises.
• Regular Review: Conduct regular reviews of demurrage invoices to ensure charges are accurate and justified. Identify any patterns or recurrent issues that could be addressed to prevent future charges.
• Detailed Record-Keeping: Maintain meticulous records and documentation for all shipments, including times of arrival, loading, unloading, and departure. This data is crucial for disputing unwarranted charges.
• Negotiate Terms: When entering contracts with rail carriers, negotiate demurrage terms that are favorable or that reflect realistic turnaround times based on your operations.
• Volume Discounts: Leverage your shipping volume to negotiate better rates or terms regarding demurrage charges.
• Demurrage Insurance: Consider purchasing demurrage insurance to cover unexpected demurrage costs that exceed normal occurrences, especially for high-value shipments or during periods of increased risk.
• Escrow Accounts: Some companies set up escrow accounts specifically for demurrage fees, helping to manage the financial impact separately from regular operating expenses.

To see if you could be saving on your demurrage costs, use our Demurrage Savings Calculator, designed by RSI Logistics’ rail logistics experts.

Section 4: Managing Demurrage Charges

Submitting a Demurrage Dispute

To effectively submit a demurrage dispute and potentially have the charges waived or adjusted, follow these typical steps:

1. Review the Invoice and Terms

Before filing a dispute, thoroughly review the demurrage invoice and the terms of service regarding demurrage as laid out by the rail carrier. Understand the charges and why they were incurred.

2. Gather Supporting Documentation

Collect all relevant documents that you believe support your case. This might include timesheets, railcar tracking data, communications with the railroad, or evidence of force majeure scenarios like adverse weather conditions.

3. Submit the Dispute Form

Railroads usually have specific forms and processes for submitting demurrage disputes. You often need to fill out a dispute form which requires details such as:

• Your company’s contact information
• Details of the disputed charge (such as invoice numbers, railcar numbers, dates of service)
• A clear explanation of why you believe the charges are incorrect
• Any supporting documentation

4. Send the Dispute Within the Deadline

It’s crucial to submit the dispute before the deadline, which is typically within a set number of days after the invoice date (e.g., 30 days). Late submissions may not be considered.

5. Follow-Up

After submitting the dispute, keep track of the process. Rail carriers have their timelines within which they aim to resolve disputes (e.g., 30 days).

6. Review the Decision

Once the railroad reviews the dispute, it will make a decision to either adjust the invoice, waive the fees, or uphold the charges. Review the decision carefully to understand the outcome and the reasoning provided.

Reasons to Submit a Demurrage Report

You might choose to dispute demurrage charges for several reasons. These generally align with situations where you believe the charges are either unwarranted or incorrect.

• Carrier-Caused Delays: If the delay in unloading or moving the railcar is due to the carrier’s own operational issues, such as equipment failures, misrouting, or crew shortages.
• Force Majeure Events: Events beyond the control of either party, such as severe weather, natural disasters, or other extraordinary events, might justify waiving demurrage charges.
• Incorrect Billing: Discrepancies in the bill, such as incorrect calculation of charges, misidentified railcars, or charges applied outside the agreed free time.
• Inaccurate Time Tracking: If the carrier inaccurately recorded the arrival or departure times of the railcar, resulting in unfair demurrage charges.
• Lack of Notification: If you were not properly notified about the railcar’s arrival, thus preventing you from making timely arrangements for unloading.
• Facility Issues: If the receiver’s facility was not accessible due to carrier’s operations, such as track maintenance or congestion caused by the carrier, then demurrage charges may be disputed.
• Disputes Over Free Time: You might be able to contest demurrage charges if there’s a disagreement over the amount of free time allotted or if there was a misunderstanding about the terms and conditions surrounding free time.
• Exceptional Circumstances: Sometimes, there may be unique or exceptional circumstances that could be considered as a basis for waiving demurrage charges.

Identification of Bunching and Its Impact

In the rail transportation context, “bunching” refers to the occurrence when several railcars destined for a particular location arrive at the same time or within a very short timeframe. This can happen due to various scheduling reasons or inefficiencies in a rail network, causing multiple trains or shipments to converge simultaneously. Bunching conflicts with the expectation of evenly spaced arrivals, which allows for smoother unloading processes and better resource management at the receiving end.

Bunching can have a significant adverse impact on demurrage:

• Overwhelms Facilities: Facilities may not have the capacity or manpower to handle a large influx of railcars simultaneously, leading to delays in unloading.
• Exceeds Free Time: Due to the unanticipated accumulation of railcars, the time required to unload can exceed the free time allowed by the carrier, resulting in demurrage charges.
• Strains Resources: Limited rail tracks, loading docks, or storage areas may become saturated, causing additional railcars to be held up on the rail network, which also can result in more demurrage costs.

Mitigating Bunching Effects

• Improved Communication and Coordination: Regularly communicate with the rail carrier to be informed about the expected arrival of cars. Coordinate with other shippers and the rail carrier to spread out the delivery of cars.
• Scheduling and Tracking: Schedule unloading resources efficiently and use railcar tracking technology to monitor the movements and anticipated arrival times closely.
• Buffer Stocks and Storage: Maintain buffer stock or additional storage capacity to handle unexpected surges in railcar arrivals.
• Contractual Terms: Negotiate terms with rail carriers that account for the possibility of bunching, such as extended free time or flexible demurrage policies.
• Efficient Resource Management: Optimize resource allocation, such as workforce and equipment, to handle peak unloading times.
• Operational Improvements: Implement process improvements to increase the speed of unloading when bunching is imminent or occurring.
• Strategic Planning: Develop a comprehensive logistics plan that anticipates potential bunching scenarios and includes contingency strategies.
• Diversifying Supply Chain: Consider using alternative transport modes or different routing options to reduce reliance on a single rail carrier or route that may be prone to bunching.

