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’ll explore the current trends shaping the rail shipping supply chain, from sustainability and eco-friendliness to the digitalization of supply chains, the integration of telematics/GPS, advancements in intermodal tracking, automated data visualization, predictive ETAs, effective capacity management, and an increased focus on customer service. We will also look at how a Rail Transportation Management System (Rail TMS) provides solutions for each of the trends we will cover.

Each of these trends reflects the broader shifts in the industry, highlighting the crucial role of a Rail TMS in addressing these challenges and opportunities.

Table of Contents

• What is a Rail TMS?
• Current Rail Trends When Shipping Freight
  • Sustainability and Environmental Impact
  • Comprehensive Supply Chain Digitization
  • Intermodal Visibility
  • Automated Rail Data Visualization
  • Predictive Estimated Time of Arrival
  • Capacity Management
  • Customer Service
  • Agile and Resilient Supply Chains

What is a Rail TMS?

A Rail TMS, such as Rail Command^® from RSI Logistics, is an advanced, comprehensive transportation management tool specifically designed to streamline and optimize every aspect of your rail shipping process.

Unlike simple digitization methods such as manual spreadsheet tracking, a Rail TMS integrates rail shipping functions and processes to provide a unified platform for more effective and intelligent management of rail logistics. These systems facilitate improved planning, execution, monitoring, and optimization of rail freight movements, encompassing everything from rates and schedules to demurrage charges and equipment lease tracking. By leveraging a solution like Rail Command, you can achieve greater efficiency, visibility, and control over your rail transportation operations.

Current Rail Trends When Shipping Freight

The trends we will explore are those the rail experts at RSI Logistics consider defining for the rail freight industry. We will also look at how a Rail TMS like Rail Command provides solutions to all these trends.

First, we will break down the push for sustainability and environmental impact. After that we will cover the rail trends of supply chain digitalization, including telematics and GPS, as well as automated data visualizations and predictive ETAs. We will also look at intermodal integration and capacity management. And finally, we will touch on the growing importance of customer service and providing visibility for your clients.

Sustainability and Environmental Impact

Sustainability and eco-friendliness have increasingly become more important for any business whose supply chain involves freight.
Freight trucking, one of the most common modes of freight transport, is an outsized contributor to emissions. On the other hand, rail shipping is a much more environmentally friendly method. Regardless, even if your supply chain is primarily rail shipping, there is still an opportunity to streamline your freight transportation.

This is where a Rail TMS can provide a solution. Systems like Rail Command provide methods of automated visibility for both inbound and outbound shipments. For instance, with inbound, you can answer questions such as do I have cars to load? or do I have raw materials for manufacturing? The answers provided by Rail Command can help your supply chain be leaner and mitigate the need to order additional cars just in case. This eases the burden on the network and the resulting emissions.

Comprehensive Supply Chain Digitization

Digitization has been a trend for some time; yet as the rail industry continues to pursue digitizing various aspects of rail shipping, a new trend is also becoming notable – making that digital data comprehensive and all-inclusive.

Traditional data management methods involve taking the digitized data from your rail supply chain and manually combining it using methods like disconnected spreadsheets. With a comprehensive system like Rail Command, your digitized rail supply chain is:

• Accurate and Accessible: A Rail TMS enhances accuracy through the digitization of all aspects of your rail shipping network and makes it accessible from anywhere.
• Integrated: A unified system promotes visibility and integration of your digitized data.
• Analytical: The comprehensive aspect of Rail Command reduces the need for manual input of digitized supply chain movements, eliminating human errors and freeing up resources for strategic planning.

Intermodal Visibility Rail Trends

Intermodal, a shipping method that uses a combination of trucks and trains to move freight, is not a new trend and has been a mainstay of the North American rail network for decades. However, what is a growing trend is the power of reporting and capturing data for both modes in one comprehensive system. The alternative, and the usual method until recently, was to separately monitor two different networks and manually compare the visibility.

However, now systems like Rail Command can track the truck and rail portion of your intermodal moves within Rail Command. This allows for reporting and capturing data capabilities in a comparable way to Rail Command’s railcar services.

Automated Rail Data Visualization

Building off the comprehensive digitization trend we just examined, automated data visualization represents the next stage of the data trend. As more data points are received and aggregated into a Rail TMS, the next stage is to find insights from that data. However, studying raw data, even if it is in one place, is difficult through only manual analysis methods.

With systems like Rail Command, data visualization is automated and insightful. For instance, Rail Command includes a home command center that highlights key performance indicators such as railcars shipped, active cars status, and most recent service logs. Beyond that, every aspect of your rail supply chain has automated data visualizations – saving you time and money on finding the insights needed to manage and optimize your supply chain.

Predictive Estimated Time of Arrival (ETA)

Much like the trend of automated data visualization is building off comprehensive supply chain digitization, predictive ETAs are building off visibility and location tracking. As the rail trends of visibility and location begin to evolve and introduce Global Positioning Systems (GPS) alongside traditional Car Location Messages (CLM), the next stage is to provide a measure of predictability to that visibility.

Systems like Rail Command take the data of a shipment route and generate an ETA. From there, the ETA can fluctuate through transit as delays and challenges occur. Doing this manually would be difficult, even if all the data were in one comprehensive system, but with the automation and data models of a Rail TMS, it is all a click away.

Capacity Management

A rail trend that is central to streamlining supply chains is capacity management. As profit maximization and supply chain optimization become more important, effective utilization of capacity is becoming a prevailing trend within the rail industry.

A comprehensive Rail TMS serves as a solution to the detailed intricacies of rail capacity management. A Rail TMS leverages data to optimize order management, monitors what equipment needs to be sent to shop when, integrate with corporate systems, and more. Furthermore, by eliminating manual tracking, guesswork is also eliminated, which means that when decision makers go to view their operations within the Rail TMS, they can understand how capacity is being utilized.

Customer Service Rail Trends

In today’s competitive marketplace, the emphasis on customer service within the rail industry is more pronounced than ever. Customers are increasingly gravitating towards companies that offer not just competitive pricing, but also superior customer service. In response to this trend, leveraging technology like Rail Command becomes crucial to meeting and exceeding customer expectations.

To improve visibility and make it inclusive for your supply chain, a Rail TMS enables you to identify and address potential disruptions before they escalate. This means that any challenges in the transportation process can be managed more efficiently, minimizing the impact on your customers. You are also able to keep your customers informed about the status of their shipments in real time. Whether it is a delay or early arrival, customers appreciate being in the know, which fosters trust and loyalty.

Agile and Resilient Supply Chains

Regardless of which mode of transportation(s) your supply chain utilizes, a trend that has been front and center for years is that of companies adopting an agile supply chain and a resilient supply chain. The impact of the pandemic in 2020 highlighted how valuable agility and resiliency are. In situations where sudden shifts in the industry can drastically impact your ongoing rail shipping, it is important that you are able to adjust correspondingly and that your freight transportation can adapt while being resilient enough to keep vital shipments arriving and departing.

To improve the rail trends of agility and resiliency, companies are investing in technology that enhances visibility in their supply chains to minimize disruptions.

We put this point last because all the previous rail trends we have covered are vital to making a rail supply chain agile and resilient. Visibility of assets, shipments, and data helps you be agile. Environmental consciousness, capacity management, and customer service help you to be resilient.

With a Rail TMS like Rail Command, your rail supply chain is prepared not just to be resilient and agile but prepared for all rail trends, current and future.

The rail industry is evolving and rail trends that just a handful of years ago were far off in the future are either here and available or working on being implemented by railroads and shippers alike. Tools like GPS and telematics are being utilized throughout supply chains and data visualizations are automated and developed via data models to provide valuable insights. Supply chains are becoming leaner and eco-friendly, and customers are demanding higher service marks.

