#101 – Inside Our Industry – Rail Gains Advantage Amidst Supply Chain Snarls

Freight rail service continues to be in high demand as distribution from U.S. ports is at record levels. And rail’s energy efficiency may surprise many. AreaDevelopment.com posted a report from Rich Thompson, who leads the global Supply Chain and Logistics Solutions team for JLL, that details many of rail’s advantages. Following are excerpts…

Rail Gains Advantage Amidst Supply Chain Snarls
Rich Thompson, International Director, Supply Chain & Logistics Solutions, JLL, Q2 2022

For companies around the world, supply chain snags have been top-of-mind for much of the past year. Delays are common, and U.S. domestic shipping rates for moving goods are up approximately 23 percent over 2020 levels, according to Cass Information Systems, Inc. High demand continues to outpace logistics capacity, and the chronic U.S. truck driver shortage only exacerbates delays. Amidst these trends, rail has become an important option for shipping goods across the United States — especially as trucking costs rise, too.

Many companies rushed to stock inventories in 2020, and they now need help distributing goods to consumers. Remarkably, international trade accounts for approximately 35 percent of U.S. rail revenue, 27 percent of U.S. rail tonnage, and 42 percent of carloads and intermodal units, according to the American Association of Railroads (AAR), an industry trade group. The flow of goods arriving or departing by ship has led to record levels of demand and huge year-over-year growth — along with significant congestion — at top U.S. ports.

Freight Rail’s Inland Reach
Inland hubs such as Kansas City, Dallas, Chicago, Memphis, Atlanta, and eastern Pennsylvania benefit from direct rail service from major U.S. seaports. Containers are shipping via expedited unit trains, consisting of cars of a single type, such as tankers, hoppers or intermodal containers, that carry a single type of commodity — all bound for the same destination and often several miles long. These trains typically reduce delays for the end user as containers are only handled or “touched” two or three times between the arrival port and the cargo recipient’s loading dock.

… inland ports have grown in importance, as near-dock coastal land is increasingly valued at a premium and moving containers by rail to an inland port frees up valuable near-shore real estate — improving the flow of goods for bulk or automotive roll-on/roll-off (RORO) traffic. Over the long term, the majority of containerized imports will likely still flow from the U.S. West Coast, but East Coast ports will continue to grow market share.

Rail’s Sustainability Advantage
Despite carrying 40 percent of the nation’s freight, rail accounts for a mere 0.5 percent of total U.S. greenhouse gas emissions, per U.S. EPA data. Idling trucks, in contrast, contribute to approximately 20 percent of annual U.S. carbon emissions.

On average, railroads are three to four times more fuel-efficient than trucks. A single freight train can replace several hundred trucks. Railroads are the most fuel-efficient way to move freight over land, moving one ton of freight more than 480 miles per gallon of fuel, on average.

Rail Can’t Solve All Supply Chain Issues
While no single freight mode can overcome today’s logistics snarls, the rising economic cycle of consumer spending and imports continues to bode well for freight rail. U.S. rail freight revenues are forecast to advance 4.7 percent per year in nominal terms through 2025, according to market research firm Freedonia Focus Reports. Trucks will, of course, always continue to play an important role in distribution, but rail transportation will continue to grow as a viable, cost-effective, sustainable transportation option for companies in the future.

Full report