Proactive Measures to Avoid Charges

Proactively avoiding or minimizing demurrage charges before they occur requires strategic planning and efficient operation management.

1. Efficient Loading and Unloading Operations: Streamline operations at your facility to ensure quick loading and unloading of railcars. This may involve investing in better equipment, optimizing labor shifts, or redesigning storage for easier access.
2. Regular Communication with the Railroad: Maintain open lines of communication with the rail carrier. Inform them of any potential delays or operational issues at your facility that might impact railcar movement. Similarly, get real-time notifications from the carrier about railcar statuses.
3. Utilize Tracking Tools for Railcars: Invest in railcar tracking technology or use carrier-provided tracking systems to have real-time information on the whereabouts and estimated arrival times of your shipments. This allows for better preparation and resource allocation.
4. Review and Understand Tariffs and Policies: Be well-versed with the carrier’s demurrage policies, free time allowances, and applicable tariffs. Understanding these details can help you strategize to maximize free time and minimize additional charges.
5. Consolidate Shipments: Whenever possible, consolidate your shipments to reduce the number of railcars used and minimize the risk of demurrage. Larger, less frequent shipments may be easier to manage than numerous smaller ones.
6. Implement a Just-in-Time Inventory System: Adopting a just-in-time system can reduce the time goods spend in your inventory, synchronizing your supply chain to the arrival of railcars and thus minimizing idle time.
7. Engage in Partnership and Collaboration with Carriers: Work towards building a collaborative relationship with your carriers. Negotiating terms that are mutually beneficial can sometimes lead to more favorable demurrage terms or increased flexibility during unforeseen circumstances.

Tips and Tricks for Efficient Demurrage Management

These tips and tricks are offered by our team of demurrage experts, who specialize in assisting our clients in minimizing their demurrage charges.

1. Maintain Open Spots: Leave some open spots available so that railcars can be immediately ordered in upon reaching constructive placement. Rail carriers charge from the date of arrival to the date the car was ordered in for unloading by plants.
2. Plan Ahead: Anticipate the arrival of incoming railcars and ensure an equivalent number of railcars are unloaded/loaded and released upon their arrival. For instance, if you have five railcars arriving over the next three days, plan to have five railcars unloaded/loaded and released before then.
   1. Coordinate with Shipping Partners: Work closely with partners, especially in plants unloading various commodities, to streamline operations.
   2. Leverage Transit Time Insights: Take time to understand your lanes’ typical transit time. If you’re not certain how to do so, at RSI we offer a Transit Times data visualization report.
   3. Monitor Load/Unload Times: Compare load/unload times with transit times when developing logistical plans.
   4. Expand Storage Options: If possible, consider additional storage methods (e.g., silos, bins, containers) to build a reserve of products, reducing reliance on railcars for storage and minimizing demurrage costs.
3. Optimize Internal Processes: Regularly evaluate your load/unload times and improve these processes for maximum efficiency.
4. Negotiate Terms: If you’re a shipper who has a considerably large amount of rail freight, negotiate terms with railroads, who are often willing to provide favorable conditions to large partners.
5. Incorporate Buffer Time: Establish a cushion for unexpected delays to avoid the domino effect.
6. Educate Your Team: Ensure your staff understands the carrier’s specific tariff rules to avoid preventable charges.
7. Audit Demurrage Invoices Regularly: Implement a routine review of demurrage invoices to catch any discrepancies or opportunities for dispute.
8. Create a Contingency Plan: Develop backup plans for unforeseen logistical challenges.
9. Utilize Demurrage Management Technology: Take advantage of technology like Rail Command to plan, track, and maintain a historical record of your demurrage activities.

Section 5: Leveraging RSI’s Experts for Demurrage Management

Our Demurrage Management Service combines Rail Command, our rail shipping management technology, with our rail demurrage experts to minimize unnecessary demurrage costs. By offering tailored solutions, we empower you to not only track but also actively manage and optimize your demurrage. By improving the accuracy of tracking, enhancing the visibility of railcar movements, and fostering proactive management practices, you can not only dispute demurrage charges but also preemptively address issues that typically result in charges.

Our Demurrage Management Service includes:

Comprehensive Reporting Tools

Demurrage Reports:

• Summary and Detailed Reports: Offer an overarching view and granular data about rail car movements and standing times.
• Site Report and 5 Days Out Report: Enable proactive management by forecasting potential demurrage scenarios before they occur.
• CP Report, Transit Time Report, and Lane Performance Report: These specific reports target performance metrics that influence demurrage costs directly.
• On-Time Report and Pipeline Report: Help in understanding schedule adherence and the sequencing of cargo loading/unloading operations.

Manual Reports:

• Invoice Tracker: Records demurrage charges and disputes, effectively associating costs with plants and providing a history of disputes.
• Total Demurrage: Visual comparisons across different periods showcase the financial impact of demurrage and the effectiveness of dispute management.
• Switch Performance Report: Focuses on operational failures like missed switches, aiding in accountability and improvements in scheduling efficiency.

Demurrage and Storage Charge Audit

Our process involves a thorough audit of demurrage charges:

• Dispute Submission: Engaging with railroads to contest unjust or erroneous charges with documented evidence.
• Relationship Management: Maintaining strong connections with railroad demurrage contacts to facilitate negotiations and dispute resolutions.