With a Rail TMS, you are equipped to collect and study your data, be environmentally friendly, monitor, track, and manage your shipments, tailor experiences to the unique needs of your customers, and more. By embracing technology like Rail Command, your company can gain a competitive edge through improved operational efficiencies, enhanced communications, and data-driven decision-making.

Explore how Rail Command can revolutionize your rail freight supply chain. Contact us today for a demo and experience the power of a Rail TMS designed by rail shipping experts for rail shipping experts.

The post Be Prepared for Rail Trends with a Rail TMS appeared first on RSI Logistics.

It was announced on April 30th, 2024, that the final rule was adopted via unanimous vote.

According to the STB, this regulatory measure is designed to address service issues that challenge rail service performance. Furthermore, it expands the transportation policy that was mandated by the Staggers Act, a 1980 rail act that provided the railroad industry with increased flexibility to tailor services to shipper’s needs.

For a video on this topic, check out our webinar – Understanding the STB Reciprocal Switch Ruling.

What is Reciprocal Switching?

A reciprocal switching agreement is an arrangement that permits an industry served by a single rail carrier to access additional rail services through a competing line haul carrier.

This agreement is important for industries that are ‘landlocked’ by the presence of only one carrier. A reciprocal switch provides them with the benefits of more than one carrier, which in turn makes their facility more competitive, and allows them the leverage to negotiate better service terms.

As an example, Shipper A currently relies on Railroad A to get them to Railroad B. If Railroad A’s service is challenging, they are locked into relying on the railroad regardless. However, with a reciprocal switch agreement, they can receive additional rail services from Railroad B, who can now service them directly. Railroad A will either have to offer better service, or risk being eliminated from servicing Shipper A.

Highlights of the STB Ruling

The final rule establishes clear-cut criteria for when and how shippers and receivers who have access to only one Class I rail carrier within a terminal area can petition the STB for a reciprocal switching agreement. The goal of these agreements is to create a competitive spirit among Class I railroads by allowing a competing carrier into the fray. This creates an incentive for the current carrier to uplift service standards to keep the organization’s business.

Competition is important for the rail freight industry. Competition, the impact of the ruling, forces the first mile and last mile service to be more important because of the potential for access to an additional line haul carrier. This, in turn, will provide faster transit service, improved overall service, and freight savings.

The reciprocal switching agreements, as outlined by the STB, shall span a minimum of three years, and could extend up to a maximum of five, based on the circumstances. This duration is important as it provides a window for assessing the impact of such agreements on service improvement and competitive practices. The agreement can also be renewed if the original carrier fails to show performance improvements, or if the carrier chooses not to terminate the agreement.

However, to ensure the fairness of the agreements, the carriers have the right to prove that service failures are due to reasons beyond their control – although intentional reduction of workforce levels and/or equipment availability cannot be used as reasons beyond their control.

Performance Standards and Accountability

The new regulation identifies three critical performance standards as benchmarks. These measures must be standardized across all Class 1 railroads and are used to evaluate the need for a reciprocal switching agreement.

Carriers must make these metrics available to shippers and receivers upon request.

Service Reliability

This standard is based on the Original Estimated Time of Arrival (OETA), an estimated time of arrival provided to the shipper by the rail carrier when a shipment is created. It measures a Class 1 carrier’s success for on time delivery. This standard demands that carriers achieve a 70% success rate in delivering shipments within a 24-hour grace period of the OETA over 12 consecutive weeks.

Service Consistency

This standard is defined by the carrier’s efficiency in maintaining transit times and measures a Class 1 carrier’s efficiency in moving a shipment through the rail network. The failure threshold for this standard is set at an average increase of 20% in transit time over 12 weeks compared to the previous year. The rule introduces safeguard measures against excessive cumulative increases in transit times.

Inadequate Local Service

This standard focuses on the carrier’s ability to perform local deliveries and pickups within the planned service window. This is known as an industry spot and pull (ISP), and the standard sets an ISP success rate of 85% – 90% on a reduced service day.

Reciprocal Switching – A Stride Towards Competitive Equilibrium

The aim of the STB’s ruling on reciprocal switching is to foster a more dynamic and competitive environment. By placing a premium on service quality, the STB is attempting to ensure that shippers and receivers have a fair shot at accessing efficient and reliable rail services.

According to the STB, this development could be especially significant for industries that currently are locked into being served by a single carrier, as it opens new avenues for cost savings, enhanced service quality, and overall operational competitiveness.

Capturing and Reporting Metrics

This new ruling from the STB requires shippers to be diligent about tracking the metrics relevant to the three performance standards, to compare them to the metrics they request from the Class 1 carriers. This can be difficult if the current method of data collection and reporting is manual or using archaic software.

Rail Command^®, RSI Logistics’ railcar management solution, can make this task a lot easier. Here’s how it helps:

Easy Data Collection

Rail Command^® is designed to make collecting data about your rail shipments straightforward. This is especially useful now, with the STB putting a spotlight on how metrics and reporting are important to the three standards of accountability. Businesses can use Rail Command^® to gather reporting metrics to compare to the Class 1 carrier’s metrics to prove they’re meeting these standards or, if they’re not, to pinpoint the reasons why they aren’t.

Made-to-Fit Reports

Rail Command^® allows you to create reports that focus specifically on what you’re interested in. This means you can directly address the areas the STB is concerned about, using data that shows how well your rail shipping is doing or where you might need help. This custom approach to reporting is a big plus for businesses needing to navigate the new regulations effectively.

With these new STB rules shaking things up, having a tool like Rail Command^® can make a big difference. It’s about gathering the right data and the reports to determine if your rail shipping is optimized. For businesses looking to stay ahead and ensure their rail logistics are operating at peak efficiency, investing in such a tool is a smart move.

The post Understanding the STB’s Reciprocal Switching Ruling appeared first on RSI Logistics.

For starters, rail services are getting better – we’re talking about faster speeds for rail and bigger cargos on tracks. Plus, the green factor can’t be ignored. Rails are an environmentally friendly choice, thanks to their fuel efficiency. With more and more businesses caring about their carbon footprint, it’s quite the bonus.

Then there’s the tech side of things. This industry is getting smarter every day. We’re seeing new advancements that make tracking goods a breeze and ensure things are running smoothly and efficiently.

So, even though trucks still own a chunk of the market, things are looking bright for rail shipping. All this improvement in service, sustainability, and technology is setting rail up to be a popular option in 2024, whether you’re a business looking to ship goods or a customer eager for your order.

The Cycle of Innovation: Ongoing Railway Infrastructure Projects

Rail shipping has positioned itself in a cycle of continual innovation. This is especially evident when we look at ongoing and upcoming railway infrastructure projects nationwide. These projects range from enhancing existing networks, developing high-speed rail paths, and extending railway lines to previously untapped regions. They aim to facilitate faster, safer, and more efficient transportation of goods.

Overview of Notable Railway Infrastructure Projects in the United States

Significant railway infrastructure projects are playing a pivotal role in the evolution of the rail shipping industry. The expansive U.S. rail network, already one of the most extensive globally, is undergoing various significant upgrades and expansions that are bound to influence the role of rail in goods transportation significantly.

One project worth highlighting is the ongoing upgrade of the rail infrastructure to ensure smoother facilitation of heavier freight cars. This not only increases the individual rail car capacity, leading to a more efficient transportation process, but also reduces the overall load on the network, providing better scalability to handle increasing freight demands.

Moreover, significant protocols and being channeled towards modernizing aged infrastructure, improving rail safety protocols, and integrating cutting-edge technology into operations. These initiatives indicate a positive future trajectory for rail shipping and its influence on goods reception processes across businesses in the U.S.