Enhanced Visibility

Included is a dedicated email for our demurrage management experts that serves as a direct line for inquiries, providing you with a straightforward method for communication.

Regular Performance Reviews

If needed, our demurrage management experts can hold strategic sessions with your railroad representatives to ensure continuous improvement and accountability, as well as address systemic issues that are causing charges.

Proactive Consulting

We advise you on best practices and strategies to avoid demurrage:

• Preventative Planning: Understanding railroad-specific nuances which can be leveraged to avoid charges.
• Historic Data Analysis: Identifying patterns and preparing for predictable fluctuations in railcar usage and demurrage accrual.

Ready to take control of your demurrage costs? Discover how RSI’s Rail Command technology, paired with our expert Demurrage Management Service, can transform your approach to demurrage. Get started with RSI today and elevate your rail management strategy.

Effectively managing demurrage is crucial for maintaining cost-efficiency and operational smoothness in rail freight shipping. Throughout this guide, we’ve explored what demurrage is, the key factors influencing these charges, and detailed strategies to manage, reduce, and dispute them effectively. By implementing the insights and tools discussed, particularly RSI’s Rail Command coupled with our expert Demurrage Management Service, you can proactively handle demurrage, leading to significant cost savings and enhanced operational efficiency.

Remember, demurrage doesn’t have to be a cost of doing business; with the right approach, it’s a controllable factor that can dramatically improve your bottom line. Take charge of your demurrage management today and drive your business towards greater profitability and efficiency.

The post The Ultimate Guide to Demurrage: Understanding, Managing, and Reducing Your Costs appeared first on RSI Logistics.

In this blog, our rail logistics experts take a look at nine vital elements of freight costing, what they mean, and how you can use them to improve your rail shipping costs.

How Freight Rate Costs Affect Rail Freight Costs

Understanding freight rate costs is pivotal if you rely on rail carriers for your shipping needs. Grasping the nuances of these costs not only enables you to effectively budget and plan but also uncovers opportunities for negotiation and cost reductions.

Rule 11 versus Through Rates

If your rail freight must be shipped on more than one railroad, this is known as a multi-railroad shipment. There are two different methods of charging rates with a multi-railroad shipment: Through Rates or Rule 11.

Rule 11 refers to the billing practice where each carrier involved in transporting shipments invoices you separately. Understanding Rule 11 is crucial because it can influence the total cost of shipping, because costs like handling fees and rates can vary between carriers. Through rates refers to when one rate is charged from the origin carrier; then that carrier is responsible for paying any other carrier(s) in the movement.

If you ship via more than one carrier, consider switching to Rule 11 for your rates. Although Through Rates reduce administrative burdens, you don’t receive as much information about how much you’re really paying. Furthermore, you lose the ability to negotiate individually with each railroad.

Fuel Surcharge and Rail Shipping Costs

Fuel surcharges are additional fees rail carriers impose to cover fluctuating fuel costs. These surcharges can significantly affect your freight costs as they are tied to variable fuel price indexes. RSI Logistics offers a data visualization of those fuel surcharges here, or you can find them in tools such as Rail Impact®.

To lessen the sting of fuel surcharges, you can:

1. Opt for longer-term contracts to lock in rates.
2. Consolidate shipments to maximize fuel efficiency.
3. Stay informed about fuel price trends to better anticipate surcharge changes.

The Railroad’s Costs

Railroads expenses range from fuel, labor, and maintenance of tracks and trains to regulatory compliance and technology upgrades. These costs directly influence the pricing of rail freight services, as they pass along costs to freight shippers on their network.

Understanding these operational costs can help you better understand your freight costs, and even empower you during negotiations. For example, knowing when railroads might be more eager to fill capacity could lead to lower rates. Or you can leverage periods of lower demand to commit to long-term contracts, which might be more appealing for railroads looking to secure steady revenue streams.

Revenue-to-Variable-Cost Ratio (RVC)

The RVC is a key metric that the railroads use to measure how much revenue the railroad generates compared to its variable costs, which include fuel, labor, and maintenance directly associated with each journey. An RVC above 1 indicates that the revenue covers the variable costs, generating a profit margin, while an RVC below 1 suggests that the service isn’t covering its variable expenses.

A railroad typically sets its profit targets based on what it currently earns from similar traffic. For instance, if existing rates for a specific commodity yield an RVC of 2.0, the railroad will likely aim for the same return with any new rate proposals, particularly if the new traffic could replace current business. Railroads often aim to surpass this ratio through a strategy known as margin-plus pricing, where they seek higher than normal profit margins.

While you don’t want to discuss RVCs with the railroad, by understanding them, you can identify opportunities to negotiate better rates, especially if you know a rail service is operating efficiently with a healthy RVC. This knowledge can be leveraged during off-peak seasons or for routes where railroads are keen to increase volume.

Optimizing Transit Time

Optimizing transit times entails a strategic approach to routing, scheduling, and environmental concerns, all of which contribute to minimizing delays and ensuring goods arrive at their destination swiftly and reliably.

Transit Days

Transit days refer to the amount of time taken for goods to be transported from the point of origin to the destination. This measurement can heavily influence total freight costs, with longer transit times generally increasing costs due to storage, handling, and capital tied up in goods in transit.

To reduce transit days, opt for direct routes when possible and leverage expedited shipping options for time-sensitive cargo. Effective planning and off-peak scheduling can also avoid delays. For instance, choosing a slightly more expensive direct route can lower overall costs compared to a cheaper, longer route with multiple interchanges.

Carbon Footprint

Carbon footprint measures the amount of greenhouse gas emissions produced by rail operations, particularly the route your rail shipment takes. Longer transit times and less direct routes often result in a larger carbon footprint due to increased fuel consumption.

To reduce your carbon footprint, consider using the most direct routes and combining shipments to maximize load efficiency. For example, shipping full rail cars instead of multiple less than full rail shipments can cut fuel use.

Routing Options and Minimizing Rail Freight Costs

In rail freight shipping, a route refers to the specific rail tracks and connections selected for transporting goods from their origin to their destination, with each route varying in distance, transit time, and potential obstacles or considerations. Selecting the right route is crucial for minimizing freight costs. An optimal route balances shorter transit times with lower operational costs.

Utilize tools like Rail Impact to evaluate potential routes effectively. Rail Impact offers insights into multiple routing options from origin to destination, allowing for a comprehensive comparison of times, distances, and associated costs. By analyzing these options, you can choose routes that offer the best mix of efficiency and cost savings.

Market and Carrier Information

Leveraging market and carrier information is important to securing competitive advantages in rail freight logistics. By staying informed about market trends, rate fluctuations, and carrier capabilities, you can make data-driven decisions that optimize cost, efficiency, and service quality.

Serving Carriers and SCRS

A serving carrier is a railroad company that provides freight service to your shipping and/or receiving facilities. The SCRS (Serving Carrier/Reciprocal Switch) database, accessible through tools like Rail Impact or Rail Info, lists these carriers, offering critical data for strategic planning.

Utilizing the SCRS database enables you to identify all possible serving carriers to facilities, which provides leverage in cost negotiations. For example, if two or more carriers can serve your shipping needs, this competition can be used to negotiate better rates or service terms.

Market Analysis Impact on Rail Freight Costs

A market analysis involves examining the trends and patterns of commodities being shipped—such as grains from the Midwest or automobiles from manufacturing hubs—the volumes typically transported, and the railcar types most used. This information, available through platforms like Rail Impact or Rail Info, provides valuable insights for strategic shipping decisions.

Leverage market data to understand demand cycles and average rates for your commodities. This knowledge assists in forecasting costs and identifying the most economical rail cars for your shipments.

Navigating the intricacies of rail freight costs involves a keen understanding of the myriad factors that go into building these costs. By utilizing resources like the SCRS database for carrier options and leveraging market data to inform shipping strategies, you can significantly enhance your negotiation stance. Remember, every element from route selection to the type of railcar impacts your bottom line.

We encourage you to apply these insights and strategies to your rail freight operations; and if you need to talk to our rail logistics experts about how to apply the strategies explored in this blog, reach out to us, or come join our free webinar where we take a look at how to negotiate with the rail carriers. Empower your rail logistics and reach out now.

The post Decoding the Data and Metrics Behind Rail Freight Costs appeared first on RSI Logistics.

Rail Interchanges Defined

Interchanges, in the context we will be examining, is not about rail freight physically switching tracks. Rather we will be looking at when a rail carrier who is transporting your rail freight needs to pass your rail cars off to a different rail carrier. This sort of cooperative effort is required to ensure that rail freight reaches its destination even when it needs to travel on tracks owned by multiple rail carriers.

Rail interchanges allow freight rail shippers to avoid a logistical headache. If the railroads didn’t use interchanges, any goods would have to be unpacked from one train and repacked onto another each time they would reach another rail carrier’s tracks. That would be a time-consuming and expensive process.

Fortunately, railroads have systems in place to manage these handovers, which include standardized equipment and schedules. The agreements that govern these exchanges are quite sophisticated, ensuring that everything from the wheels on the freight cars to the paperwork trails is compatible and in order. This means that freight can move from one rail carrier’s network to another’s as smoothly and quickly as possible.

This teamwork among railroads is not only good for shippers but also makes the entire freight transport process more efficient and cost-effective.

How Interchanges Work

Rail interchanges involve a series of meticulously coordinated actions. Here, we delve deeper into the mechanics of how interchanges work:

Physical Connection

At the heart of an interchange is the physical connection between the tracks of participating railroads. This connectivity is a carefully engineered interface designed to accommodate the diverse equipment and operational standards of different rail carriers. The compatibility of track gauges, signal systems, and track designs is crucial to ensure that trains can move from one rail carrier’s network onto another without interruption.

Exchange of Cars

Upon arrival at an interchange point, railcars categorized as ‘foreign’ to the host railroad are handed over to the receiving railroad. This transfer is more complicated than simply moving rail cars from one rail track to another and involves a more strategic switching. This often requires the use of specialized locomotives and crews proficient in the operations of both involved railroads. The goal is to integrate these foreign cars into new trains that continue towards their destination.

Documentation and Billing

Behind the scenes of the physical and operational interchange processes lies a complex series of documentation and billing. This administrative aspect is essential for accountability and financial settlement between railroads. Each participating railroad meticulously documents the transfer of cars, noting specifics such as car numbers, cargo descriptions, and the condition of goods.

Benefits of Rail Interchanges

Interchanges are pivotal in maintaining the seamless operations of freight rail transport across a vast network. They ensure that the movement of freight across different territories or rail systems is seamless and rapid through efficient connections, optimized routes, and flexible networks.