The Direct Correlation Between Growth of Railway Infrastructure and Rail Shipping Scalability

The success, scalability, and growth of the rail shipping industry are inherently tied to the evolution of railway infrastructure. Enhancing infrastructure results in better connection points, faster transportation speeds, and improved capacity to handle larger quantities of goods.

Such upgrades enable the rail shipping industry to accommodate the increasing demand for goods transportation, both now and in the future. Thus, ensuring its sustainable growth and relevance in the rapidly advancing world of global logistics.

The Road Ahead: Opportunities and Challenges for Rail Shipping

The evolution of the rail shipping industry continues to present a mixed bag of opportunities and challenges. By addressing these effectively, the sector can significantly enhance its share in the global goods transportation market.

A Review of the Prospective Opportunities and Potential Market Expansion

As expanding global trade necessitates efficient, economical, and environmentally friendly shipping solutions, rail shipping stands well-poised to fill this gap, especially for land-based, long distance trade routes. The ongoing thrust on infrastructural development and adoption of innovative technologies presents a substantial opportunity for the rail shipping market expansion.

Furthermore, rail shipping’s capacity for transporting massive quantities, coupled with its relatively lower environmental impact, positions it favorably compared to other modes of freight transport. As organizations around the nation intensify their focus on reducing carbon footprints, embracing rail as a preferred mode of transportation might soon become a norm, further opening avenues for market expansion.

Additionally, the rise of e-commerce and the demand for cheap and efficient logistics solutions might stimulate substantial growth in the rail freight industry.

Addressing Challenges that Can Impact the Continued Evolution of the Rail Shipping Industry

Despite the apparent opportunities, several challenges threaten the pace of evolution in the rail shipping industry. Prominent among these is the capital-intensive nature of rail transport – laying tracks, acquiring locomotives and wagons, and maintaining these facilities requires substantial resources.

Bureaucratic hurdles and fragmented regulatory landscapes across different states and countries can stifle cross-border rail transportation growth, especially for national projects.

Moreover, competition from other modes of transport, most notably maritime and road freight, poses significant challenges. Achieving a balance between cost, speed, and flexibility, where rail shipping often concedes to road and air freight, remains critical.

The sector also needs to cope with technological challenges – integrating advanced technologies for better efficiency must align with robust cybersecurity measures to secure transport data and protect against digital threats.

Addressing these challenges will play a crucial role in the continued evolution and success of the rail shipping industry. The ability to navigate this complex landscape can determine the future trajectory of this dynamic industry.

Looking Towards a Promising Future for the Rail Shipping Industry

The transformative initiatives and developments within the rail shipping industry spell exciting times. As railways grow more efficient, safer, and capable of handling larger loads, it reaffirms the sector’s ability to innovate and improve.

Yet, there are still uncharted territories within the realm of innovation, particularly concerning technology. As we witness rapid technological advancements, it’s unquestionable that they will continue to contour the future of rail shipping, potentially in unimaginable ways.

Keen to discover more about the technological innovations waiting to redefine rail shipping in the future? Check out our blog post where we delve into the potential tech trends poised to revolutionize this industry.

The post How Rail Shipping is Changing the Way we Receive Goods appeared first on RSI Logistics.

Critical Period for Railcar Maintenance and Qualification Coming in 2024

2023 proved to be an informative year for rail freight as we turned our attention toward the fast-approaching 2024 – a year that holds a significant milestone for railcar maintenance and qualification. An above-average percentage of railcars are slated for qualification, thanks to a production boom between 2013 and 2015.

2024 Railcar Qualification Period and Maintenance Challenges

With a significant number of railcars reaching their ten-year mark around 2024, and thus needing qualification, maintenance facilities will grow more crowded, lengthening any qualification or maintenance processes. Here at RSI Logistics, we’ve seen as many as 30% of our client’s total fleets that will need servicing.

Understanding Turn-Around Times and Maintenance Shops’ Current State

2023 saw a significant focus on understanding the current ‘turn-around’ times at maintenance shops and their capacity to accommodate the upcoming demand. Analysis showed that railcar downtime (the average time cars spend in maintenance before returning to the track) can vary dramatically (from 53-103 days, for instance). Moreover, maintenance shops already operate near maximum capacity (90-100%), and this is likely to continue until we navigate past the expected qualification surge.

Strategies for Making Railcar Maintenance More Effective

To ensure a smoother transition, align your railcar qualification and maintenance schedule with all relevant stakeholders. This collaborative approach can help to effectively manage the expected surge, prevent delays, and avoid a crunch of resources.

Moreover, take some time to review your strategies for diverting and billing cars to shops and possibly consider different cleaning methods like third-party or mobile cleaning units. Shipping railcars early to shops and streamlining operational process can help to accommodate the upcoming surge.

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Q3 Railway Results: Rail Rates and Industry Challenges in 2023

The third quarter of 2023 was telling for the rail freight industry, with financial performance revealing critical industry challenges. The sector experienced declining revenues, rising operational costs, and reduced volumes. These trends have important implications for rail rates, business strategies, and contract negotiations.

Key Findings from Q3 2023 Financial Results

Revenue and volume decreases plagued major railroads, with Norfolk Southern and Union Pacific reporting 11% and 10% drops in railway operating revenues compared to Q3 2022, respectively. Union Pacific also reported a 3% decline in business volume. Contributing factors to this negative trend included inflationary pressures, fears of an economic downturn, and the lasting effects of the Eastern Ohio Incident.

Simultaneously, operational costs — particularly fuel and labor expenses — increased, posing a major obstacle for industry profitability and efficiency.

Rising Rail Rates as a Response to Industry Challenges

Considering the declining volumes and revenues coupled with rising costs, the rail shipping industry is likely to experience an increase in rail rates. This move is expected as railroads try to offset higher operating costs and lower volumes.

Impact on the Operating Ratio and Industry Strategies

The Operating Ratio, defined as costs divided by revenue, is an essential indicator of railway profitability and efficiency. Given the financial trends revealed in Q3 2023, the Operating Ratio is projected to increase, posing challenges for industry stakeholders. Railroads must adopt effective measures to reverse this trend, which could include raising rates, leveraging data insights, and adjusting operations accordingly.

Addressing Year-End Contract Discussions and Tariffs

As you approach year-end, contract negotiations will be significantly impacted by the financial trends observed in Q3 2023. Developing a thorough understanding of railroad costs, revenues, and pricing structures will be crucial to successful negotiations.

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Seven Pivotal Trends Revolutionizing Rail Logistics in 2023

The Rail Freight Industry, in 2023, displayed dynamic evolution in technology, strategies, and trends. From advanced technologies to sustainability, the future of rail logistics takes shape through various innovative trends.

1. Internet of Things (IoT) in Rail Logistics

The IoT is central to the shift in rail logistics. IoT devices interconnected across networks generate, share, and interpret real-time data. In rail logistics, IoT devices embedded in rail cars, tracks, and cargoes monitor performance, track location, and ascertain cargo conditions.

2. Harnessing Data Analytics for Improved Efficiency

Data analytics emerged as a pillar of operational efficiency. Through data analytics, intricate patterns and potential bottlenecks in tracking and tracing data are scrutinized, improving schedule adherence and customer satisfaction. The outcome is an era of transparent and data-driven decision-making in rail operations.

3. Machine Learning (ML) & Artificial Intelligence (AI)

ML and AI are increasingly used for predictive analytics in rail logistics, predicting equipment failure, optimal route planning, and precise freight demand forecasting. The application of ML & AI reduces operational expenses, minimizes downtime, and revolutionizes processes like preventive maintenance and demand planning.

4. Ascendancy of Blockchain Technology

Blockchain technology enhances transparency and tightens security in rail logistics transactions. Establishing a stable, traceable, and secure record of transactions, blockchain eliminates potential discrepancies and increases trust among stakeholders, simplifying contractual processes, and boosting efficiency.

5. Embracing Green Logistics

Identified as more than an aspirational trend, green logistics emerged as a competitive necessity. Rail freight shifted focus to sustainable practices, minimizing carbon footprint through reduced emissions engines and eco-friendly practices.

6. Developing Digital Platform

Digital platforms have surged as the backbone for real-time information sharing and collaborative decisions. Platforms like Rail Command® offer unified solutions for managing aspects like railcar tracking, rail rate management, and demurrage management, enhancing overall rail operations efficiency.

7. Prioritizing Predictive Maintenance

Predictive maintenance broke new ground in rail logistics. Leveraging IoT and data analytics, rail operators can anticipate possible faults or equipment failures, making a shift from reactive to proactive management.

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Leveraging Waybill Sample Data to Propel Rail Freight Business Growth in 2023

Waybill Sample Data, an invaluable resource for rail shipping, saw an exceptional upturn in detail in 2023. More data than ever became key in driving business growth, conducting market analysis, understanding competitors, and identifying new opportunities.

Waybill Sample Data: Its Significance and Expansion

Waybills, critical to rail shipping, outline detailed shipping instructions and other related information. Annually, railroads supply a portion of this waybill data to the Surface Transportation Board, publishing it as the Public Use Waybill Sample. Importantly, in 2023, the sampling rate soared from the usual 2.5% to 20%, meaning there is much more data available for analysis.

The Real Value: Genuine and Masked Data

To glean value from this data, understanding actual (genuine) and masked information is paramount. The genuine information includes commodity, miles shipped, equipment type and owner, shipment size, and lading weight. However, certain details like Station Names and Railroad names, and sometimes Revenue, are masked to maintain confidentiality.

Profiting from the Waybill Sample Data

Despite the masked data, opportunities abound in the Waybill Sample Data:

Market Intelligence

The sample provides insights into market dynamics, such as contracts’ prevalence, Rule 11 rates, and major traffic flows. Analyzing these allows businesses to align their strategies for pricing, marketing, and supply chain optimization.

Competitor Analysis

The data helps analyze how competitors ship commodities. Factors like the type of equipment used, whether private or rail-owned, and cargo weight can influence shipping practices and overall profitability.

New Opportunities

History traffic flows can reveal underserved market areas, paving the way for potential market share growth.

RSI incorporated this information into four easily interpretable reports within their rail rate application, Rail Impact®, proving a valuable tool for rail shipping businesses looking to utilize this data for growth.

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The Canadian Pacific and Kansas City Southern Merger: A Transformative Moment in Rail Freight Operations in 2023

The rail freight industry in 2023 witnessed a merger of giants. The merger of the Canadian Pacific Railway (CPRS) and the Kansas City Southern (KCS) revolutionized North American rail operations. The birth of ‘Canadian Pacific Kansas City’ (CPKC) is expected to enhance the industry’s efficiency while expanding market reach and increasing benefits for shippers exponentially.

Cross-Border Connectivity and Market Expansion

The merger brings about an unprecedented, connected rail network that extends over 20,000 miles across the United States, Mexico, and Canada. For shippers, this means access to broader markets, reduced transit times, and greater flexibility in planning their shipping routes.

Upgraded Operational Efficiency and Cost Savings

The amalgamation of two major North American railroad operators brings about enhanced operational efficiency with unified networks and superior coordination. Shippers can look forward to better service quality, expedited shipment processing, and more reliable delivery times. Moreover, by consolidating resources and optimizing operations, this merger is expected to pass on cost savings through competitive pricing, thereby reducing the overall cost of shipping for businesses.

Green Logistics and Investment in Technology

The merger also promises environmental benefits, making the rail transportation system more sustainable through better fuel efficiency and reduced greenhouse gas emissions. Simultaneously, the merger acts as a catalyst for improved infrastructure and cutting-edge technology implementation. Upgrading facilities and integrating advanced technology will benefit not only railroads but also provide a superior experience for shippers, marking an era of growth and innovation in rail transportation.

A Deal Sealed After a Year of Competitive Bidding

The merger at the start stoked competition between CPRS and Canadian National (CN) who also aspired to merge with KCS. However, after a flurry of bids and counterbids, along with regulatory hurdles, the merger between CPRS and KCS was settled and approved by the Surface Transportation Board in March 2023, marking a new chapter in the rail freight industry.

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The post Rail Freight Industry Review: Biggest News of 2023 appeared first on RSI Logistics.

The third quarter of 2023’s results present a unique opportunity to examine the current status of the industry and the specific factors that contribute to its ongoing development. To better equip professionals in the rail shipping industry with the knowledge and tools necessary for navigating these complex waters, this comprehensive analysis delves into the railway’s financial performance, exploring rail rates insights, strategies for rate negotiations, and leveraging data insights for more informed decision-making.

A Detailed Study of Railways’ 3rd Quarter 2023 Results

The railways’ financial performance in the third quarter of 2023 sheds light on the economic issues in the industry. Looking closer, we can see a concerning mix of falling income, rising expenses, and dropping volume. This presents a difficult challenge for the railroads, who will try to compensate by raising rates to make up the difference in income.

Revenue Down, Costs Up, Volume Down

The railroad’s 2023 third quarter results show a decrease in revenue, an increase in costs, and a decrease in volume.

The largest railroads are all showing a year over year decrease in revenue from 2022. For instance, compared to third quarter 2022, the Norfolk Southern reported an 11% drop in railway operating revenues, while the Union Pacific reported a drop of 10%.

Part of the decrease in revenue is because of a drop in volume for some of the Class I railroads. For instance, Union Pacific reported business volumes, as measured by total revenue carloads, were down 3%.

The drop in revenue and volume can be attributed to a few factors, including inflationary pressures, fears of an upcoming economic downturn, and service issues. The Eastern Ohio Incident has also continued to have lasting effects on some railroad’s revenue, as shippers consider possible alternate methods of transportation.

At the same time, an increase in expenses is a challenging barrier to achieving financial efficiency and profits for the rail shipping industry. Higher operation costs, often connected to changing commodity prices, investment in infrastructure, or labor costs, unavoidably affect the final profit. Most recently, rising fuel and manpower costs have both contributed to the railroads showing an increase in their operation costs.

The Coming Increase in Rates

The combination of a decrease in revenue and volume, and an increase in operating costs, paints a clear picture: rates are likely to increase. With the third quarter results as our source of data, we believe that rail rates will continue to rise as the railroads try and offset the higher operating costs and lower volumes.

Understanding the Effects of Financial Troubles on Railroad’s Operating Ratio

In the rail industry, the term Operating Ratio is used in relation to the railroads. What is the Operating Ratio? Put simply, it is Costs divided by Revenue. It’s a key element that can be used to measure profitability and efficiency and makes for a great comparison tool when looking at the railroad’s performance. Anyone working in the rail shipping industry, shipping by rail for their business, or just paying attention to economic contributors, are keeping an eye on the Operating Ratio of the railroads for a multitude of reasons. And the railroads are constantly seeking to improve their Operating Ratio by finding ways to reduce costs and boost revenue.

Given the recent third quarter reports of increasing expenses and dropping revenue, the rail shipping industry faces a big challenge: the Operating Ratio is bound to get higher. This forces the railroads to take combined steps specifically aimed at lessening or halting this increasing trend.

Operating Ratio: A Number Watched Closely

It’s worth repeating that not only the railroads keep a close watch on the Operating Ratio. Wall Street, where investment choices are made based on a company’s financial health, also scrutinizes it. This stresses the significance of making strategic choices and carefully balancing revenue and cost.