Efficient Connections

Interchanges act as hubs in the rail network that link different railroads across the continent. This network enables your freight to remain in the same rail car from the starting point to the destination, regardless of the distance. This continuous journey eliminates the need for transferring cargo between different cars and trains, which saves time, reduces handling errors, and minimizes damage risks.

Optimizing Routes

Railroads effectively collaborate to pinpoint the most strategic locations for interchanges, ensuring the smooth flow of traffic across various networks. Rail carriers like the CSX, BNSF, CN, UP, and CPKC work together, pooling their expertise and resources to optimize the routing of rail freight. This cooperation is reflected in the way shippers are advised on routing instructions; by specifying routes that use these optimal junctions, they inform you how you can optimize your routes while lowering transit times.

Network Flexibility

Interchanges not only connect different railroads but also bring versatility to the rail network. They enable the handling of a diverse array of cargo types, accommodating goods from various industries and geographical areas. This flexibility is essential especially for businesses that operate in multiple regions, providing them with reliable transportation options regardless of the cargo’s origin.

Challenges of Rail Interchanges

Like all specialized movements in a transportation network, rail interchanges come with their own set of challenges. These complexities can at times hinder the efficacy and timeliness of your rail freight. Here, we further explore the challenges associated with rail interchanges:

Delays

One of the more prominent issues faced at interchange points is the potential for delays in shipping. These delays can occur for a myriad of reasons, with congestion at the interchange point being a chief contributor.

Many railway networks converge at these junctions, and when traffic volumes exceed the handling capacity of the interchange, bottlenecks can occur. Trains may be forced to wait for extended periods before they can proceed, impacting schedules downstream and potentially causing significant delays in cargo delivery.

While alternative interchange points might exist that could alleviate traffic congestion, the selection of interchange points is a complex decision. It involves considerations of geography, agreements between railroads, and infrastructure capacity. The railroads involved have the authority to determine the most suitable interchange points based on these factors, which may not always prioritize the avoidance of congestion.

Misplaced Cars

Another issue, less frequent but significant in its potential impact, is the misplacement of railcars.

Errors can sometimes occur when moving thousands of railcars across vast distances and through numerous interchange points. A missed switch, human error, or miscommunication can result in a railcar being sent on an incorrect path, leading to misplacements. Even with sophisticated tracking and scheduling systems in place, the sheer volume of cars and the complexity of operations can lead to such errors.

The consequences of misplaced cars can range from minor delays to significant logistical challenges, especially if the cargo in question is time-sensitive or involves hazardous materials. Overcoming such errors often requires additional time and resources, further compounding the delays.

While they offer numerous benefits in terms of connectivity, route optimization, and network flexibility, rail interchanges are not without their challenges. Issues such as delays and misplaced cars can occasionally disrupt the smooth flow of operations.

Nevertheless, the collaborative efforts of rail carriers to navigate these challenges underscore the importance of interchanges in maintaining a robust and reliable freight transport system. As railroads continue to refine their interchange processes and technologies, the future of freight rail transportation looks promising.

The post The Ins and Outs of Rail Interchanges appeared first on RSI Logistics.

Recently, we’ve seen an increase in businesses interested in exploring the potential of shipping by rail. As the trucking industry deals with unpredictable highs and lows, many companies are considering rail as a more cost-effective alternative to trucking. Rail is an excellent mode of transportation presenting numerous advantages, like cost-savings, stability, less environmental impact, and safety. We put together this blog post to provide some instructions and tips about how to ship by rail for beginners. We’ve updated this blog post in 2024 to give you more information and additional tips.

What Commodities Are You Shipping?

The first thing to consider for beginners when shipping by rail is the type of commodity that you are thinking about moving via rail. The products that you will move are a major factor in determining which modes of shipping are appropriate! The commodity being moved is the foundation and basis for your rail shipment, and as a result, this is the starting point. So, let’s talk about the details of the commodity you will be shipping and the important questions to ask.

Time-Sensitive Commodities

Is your commodity time sensitive?

Although rail is an excellent way of moving bulk commodities over great distances, it is also considered one of the slower modes. The rail network is rigid and delays resulting from weather events, derailments, embargoes, and more, can have a ripple effect on the entire North American rail network. For example, weather issues in the New Orleans area can result in delays to rail traffic in the Chicago area.

Though it also depends on the distance, rail loads often take two weeks or more to make it to their destination. For this reason, time-sensitive loads may not be ideal for rail.

Commodity Type

Most commodities can move via rail. However, your specific commodity may affect which type of rail transportation you should trust to move your goods. For example, if you are shipping dry bulk goods, you can certainly take advantage of shipping on standard manifest trains, as that will be your most cost-effective rail option.

Conversely, if you are shipping finished goods, you are more likely to use an intermodal shipping option. With this option, your goods will be containerized and moved in the same container on truck, rail, and if shipping internationally, on a vessel.

Distance and Costs

Rail transportation has been shown to be cost effective over long distances, thanks to fuel-efficient trains. In fact, on a single gallon of gas a train can move one ton of freight 492 miles!

This makes rail the obvious choice for both your wallet and our environment for movements longer than 400 miles! However, the savings of shipping by rail decline when the distance from the origin to the destination is short and involves multiple railroads. Even with short moves, the railroads still have a base cost to move the goods and their overall ability to mitigate costs over many miles becomes hindered. It’s important to factor in distance when comparing the costs of rail vs trucks.

Origin and Destination

Another important detail to consider when looking at the distance of your move is where your move begins and where it ends.

Because rail shipping relies on tracks that have already been placed, and cannot easily be removed or changed, rail transportation is limited to certain routes. If where your supply chain begins and ends is not rail served, you will have to figure out how to get your commodities to and from railcars.