Industry professionals need to create shifting action plans based on data analysis to make real improvements in their operations. By doing this, they arm their companies with the knowledge and tools to adjust to the changing environment, ultimately leading to a more sustainable and profitable way of doing business.

The Railroad’s Possible Response

With the railroad’s recent financial reports hitting the rail shipping industry, it’s expected that rail rates will increase to help mitigate the downward trend. This isn’t unexpected; rail rates were already trending up even before the recent quarter’s results. This consistent upward trend is seen as a strategic reaction to the problems the industry is currently facing, and part of the attempt to improve the Operating Ratio.

It’s important for professionals involved in the industry to recognize this trend is a natural part of how the rail industry works. Furthermore, if your business is affected by rising rail rates, it’s important to have a deep understanding of how the railroads price. This understanding can be a powerful tool during contract discussions, potentially reducing overall rail cost and rail spend.

The Structure of Rail Pricing

Rail pricing uses a unique strategy, similar to the mark-up used by retailers. Railroads add to their costs using commodity-specific Revenue-to-Variable Cost (RVC) ratios. The RVC is the inverse of the Operating Ratio and is calculated by dividing Revenue by Cost. However, unlike the Operating Ratio, the RVC is calculated on an individual lane basis. Understanding this pricing model is crucial when looking to reduce costs and plan financial strategies.

Effect of RVCs on Operating Ratio

An increase in these RVCs impacts the Operating Ratio, driving it downwards. As a result, it’s a common strategy the railroads use in times of high Operating Ratios.

Addressing Lack of Volume by Increasing Carloads

An alternative approach railroads can take to address falling volumes is increasing carloads.

One method they could use to accomplish this is by going after business opportunities that are currently moving adversely to them, to increase their overall volume. It is, however, crucial for railroads to be careful utilizing this strategy. If they are not cautious, they could start a pricing war with competitors, which could paradoxically increase costs while reducing volume.

Additional new volumes can also be created by changing the transport mode that businesses use. For example, some railroads are currently focused on establishing cross-docking operations involving boxcars. Their intent is to make it easier to implement rail shipping for all, or part, of a business’ supply chain networks, to persuade a change from another mode of transportation, like truck, to rail.

Handling Contract Discussions and Tariffs Successfully at Year-End

The last months of the financial year are critical for businesses who ship by rail. Particularly, many contract discussions take place at year-end. These talks between railway operators and their clients help shape business plans for the next year and give an idea of what it will cost to ship by rail. So, it is important to be well-prepared and understand thoroughly what is needed for these discussions.

The Importance of Preparation

Being well-prepared for these discussions is key and a carefully planned strategy can change your negotiation results, potentially producing better results. Good preparation is based on understanding fully the current financial situation, supported by a clear picture of market trends. Using solid data and useful insights, negotiators can navigate through the intricacies of railway tariffs and finalize a contract that meets their terms best.

Strategic Steps in Negotiation Process

The negotiation process can be handled strategically using several key actions:

1. Put forth a well-grounded suggestion for a lower rate, based on a detailed understanding of the rail operator’s pricing strategy. This step relies on understanding how the railway adds to its costs, the specific Revenue to Variable Cost ratios for the railway, and their effect on rate setting.
2. Identify and aim for specific rates if they are unusually high, what we call ‘out-of-line’. To pinpoint these exceptions requires rigorous data study and clear communication with the rail operator.
3. Strive to lower the proposed rate hikes for specific lanes in contracts instead of trying to reduce the raise across all lanes. This approach allows for more focused negotiation tactics and leads to better results due to the targeted nature of the strategy.

Understanding Railroad Costs and Revenues

In the rail shipping industry, smart choices and successful discussions depend on understanding the costs and standard revenues of individual shipping lanes thoroughly. By deeply analyzing these elements, one can detect unusually high rates, discover negotiation strengths, and focus efforts on lanes that have the greatest potential.

A. Spotting Unusual Rates

Finding rates that are significantly different from common industry rates requires close examination of revenues and costs across different lanes. Spotting these rates opens opportunities for saving costs and planning focused negotiation strategies, especially ones aimed at fairness. Besides, knowing about these unusual rates helps rail professionals concentrate their efforts on fixing these financial imbalances.

B. Identifying Negotiation Strengths

Negotiation strengths refer to the power one has compared to the other party during discussions. Through a detailed study of costs and revenues for different lanes, rail professionals can identify where they have a strong bargaining position. Knowing these areas empowers negotiators to strategically obtain better conditions, leading to overall enhanced results.

C. Concentrating on Specific Lanes for Negotiation

With a broad understanding of costs and revenues specific to each lane, industry professionals can smartly identify lanes that offer the best negotiation opportunities. Focusing on these particular lanes allows negotiators to maximize cost savings and revenue increases by concentrating their efforts on lanes that have either unusual rates, high negotiation power, or both.

D. Handling Rate Increase Discussions

During negotiations, the chance of rate increases is often important for both parties. Rail professionals are advised to handle these proposed increases with a data-led, planned approach. In some cases, accepting reasonable rate increases on select lanes could be justified if market dynamics and cost changes demand it. On the other hand, if rates are already high, efforts should be made to reduce unnecessary financial load.

Leveraging Rail Impact for Insights and Data Accessibility

In the data-driven arena of the rail shipping industry, our Rail Impact^® platform offers features specifically designed to enhance your ability to negotiate your rail rates.

A. Proprietary Cost Model

Understanding the cost infrastructure of railroad operations is fundamental. Rail Impact’s proprietary cost model provides a distinctive lens to help professionals unearth the layered complexities and decipher the railroad’s cost structure effectively. This purpose-built model unfolds the financial intricacies and informs decision-making significantly.

B. Proprietary Benchmarks

Accuracy and specificity in data analytics are powerful. Rail Impact leverages proprietary benchmarks that are both lane-specific and commodity/car type specific. This precision enables users to craft targeted, data-informed strategies pertaining to individualized shipping lanes and specific commodity/car types.

C. Market Data

Trends drive progress. Rail Impact offers a robust assembly of market data to scrutinize trends and evaluate traffic flows by commodities. This time-based scrutiny of market trends offers an empirical understanding of not only the current status quo but also the propensity toward future trajectories.

D. Reference Information

Knowledge is power. Complementing the above, Rail Impact also provides a wealth of reference information. This includes a Fuel Surcharge Table, the Serving Carrier/Reciprocal Switch (SCRS) database, and a series of comprehensive rail directories. These resources serve as invaluable tools aiding professionals in establishing a well-rounded understanding of the rail shipping industry dynamics.

The rail shipping industry is continuously faced with challenges and opportunities that arise from market trends, economic forces, and evolving business models. This in-depth analysis of the third quarter 2023’s railroad financial results highlighted several key areas of concern and potential strategies to address them, with a focus on understanding revenue dynamics, cost structures, and volume changes.

By closely monitoring the industry’s financial performance and leveraging advanced data analytics tools like Rail Impact®, professionals can develop more informed, data-driven strategies for negotiation, cost-saving, and revenue optimization.

In the face of rising rates, falling volumes, and economic uncertainties, a comprehensive understanding of the industry’s financial landscape empowers rail professionals to make well-informed decisions, cultivate resilience, and ultimately lead their businesses towards long-term success in the ever-changing rail shipping industry.

The post Rail Rates in Focus: Insights from the 2023 Third Quarter Railway Results appeared first on RSI Logistics.

Understanding the Hurricane Season

Diving into the specifics of hurricane season, we discern that this period lasts from June 1 to November 30. The most severe storms, with higher wind intensity and heavier precipitation, occur during the peak period from mid-August to late October.

Throughout this period, the dominant regions exposed to these storms include the Atlantic Ocean, Gulf of Mexico, and the Eastern Pacific Ocean. The rail shipping industry, with its extensive networks and operations spread across these areas, finds itself squarely in the path of these severe weather systems annually.

Atmospheric Conditions and Their Impact

The core aspects of hurricanes that are detrimental to rail shipping are high winds and heavy rainfall. NOAA’s Atlantic Oceanographic and Meteorological Laboratory mentions that hurricanes can generate wind speeds as high as 150 mph. This intensity can result in extensive damage to freight rail infrastructure, including rails, bridges, and other core transportation structures.

Significant precipitation exacerbates these effects. Hurricanes can produce rainfall amounts of 6 to 12 inches over a widespread area, and in extreme cases, rainfall totals can reach 40 inches or more. Flooding can wash away ballast, dislodge rail lines, and render integral parts of the rail network inaccessible or inoperable.

The operational implications of these conditions include standstills, significant rerouting, and an inevitable surge in costs. Historically, the economic cost of hurricanes impacting the U.S. freight network directly hits the rail shipping industry, with effects rippling across the globe through complex supply chain mechanisms.

Inference and Actuation

Reviewing the aftermath of Hurricane Katrina in 2005 can offer quantitative insight into these consequences. Core railway lines, such as the CSX line which ran along the Gulf Coast, took months to restore to functionality post-hurricane. At New Orleans, CSX interchanges over 1,000 cars per day with the western railroads, and financial techniques estimated Katrina’s total impact to the US freight transportation system to be in the hundreds of millions. This cost primarily arose due to increased transit times, rerouting, and freight transfer to more expensive modes of transportation.

Understanding the specific elements of hurricane conditions and the potential impact on your operations allows for more profound, data-driven decisions. Appropriately assessing these risks and scaling your hurricane preparedness accordingly is an action of utmost importance. This methodology ensures a nuanced and knowledge-backed approach to securing your rail shipping operations against formidable weather eventualities.

Historical Impact of Hurricanes on Rail Shipping Operations

Historical data provides detailed insights into the tangible array of challenges that the rail shipping industry confronts during the hurricane season. It is paramount to scrutinize these events to accurately forecast potential adversities and bolster resilience in forthcoming seasons.

The Devastation of Hurricane Irma

Hurricane Irma, a Category 5 hurricane that struck in 2017, serves as a cogent illustration of the potential cataclysms. This hurricane adversely impacted the freight transportation industry, resulting in losses estimated between $2.5 billion and $4 billion. With a diameter of over 400 miles, nearly the width of the entire state of Florida, its magnitude and path led to extensive infrastructure damage and consequent operational shutdowns.

Crucially, this included large-scale impairment to critical rail shipping infrastructure. Rails, bridges, and signal systems were rendered inoperative or completely destroyed. Consequently, there was a substantial decrease in rail shipping activities, not just because of infrastructure damage, but also due to the preemptive closure of terminals and diversion of trains. This disruption had cascading effects on the supply chain, inducing delays for customers and exorbitant costs from rerouting freight and making reparations.

The Havoc Wrought by Hurricane Harvey

Just weeks before Irma, in August 2017, Category 4 Hurricane Harvey wreaked havoc in Texas. The hurricane had an astounding impact, leading to unprecedented flooding that caused significant casualties and infrastructure damage.

This disaster had serious repercussions for the rail shipping industry in particular, causing considerable delays and disruptions. The rail network in the region suffered extensive damage due to flooding and high winds, affecting key railway lines. Additionally, railway equipment and assets in the vicinity of the storm were directly damaged.

Harvey’s impact was felt beyond the borders of Texas. Amid the destruction, trains were halted within and near the region, causing large-scale disruptions to operations. The freight destined for Texas faced delays or was rerouted, both translating into additional costs. Even after the storm passed, the recovery of all rail functions took weeks due to extensive infrastructure damage.

Reflection and Future Preparedness

Examining these historical events, it is clear that hurricanes can drastically disrupt rail shipping operations, causing immense economic damage. Understanding the specific impacts of these events is a key step towards developing effective strategies to mitigate the risk and impact of future hurricanes.

Through effective preparedness, strategic planning, and continuous technological advancements, the rail shipping industry can fortify itself against such adversities and ensure business continuity even in the face of severe weather challenges.

Anticipating the 2023 Hurricane Season

The upcoming 2023 hurricane season is anticipated to be near-normal, as per the predictions from seasoned meteorologists. Though not overly above average, this projection still indicates a possible risk for direct hits on US coastlines, leading to potential disruptions in rail shipping operations, infrastructure degradation, and a potential slowdown in cross-country transportation of goods.

Predictions for 2023

The forecast for the 2023 hurricane season is based on various environmental factors such as oceanic-temperature anomalies, atmospheric-climate oscillations, and other unforeseeable variables. NOAA’s Climate Prediction Center predicts that the Atlantic hurricane season will have a 40% chance of near-normal activity, a 30% chance of an above-normal season, and a 30% chance of a below-normal season. By factoring in these predictors, meteorologists provide the rail shipping industry with essential information, thereby emphasizing the need for a well-thought-out risk management strategy.

Anticipated Implications of the Near-Normal Hurricane Forecast

Given the context of near-normal hurricane activity in 2023, it’s important to outline the potential impact on the rail shipping industry:

1. Moderate Operational Disruptions: While the risk of severe disruption is reduced in a near-normal season, periodic storms are still likely to cause some operational disruptions. The possibility of storms making landfall does exist, which can necessitate delays, rerouting, or cancellation of shipping routes. As a result, the rail shipping industry may need to employ contingency planning strategies to reduce service disruptions and potential supply-chain disturbances.
2. Infrequent Infrastructure Damage: With lower storm frequency and intensity, the stress on rail-network infrastructure may be lesser; however, rail tracks, bridges, and terminals still face some degree of risk from routing storms. High-wind gusts, flooding, and debris can still lead to a need for regular maintenance and repair, adding to operational costs.
3. Fewer transcontinental Shipping Delay: As fewer severe storms are predicted, the potential for widespread bottlenecks may reduce. Nevertheless, the storms that do occur can still impact cross-country rail shipments, leading to slower nationwide logistics planning and potentially requiring contingency plans.

Overall, a near-normal hurricane season still poses challenges but also reduces the scale of potential disruptions when compared to an above-average season, allowing the rail shipping industry to strategize accordingly.

Strategic Preparedness: The Cornerstone of Navigating the Hurricane Season for the Rail Shipping Industry

The unsettling impact of hurricanes in our modern logistics landscape is vast and multifaceted, often rippling through the rail shipping industry with a grave magnitude. Beyond evident interruptions in shipment schedules and considerable operational costs, extensive damage to the infrastructure holds the potential to trigger a cascade of repercussions. Moreover, downtime-induced financial losses, the economic burden of rerouting, and looming penalties for non-delivery of goods must be factored into a comprehensive risk assessment.

Systematic Approach to Navigating the Hurricane Season

To temper the risks posed by the relentlessly tumultuous hurricane season for the rail shipping industry, a strategic approach is absolutely indispensable. This necessitates a four-fold process, encompassing Risk Assessment, Strategic Planning, Plan Implementation, and Recovery Planning.

1. Risk Assessment: The initiation point of mitigation strategies lies in recognizing inherent vulnerabilities within your operations and infrastructure. This process must entail an intensive analysis of geographical locations within your operational landscape that are most susceptible to hurricane strikes, and a thorough evaluation of your infrastructural components, particularly assessing if aging assets can endure the onslaught of a hurricane.
2. Strategic Planning: A plan devised to secure and safeguard identified at-risk assets forms the backbone of your disaster management strategy. Essential components to consider include robust communication systems to uphold seamless correspondence pre, during, and post-hurricane, alongside meticulously drafted rerouting plans to circumvent disruptions to the delivery schedule.
3. Plan Implementation: With the onset of a hurricane warning, the immediate activation of your disaster management plan is pivotal in minimizing potential damages. This aspect not only underscores the imperative need to mitigate operational losses, but also places paramount importance on ensuring personnel safety and well-being.
4. Recovery Planning: The aftermath of a hurricane necessitates a resilient recovery planning mechanism. The primary objective post the natural disaster remains the swift reestablishment of operations, minimizing any further potential slide in revenue.