One method to accomplish this is transloading. Transloading is when goods are transferred from one mode of transportation to another. For rail, that normally means taking something from a railcar and placing it into a truck, or vice versa. For example, let’s say your origin location is rail served but your destination is not. In this scenario you can load directly to railcars at your origin, but you will need to use a transload facility near your destination, so the product can be transloaded to truck for the final move to your destination.

Railcars and Volume

In addition to your routes and commodities, it’s also critical to consider the volume of goods you’re moving. One railcar can carry about four truckloads worth of goods. If you have a high volume of goods over long distances, rail will generally be ideal. A high volume of goods will also spread out the costs of railcar ownership or leasing costs.

How to Get Railcars

If you are interested in starting in rail shipping, you may still be wondering where to obtain the railcars you need. what about a railcar?

This answer depends on multiple variables. Railcars can be purchased, leased from railcar manufacturers and owners, or supplied by the railroad. If you anticipate consistent rail volume, you may prefer to lease or purchase your own railcars, instead of using railroad provided railcars. The type of commodity you’re shipping will also influence this decision, which we’ll discuss in a later section.

If you anticipate infrequent movements via rail, your better option may be to use railroad-provided railcars, also known as system cars. These are one-time use railcars that you pay for as part of the freight rate.

An Example: Shipping From Houston to Cleveland

Let’s take a look at an example. Let’s consider the movement of a bulk commodity from Houston, TX to Cleveland, OH. To ship by truck in this example lane, the costs would amount to approximately $5,159 per load, whereas rail would be $6,676 per car. However, you also have to consider the volume of goods you’re shipping. Since one railcar equals four truckloads, you must apply the ratio of 1:4. This amounts to a truck cost of about $215 per ton, and a rail cost of only about $70 per ton. This will vary somewhat depending on whether you are leasing railcars, using railcars you own, or using system cars.

Railcars and Commodities

Another variable to help beginners ship by rail is to consider your commodity type. Some commodities cannot be shipped in system cars. Instead, you must lease or purchase railcars. Generally speaking, the only type of system cars available are flat cars, box cars, hopper cars, and automotive cars. If your commodity is bulk liquid, sensitive to getting wet, or has other special considerations, you will need to procure your own railcars. In this process, you will also determine the type of railcar that best suits your needs. Here are some common examples:

• If you are moving any type of free-flowing liquid, you will want to ship it in a tank car.
• If you are moving free-flowing dry bulk, you may want a hopper car. However, if you are moving dry bulk that cannot be exposed to the elements, you may want a covered hopper car.
• If you are moving palleted palletized goods, you will want to use a box car.

The railcar owner that you are working with can help you determine the best option for your specific requirements.

Take Advantage of Rail Shipping

Should you take advantage of shipping by rail?

Rail is an incredible mode of transportation due to its ability to transport a massive amount of goods at one time. In fact, when comparing railcars vs trucks, one railcar is typically able to handle 3-4 truck loads worth of goods! However, due to trains moving massive amounts of goods for many companies at one time, trains are forced to stop though during transit to both add and remove cars. This contributes to rail shipments being slower than truck shipments.

One aspect of rail that is similar to trucks is the freight rate process. In rail, your volume may impact the overall rate you are given by the railroads. If you have significant volume, you may have the leverage to negotiate freight rates with the railroads. Or, if you are not able to negotiate private freight rates, you will be required to ship on a railroad’s public rate, also known as tariff rates.

If you are contemplating a new rail-served location, you should consider selecting a location with access to more than one railroad. This will give you leverage in negotiating rates because your location is now competitive, meaning you have more than one rail carrier you can ship with.

Final Thoughts

If you’re one of the many shippers who is considering rail for the first time, welcome! Although there is a learning curve to rail shipping, your cost savings can be significant. Before you jump in, consider the product, distance of the move, rail access, and railcar requirements.

If you find yourself unsure of where to start, don’t worry. Here at RSI Logistics, we can help you get started in rail shipping! Our experienced staff is able to guide you through the process. Reach out to find out more.

The post How to Ship by Rail for Beginners appeared first on RSI Logistics.

Rail freight rate negotiation involves a nuanced process of discussions between shippers — who need to move goods — and rail carriers — the entities that provide the transportation service. This process isn’t just about haggling over prices; it’s an art that requires a deep understanding of numerous factors including but not limited to the volume of goods, the type of commodities being shipped, and the service requirements. Spending effort to research, analyze, and improve these factors can save you time and money in the long run.

This blog aims to demystify the process of freight rate negotiation in the railway sector. From here we’ll look at some insights into how you can prepare, strategize, and engage in discussions with rail carriers to secure the best possible terms.

What is Freight Rate Negotiation?

Put simply, freight rate negotiations refer to the process of discussing and agreeing upon the cost of transporting goods via carriers – in this case, rail carriers.

This process usually involves shippers (those who have goods to transport) and railroads (the service providers) trying to settle on a fair price for the movement of freight over rail lines. The negotiation takes into consideration factors such as the volume of goods, the distance traveled, the commodity type, and service requirements. However, though the discussion is based on these factors, it is still a negotiation, and approaching it as such can help you secure better rates and terms that align with your logistics needs and budget constraints.