In summary, an insightful cognizance of your operational landscape, preemptive risk mitigation plans, and an agile recovery strategy encompass the integral trinity guiding your preparation for hurricane seasons. Your endeavors in this direction would ascertain that your rail shipping operations withstand the trials of a hurricane season with grace and resilience, effectively balancing operational continuity and financial stability.

Facing a near-normal hurricane season still requires careful planning. It’s key to have a solid disaster management strategy in place to deal with upcoming weather patterns. Being well-prepared is critical to lessen damage, reduce financial losses, and avoid significant disruptions to daily operations.

We strongly recommend starting your preparation for hurricane season as soon as possible. Taking a proactive approach will benefit your operations during the upcoming hurricane season. Being ready today will help you handle the challenges of tomorrow.

The post Preparing for Hurricane Season: A Yearly Guide for the Rail Shipping Industry appeared first on RSI Logistics.

• Background
  • KCS and CPRS Information
  • Historical Timeline
• Benefits to Rail Shippers
  • Enhanced Connectivity and Expanded Market Reach
  • Improved Operational Efficiency
  • Cost Savings
  • Environmental Benefits
  • Investment in Infrastructure and Technology

Background

KCS and CPRS Information

KCS and CPRS are two prominent North American Class I railroads. KCS operates primarily in the central and southern United States, Mexico, while CPRS covers Canada and parts of the northern United States. The merger between these two Class 1 railroads creates a combined entity, known as Canadian Pacific Kansas City (CPKC), which now spans over 20,000 miles of rail across the United States, Mexico, and Canada.

Merger History

March 21, 2021

CPRS and KCS announced they have entered into a merger agreement with each other.

April 20, 2021

Canadian National (CN) announced they have made a bid to merge with KCS instead of the CPRS.

April 23, 2021

The government entity the Surface Transportation Board (STB) announced that they will review the proposed merger of the CN and KCS.

April 29, 2021

We took a look at the competition between the two Canadian railroad’s bids.

May 13, 2021

CN revised the offer to the KCS to compete with the CPRS. The KCS deemed the CN proposal “superior” to the CPRS and the KCS notified the CPRS that it intended to terminate their merger agreement.

May 21, 2021

KCS announced that it terminated the CPRS merger agreement and entered into a merger agreement with CN. KCS paid CPRS a breakup fee of $700 million, which was to be reimbursed by CN. CPRS announced their intent to file an application with the STB, seeking authority to control KCS.

May 26, 2021

CN and KCS filed a renewed motion with the STB for its voting trust to advance the CN-KCS merger, outlining the case for approval.

June 23, 2021

The National Industrial Transportation League (NITL) advised that the CN asked them for their support of the proposed CN-KCS merger and Voting Trust. Similarly, the CPRS asked the NITL to oppose the CN Voting Trust and to endorse their proposed CPRS-KCS merger. The NITL recommended several actions to enhance competition regardless of the outcome of the merger, and strongly favored a review of the merger by the STB.

August 31, 2021

The STB announced a unanimous decision to reject the use of a voting trust agreement in connection with the proposed transaction between CN and KCS. The Board determined that the proposed voting trust was not consistent with the public interest standard under the Board’s merger regulations.

September 12, 2021

After the decision by the STB to reject the use of a voting trust, the KCS accepted the CP merger offer. This acceptance of the CPRS’ offer initiated plans to terminate the merger agreement with the CN, giving the CN five days to respond to the KCS.

September 15, 2021

The CN announced that they chose not to pursue their merger attempt; with this decision the merger agreement between the CN and KCS was cancelled.

November 19, 2021

The Union Pacific (UP) submitted a petition to the STB to reject the application for the CPRS to acquire the KCS.

March 15, 2023

The STB approved the CPRS-KCS merger.

Benefits to Rail Shippers

Enhanced Connectivity and Expanded Market Reach

The merger of KCS and CPRS significantly expands the combined network’s reach, creating an end-to-end railway system that connects key markets across North America. The result is a seamless rail connection between the major economic regions of the continent, including the U.S. Midwest, Gulf Coast, Canadian Prairies, and Mexican industrial areas. For shippers, this translates into increased access to more markets, reduced transit times, and greater flexibility in shipping routes.

Improved Operational Efficiency

One of the critical benefits of the KCS and CPRS merger is the potential for enhanced operational efficiency. With a unified network and better coordination, the newly formed CPKC will optimize resources and creates a single-line service spanning Canada, the United States and Mexico. As a result, rail shippers can expect improved service quality, faster shipment processing, and more reliable delivery times.

Cost Savings

The merger is expected to generate cost savings for both the railroads and shippers. By consolidating resources and increasing operational efficiency, CPKC can offer more competitive pricing and reduce the overall cost of shipping. In turn, shippers can enjoy lower transportation costs, helping businesses thrive in an increasingly competitive global market.

Environmental Benefits

With the KCS and CPRS merger, rail shippers stand to benefit from the environmental advantages of rail transportation. Railroads are one of the most fuel-efficient and sustainable modes of freight transportation, and the CPKC network will facilitate increased use of rail for long-haul shipments. By reducing the need for truck transportation, shippers can contribute to lower greenhouse gas emissions, reduced traffic congestion, and improved air quality.

Investment in Infrastructure and Technology

The merger between KCS and CPRS will likely lead to significant investments in infrastructure and technology. The combined entity will be in a better position to invest in modernizing rail infrastructure, upgrading facilities, and adopting cutting-edge technologies to improve service and efficiency. These investments will not only benefit the railroads themselves but also create more opportunities and better services for shippers.

The KCS and CPRS merger ushers in a new era for the North American rail industry, with rail shippers standing to gain numerous benefits from the consolidation. With enhanced connectivity, improved efficiency, cost savings, environmental advantages, and investments in infrastructure and technology, the merger sets the stage for a brighter future for rail transportation across the continent. As the new CPKC network continues to evolve and grow, shippers can look forward to reaping the rewards of a more connected, efficient, and sustainable rail system.

The post The Canadian Pacific and Kansas City Southern Merger: Unveiling a New Era for Rail Shippers appeared first on RSI Logistics.

Ongoing Railcar Repair Issues

At RSI Logistics, we’ve noticed over the last couple of years that supply chain and staffing issues have caused railcars to be in the shop process for much longer than what it took prior to COVID-19 and 2020. This is largely due to material shortages, production issues, labor issues, and more railcars needing to be at the shop. The years 2023 – 2025 are significant in terms of the number of tank cars that will be due for qualification, based on the 10-year requalification schedule. Some shippers have started to try to get ahead of this influx of requalification railcars by sending them to shop early. This has contributed to railcars taking longer to get through the shop process.

Pre-pandemic, if a leased railcar needed to go to shop, it would take the railcar owner somewhere between 1 day to 7 days to assign that railcar to a shop. However, over the last couple of years, some railcar owners are taking up to 2 weeks to provide shop assignment. Meanwhile, it is up to the railcar lessee to figure out where best to hold that railcar until it can be sent to the shop. If the shipper’s plant is limited on railcar space and storage options, this amount of time can be difficult.

Railcar shop facilities are experiencing the same last-mile delivery issues that all railcar shippers and receivers have seen in the past year and a half. This means the overall amount of time it takes for the railcar to arrive at the shop is taking longer, which just adds to the number of days this car is not in its intended service for the shipper.

If the shop has the material needed to do the cleaning and repairs on hand, the shops have been able to clean cars in about 1-3 weeks. If the railcar has an excessive amount of last contained product left in it, then it may take more than 3 weeks to process this railcar. General repairs average between 45-60 days, which will be longer for railroad damaged railcars. Again, this time can be exasperated if the shop is experiencing staffing and/or material shortages.

Tank car qualifications are currently averaging 60-90 days to complete the process. Older railcars may take longer at shop, as more repairs are typically identified and performed.

Mobile Repair Units for Railcar Repair

If you are experiencing challenges with your railcars at the shop, it could be advantageous to consider utilizing a mobile repair unit (MRU) instead of sending your railcars to the shop. This means the repair crew comes to the railcar instead of the railcar moving to them, which avoids railroad transit time and empty freight charges to move the car. We have seen dramatic changes in the amount of time it takes for an MRU to respond and make repairs. Companies that perform MRU services also claim that they have little to no material on hand to make repairs. Parts are ordered on a case-by-case basis once the crew has examined the railcar in question. Parts that are ordered are delivered directly to the railcar’s location, then the crew must be scheduled to come back out to fix the car. MRU turnaround times vary greatly depending on the region, we see events take from a few weeks to several months to complete.

7 Tips to Improve Your Railcar Repair Process

1. Appoint a dedicated person to communicate directly with car owners and railcar shops in a timely manner. This person can be part of your organization, or a third-party entity that acts on your behalf, such as RSI’s Fleet Management team.
2. Request a mobile repair unit or request a shop assignment from the railcar owner the same day of the identified defect to start the shipping process as quickly as possible.
3. Have photos of the defect, a safety data sheet, and clear shopping instructions ready to be provided to the car owner and mobile teams at the time of the service request.
4. Prepare good shipping instructions (bill of lading) with efficient routing and correct consignee information to help ensure the railcar moves to the shop correctly and without delays.
5. Once the shop estimates the work to be performed and an estimated cost, respond to the shop promptly, within 24 hours if possible. This will help improve the chances the shop will begin working on the car sooner.
6. Provide clear disposition instructions as soon as the shop requests them, letting them know where you want the car to be sent and how it should be routed once repairs are made. Provide this information within 24 hours so the shop does not have to wait and possibly move your railcar out of the way because they do not know what to do with it.
7. Create a plan to execute qualifications on a schedule where railcars are sent in smaller blocks throughout the year as opposed to sending large groups of railcars to the shop near the end of the year. In other words, try not to create a backlog for the shop, work with them and create a plan to rotate railcars in an out of service at a consistent pace.

Shop capacity comes and goes, and shop throughput, material, and staff availability changes with time as well. As a railcar owner or lessee, it is important to work within current conditions and do your best to make the process as smooth as possible. Understand what the current conditions are, and plan accordingly.

If you need help, we have a dedicated staff of experienced fleet maintenance managers that can help lead and execute your railcar shopping needs to help make this as smooth as possible. Learn more about RSI’s comprehensive logistics services here.

The post 2022 State of Railcar Repair Shops appeared first on RSI Logistics.

Recent Updates on the STB Embargo Meeting

As a result of their December 13-14 hearing with the Surface Transportation Board (STB), the Union Pacific Railroad (UP) has pushed the paused button on their use of embargoes to control congestion.

According to the UP’s CEO Lance Fritz, “We are taking a hard look at our use of congestion-related embargoes”, and that they’ll “facilitate a hard look, we are immediately pausing any additional embargoes under the pipeline inventory management program that we began in November”. The UP indicated that they will provide additional information in the coming days.

Even though the UP has not yet commented, it is the belief of others that the congestion problem originated in 2018 with their release of their “Unified Plan 2020”, an initiative to establish Precision Scheduled Railroading (PSR) practices. The key principles incorporated into the plan was to include:

• Shifting the focus on operations from moving trains to moving cars
• Minimizing car dwell, car classification events and locomotive power requirements
• Utilizing general-purpose trains by blending existing train services
• Balancing train movements to improve the utilization of crews and rail assets

One commonly hyped benefit of PSR is that this method will create a reduction in labor for the railroads. However, information provided by the STB indicates a history of labor attrition since the beginning of the UP’s Unified Plan. According to Richard Edelman, an attorney who represents the rail unions, “they (the UP) are lengthening train sizes that exceed infrastructure capacity, which is adding congestion, instead of adding workers to improve the service…the Class I freight rails may be hiring, but they are not retain existing workers so there is no net gain”.

What is an Embargo?

Per the Association of American Railroads, “an embargo is a temporary method of controlling traffic movements when in the judgment of the serving railroad threatens congestion, accumulation, or other interference with operations such as track, bridge or other physical impairments that warrant restrictions. Embargoes may contain a provision for a permit to provide a controlled movement of traffic to an embargoed destination”.

Embargoes are put in place to manage traffic when congestion or interference at certain locations requires controlled movements and limitations to keep things moving. For instance, if a rail switching facility finds itself constantly filled with snarled traffic, an embargo may be used to limit rail traffic enough to untangle the mess. Railroad staffing issues, weather events, track or bridge maintenance issues, and heavy rail traffic are major contributors in creating congestion.

The Union Pacific and Embargoes

The basis for the STB hearing comes from the UP’s significantly increasing issuance of embargoes over the past 12 months of 2022. According to the STB, “disruptions in the UP’s service levels have a significant detrimental impact on the supply chain and the nation’s economy”. The UP’s response is that the use of embargoes is the only tool that they can use to minimize congestion that results from excessive customer-controlled cars on their network. The UP argues that their significant geographic footprint, yards, shipper facilities, and blend of commodities makes them vulnerable to congestion.

According to our Director of Customer Service, Gail Carlson, “the root cause for the congestions stems from the UP reducing their last mile switching service. We have seen situations where the UP has reduced the weekly switch service from 5 days to 1 day per week. Often, the single weekly switch is missed because of the crews running out of hours.” The UP simply does not have enough labor to support their overall level of business. “This is a challenge that all of the Class I railroads are experiencing, but the UP has extended the use of embargoes to force shippers into volume changes to accommodate the UP’s reduction in last-mile service.”

We performed a review of current Embargoes by Class I carrier based on “Congestion/Accumulation” (see below):

The UP’s 108 Embargoes represent 72% of the current total. Considering that the UP handles 27% of the nation’s carloads freight, it is clear to see that they may be taking advantage of them. This is the challenge for the STB to determine.

The hearing will be broadcast on the STB’s YouTube channel.

Embargo Permits

Embargoes can be fully restrictive or allow certain traffic to go to embargoed locations. If changing lanes to ship your railcars is not possible for an embargoed location, you can request a permit. If your permit is accepted, that will allow your equipment to move to embargoed locations.

Permits can be requested on the individual railroad’s websites and normally are only for emergency situations of special transportation relief. Permits are not guaranteed but are appraised for consideration of approval.

If you receive embargoes, examine the embargo to find the issuing party. The embargo will have the contact information for the party responsible for issuing permits in the permit system; furthermore, the information will be listed on the embargo page in Railinc. You can use this information to apply with that carrier for a permit.

Preparing for Upcoming Embargoes

Preparing contingency plans can help you overcome the challenge of an embargo. Have a backup plan developed and up to date with your current rail shipping details; that way, if an embargo does appear, you are prepared instead of having to react.

When possible, try diversifying your locations and the lanes that you use to move railcars to their destination. If inclement weather and/or embargoes shut down one shipping route, and you are diversified, it is possible your other routes are not affected.

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