During negotiations, several elements can play a crucial role, such as fuel surcharges, accessorial charges, payment terms, and escalators. It’s important for you to understand these elements, as they can have a large impact on the total cost of shipping freight beyond simply the linehaul rates. For example, fuel surcharges are additional fees to compensate for fluctuating fuel prices, while accessorial charges are fees for extra services not included in the linehaul rate. These, and other elements, are set by the railroad during the negotiations.

Data is a critical asset in these discussions, as it supports a well-founded case for you to negotiate. Pricing data — including tariff rates, contract rate data, and understanding the Revenue-to-Variable-Cost Ratio (RVC) — can provide insights into which rates may be inflated and what could be a reasonable starting point for discussions.

How Freight Rate Negotiation Works

The actual process of freight rate negotiation between you and railroads involves a strategic and multifaceted approach, where understanding each other’s needs and capabilities plays a key role. Before the process begins, you should take the time to prepare a compelling business case to present to the railroad. This involves gathering detailed data and insights, including tariff rates, contract rate data, historical rates for other lanes, and understanding the railroad’s pricing strategies.

Railroad’s Price Presentation

Railroads often begin by presenting their initial rates. They have based these on various factors such as the type of goods, volume, service requirements, and distance. They might base their pricing on targeted profit levels from similar traffic, using metrics to assess the profitability of new rate requests against existing business.

Shipper’s Response Options

Once the carriers have presented their price, you as the shipper have several strategies and tools at their disposal to negotiate better terms. These include evaluating rail spend by railroad, considering the competition and the rail market, and determining where leverage exists.

Strategies to Improve Your Freight Rate Negotiation

Now we’ll take a look at three strategies that you can get started on today:

• Evaluate Your Rail Spend by Railroad
• Understand your Competition and the Rail Market
• Determine Your Leverage

It is important to note that the strategies we will take a look at now are proactive measures, and usually prepared ahead of any upcoming negotiations.

Evaluate Your Rail Spend by Railroad

Determine Profitability and Your Value

To highlight your significance to the railroad’s business, start by analyzing the volume of goods you ship on each lane, as well as where your biggest spending lies. Estimating the profitability of these lanes for the railroads can provide leverage in negotiations, as it reveals how much they stand to lose if your business goes elsewhere.

Understand Rate-Setting and Identify Outliers

To understand various cost components like base rates and surcharges, break down your current freight rates and then compare these to the general market. This analysis will help pinpoint any rates that are significantly higher than what is standard, indicating areas where there’s room for negotiation.

Benchmark and Focus Negotiations

Assessing the quality of service you receive and how your rates stack up against industry benchmarks enables you to pinpoint where you might be getting less value for your spend. This insight helps in making informed decisions on which railroads deserve more of your business and guiding your negotiation efforts towards improving terms on critical lanes or rates that are out of line with industry standards.

Understand Your Competition and the Rail Market

Consider Car Ownership, Size, and Weight

Knowing the equipment and logistics strategies of your competitors is crucial. If they use private railcars, opt for larger capacity cars, or maximize each car’s weight load, they might secure more favorable rates. Analyze if utilizing similar strategies could lead to cost savings for your freight operations and create an edge over competitors in rate negotiations.

Determine Your Railroad’s Market Share versus Competing Railroads

It’s important to gauge your railroad carrier’s position in the market compared to its competitors. If the railroad you are negotiating with is experiencing a decline in market share, this could indicate a willingness to negotiate better rates to retain and grow their business alongside yours. Leveraging this understanding could give you a substantial advantage in discussions about rate reductions.

Communicate Competitive Factors to Railroads

When negotiating rates, it can be beneficial to explicitly communicate to the railroad how certain rate adjustments are critical for you to maintain a competitive edge. If they are aware that offering you more competitive rates could be the key to preventing a competing rail carrier from capturing your business, they may find it justifiable to provide concessions that align with your needs.

Determine Your Leverage in Rail Freight Negotiations

• Shifting Traffic Possibilities:
  • Explore the feasibility of diverting your shipments to alternative rail carriers or different transportation modes (e.g., road, barge). If these competitors or other modes are feasible and cost-effective, having that knowledge will help in negotiations.
  • Analyze the benefits of transloading goods to different carriers partway through their journey. Switching to truck to access another carrier can, in some cases, allow you to potentially leverage more competitive rates or services.
• Captive Lane Treatment:
  • Keep in mind the premium pricing often associated with captive lanes (where only one railroad operates) when assigning lanes with competition.
  • Use the potential of assigning competitive lanes as a bargaining chip, especially if your current provider’s rates in captive lanes are unreasonably high.
• Rule 11 vs. Thru Rate Position:
  • Rule 11 rates pertain to interline shipments that don’t have “through” pricing – this means that each carrier along your freight’s route will create freight bills for its own portion of the movement. If it is a Through rate, you pay the origin carrier, and they are responsible for paying other carriers utilized in the interline shipment.
  • Assess your company’s usage of Rule 11 rates versus Through rates to identify opportunities for direct negotiations and potentially better rates with carriers.
• Identify Target Lanes to be in an Informed Position:
  • Pinpoint specific lanes where you aim to secure rate reductions, particularly when your contract renewals come due.
  • We recommend focusing on lanes where you have substantial volume, lanes served by multiple railroads, or lanes essential to your operations. Making these a priority in negotiations could help you start to see savings quickly.
  • After your analysis, start the negotiation process with lower, reasonable numbers based on being in an informed position.

Advanced Rail Freight Negotiation Strategies

If you’re a logistics professional in the rail industry, analyzing the minutiae of your rail logistics and strategically approaching your freight rate negotiations can be pivotal. The strategies that we have explored are a good starting point.

Furthermore, the strategies we have explored are intended to be proactive – done in preparation for negotiations. However, there are also strategies that can be employed reactively, in answer to rail carrier’s activities.

However, your negotiations and rail rates can be further optimized with the right tools and knowledge! This is where Rail Impact® and the rail experts of RSI Logistics can help. Utilizing Rail Impact makes exploring these strategies more efficient and effective, as it provides an in-depth analytics solution that is geared towards enhancing your rail rates knowledge and negotiation outcomes.

If you’re interested in delving deeper into these strategies, or exploring more advanced negotiation techniques, join us for our upcoming “Railroads Will Negotiate” webinar. Hosted by the RSI Logistics rail rate experts, this session will provide you with invaluable insights into freight rate negotiation strategies that can save your company money and improve your service agreements. Don’t miss the opportunity to learn from the best in the business.

Register now for the webinar and start transforming the way you negotiate in the rail industry.

Navigating the details of freight rate negotiation can be difficult, and being successful requires a strategic approach, as well as coming armed with in-depth knowledge and a good understanding of both your needs and those of the rail carriers. By thoroughly preparing, evaluating your rail spend, understanding the market, and determining your leverage, you can enter negotiations with a strong position.

Remember, the goal is not only to reduce costs but also to ensure that the service aligns with your logistical requirements and business objectives. Embrace these strategies, and you may find that your freight rate negotiations not only become more manageable but also more productive.

The post Strategies to Improve Your Freight Rate Negotiation appeared first on RSI Logistics.

Railcar storage is a service offered by certain facilities where railway companies or owners of railcars can temporarily store their train cars when they are not immediately needed for service. This may occur for a variety of reasons, such as seasonal fluctuations in demand, a surplus in transportation capacity, during disruptions in the supply chain, or when awaiting new shipments to fill the cars.

Storage facilities are usually strategically located areas where tracks are designated specifically for the purpose of storing these cars. They must be secure and well-maintained to ensure the safety and integrity of the stored railcars.

When to use Railcar Storage

Though railcar storage might not be ideal for generating revenue, there are scenarios where it makes sense and can lead to cost savings. Several factors can come into play when considering storing your cars, including the length of storage time, in and out fees, cherry-picking (if applicable), and the cost of moving cars to and from storage locations. We will look at these factors in just a moment; however, what is important to calculate is the difference between railcar storage factors and demurrage. The charges associated with demurrage can sometimes surpass the expenses of railcar storage, making storage a valuable option.

Particularly, railcar storage becomes ideal in situations where a fleet is oversized due to a decrease in demand or a potential increase in railroad efficiency through initiatives like Precision Scheduled Railroading (PSR). Railcar storage may also be beneficial when internal efficiencies are realized, or during long-term planned outages intended for upgrades to enhance efficiency.

Any of these scenarios can result in railcars being underutilized, and racking up charges as they sit, waiting for good to move. No matter how effectively a fleet is managed, changes in the supply chain are inevitable, and the ability to adapt as seamlessly as possible is crucial. Just as importantly, it is valuable to plan contingencies ahead of time, so that you can respond quickly and efficiently when necessary.

Railcar Storage Factors to Consider

When considering railcar storage for your logistics, certain requirements must be met, particularly for hazardous materials shippers. These requirements might include a secured, gated yard, adequate lighting, or potentially on-site security to meet liability concerns. If you require more specialized railcar storage locations with these amenities, this will typically mean a higher cost. In contrast, rural storage facilities often have a lower cost since space is more readily available.

Regarding the possible costs associated with railcar storage, several factors can affect those charges.

1. Per Diem Charge: Daily fees range from $4 to $50.
2. In-and-Out Charges: This fee is associated with moving the car into or out of a facility. Some facilities charge this fee entirely upon entry, while others split it between entry and exit. When storing cars on a short line, it is essential to determine ahead of time whether this fee includes moving the car to the storage track or if the cars will be subject to a separate revenue move. Market quotes range from $100 to $800 for in-and-out services.
3. Cherry Picking: If a specific car is needed from the railcar storage lot, additional efforts from the storage crew will be required to find and move it from amongst the rest of your fleet. These efforts often result in a “cherry picking” fee. This charge is additional to the in-and-out charge and can range from $150 to $400.
4. Revenue Freight Charges: Depending on whether the cars are loaded or empty, or when the railcar last traveled on those lines, revenue freight charges may be applied. This complex fee is influenced by numerous rules and can change depending on the storage facility, so understanding them is crucial to assess potential costs.

When considering storage costs, one important factor that can affect the calculation of charges is your intended duration. Different durations can change what might be the most cost-effective facility. For instance, a short-projected storage time might favor locations that capitalize on in-and-out charges, whereas longer-term storage could offer lower daily rates.

When evaluating storage and associated costs, an alternative to consider is sending cars to a shop if maintenance or upgrades are anticipated. This option is worth exploring since the cost would be incurred eventually anyways, and shop turn times would effectively remove the cars from service for a period – akin to storage.

The Industry Impact of Railcar Storage

Railcar storage levels can serve as an indicator of economic conditions, with high numbers of stored railcars often suggesting a reduction in industrial demand. In contrast, a decrease in storage levels may indicate an increase in economic activity and the movement of goods.

According to the Association of American Railroads, current storage levels are lower in comparison to the elevated volumes experienced during 2020 due to COVID-19. Although certain sectors of the economy displayed a slight increase in storage at the start of the year, there has been a notable reduction of 22,000 cars in storage since the year’s onset.

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