Norfolk Southern’s intermodal enterprise is getting into a brand new part during which success will rely much less on merely matching trucking on price and extra on making rail freight simpler to purchase, plan, monitor and use, in line with an organization govt reflecting on the railroad’s three many years of community growth and customer-service evolution.
Shawn Tureman, vice chairman of Automotive & Intermodal Advertising marking 23 years at Norfolk Southern (NYSE: NSC) whereas attending the Intermodal Affiliation of North America’s annual convention in Lengthy Seaside, mentioned the trade has spent a lot of that interval asking whether or not intermodal can compete with over-the-road trucking. That query, the manager argued, now not captures the central problem.
Intermodal has lengthy held benefits in scale, gasoline effectivity, sustainability and attain on the longer-haul lanes the place railroads compete. The extra consequential query is whether or not railroads have made the service easy, dependable and visual sufficient for shippers and logistics suppliers to decide on it persistently over a truck transfer.
That customer-experience problem has develop into extra urgent as provide chains adapt to an on-demand financial system. Shippers are more and more accustomed to service that’s fast, clear and easy to handle. They’re evaluating freight choices not solely on transportation value, but in addition on predictability, ease of execution and whether or not a transportation supplier can help their development.
In that context, trucking’s benefit shouldn’t be at all times transit velocity alone. A truck transfer can seem easier as a result of it usually includes one supplier, one motion plan and a extra direct line of accountability. Norfolk Southern’s alternative, Tureman mentioned, is to supply comparable ease and certainty whereas retaining rail’s capacity to maneuver freight at scale.
The railroad has not too long ago proven stronger intermodal momentum. Norfolk Southern’s intermodal quantity rose 13.7% year-over-year this previous week, pointing to proof that rail can seize enterprise from the freeway when its service providing is aggressive.
Three eras of intermodal
Norfolk Southern’s view of the enterprise might be divided into three distinct intervals: Constructing the community, competing for the shopper, and eradicating the friction that continues to constrain rail’s capacity to win freight from vans.
The primary period centered on community building. Following railroad consolidation within the late Nineteen Nineties, Class I railroads invested extensively in intermodal terminals, double-stack routes, port connections and long-haul freight corridors. These investments created the spine of the U.S. intermodal system and established rail as a viable long-distance different to freeway transportation.
For Norfolk Southern, that meant growing what Tureman characterised as essentially the most in depth intermodal community on the East Coast. The railroad added terminal capability, constructed or upgraded routes connecting main freight markets and improved entry to East Coast ports and inland distribution facilities.
The investments gave shippers a further strategy to transfer items over lengthy distances and helped flip intermodal from a growing freight possibility right into a central a part of the transportation market.
However the community buildout didn’t get rid of the complexity dealing with prospects.
Lengthy-haul rail strikes steadily concerned a number of railroads, terminal transfers, drayage suppliers and repair handoffs. Even in lanes the place intermodal delivered a price or effectivity benefit, prospects may face service variability and uncertainty that made rail tougher to include into tightly managed provide chains.
“Price alone doesn’t shift a provide chain,” mentioned Tureman.“Clients want confidence.”
The primary period demonstrated that intermodal may scale, however it didn’t totally resolve the shopper expertise. In lots of instances, prospects needed to adapt their operations to the railroad slightly than receiving a product designed round their wants.
Service turns into the product
The second period, which Norfolk Southern locations largely up to now 15 years, shifted the trade’s consideration from bodily community growth to customer support, terminal efficiency, visibility and consistency.
Shippers started to guage intermodal in a different way. Moderately than asking solely whether or not rail may transfer freight at a decrease price, they more and more requested whether or not it may assist them function extra successfully.
May they plan round transit occasions? Would service be constant from week to week? May they observe freight and anticipate exceptions? Would the rail service be easy for his or her operations groups, drayage companions and prospects to handle?
That change raised the significance of the intermodal terminal, the place shippers and truck drivers typically expertise the railroad most immediately. Norfolk Southern mentioned it has centered on terminal stream, bottleneck discount, capability administration and instruments supposed to make it simpler for purchasers and drayage suppliers to transact with the service.
The railroad additionally has continued investing within the underlying infrastructure that helps the service product: East Coast port connectivity, inland ports, double-stack-capable corridors, strategic terminal capability and high-performance routes serving rising freight markets.
When terminals function easily and connections are reliable, prospects expertise fewer pickup and supply surprises, extra dependable cutoffs and higher freight visibility, the manager mentioned. Additionally they have a greater capacity to recuperate when disruption happens.
That progress doesn’t imply the railroad considers its intermodal community completed. Tureman acknowledged Norfolk Southern shouldn’t be “good,” however mentioned the corporate’s buyer expertise has improved materially because the railroad has positioned larger emphasis on steady enchancment.
The elemental objective is to make rail service one thing prospects can confidently plan round slightly than a lower-cost different which will carry an excessive amount of working complexity.
UP–NS mixture seen as subsequent step
Norfolk Southern’s proposed mixture with Union Pacific (NYSE: UNP) is central to its imaginative and prescient for a 3rd intermodal period centered on eradicating structural friction from the freight community.
The proposed transaction would hyperlink Union Pacific’s western community with Norfolk Southern’s jap system, making a single-line railroad connecting main West Coast markets with the Southeast, Northeast and different jap markets. Supporters argue {that a} mixed UP-NS railroad would scale back the complexity now related to interline freight strikes that cross between carriers.
Chicago and different main rail gateways stay a selected supply of complexity for transcontinental intermodal shipments. A handoff between railroads can introduce one other level at which containers should be transferred, plans can change and delays can happen. From a buyer’s perspective, these handoffs can add time, uncertainty and extra coordination necessities.
These issues might be sufficient to go away freight on the freeway, even when rail is in any other case an acceptable transportation mode.
Beneath the proposed Union Pacific–Norfolk Southern mixture, the railroads mentioned about 10,000 present lanes may shift from interline service to single-line service. The appliance filings additionally undertaking the elimination of roughly 2,400 railcar and container handlings and 60,000 car-miles per day.
The proposal requires seven new premium intermodal lanes and would give prospects broader single-line service choices throughout the nation, in line with the businesses.
Single-line service can change the industrial and operational proposition for shippers. As a substitute of working throughout separate railroad industrial groups, contracts, invoices, data programs and accountability constructions, prospects may work with one supplier for extra of the coast-to-coast motion.
The consequence, Norfolk Southern argues, can be fewer handoffs, fewer touches, fewer potential delays and a extra direct chain of accountability.
For a shipper shifting cargo from a West Coast port to the Southeast or Northeast, that might imply much less have to construct buffer time into the supply-chain plan for an inter-carrier handoff. For logistics suppliers, it may scale back the hassle required to handle a transfer throughout a number of railroads. And for purchasers selecting between rail and truck, it may make intermodal look much less like a sophisticated exception and extra like a sensible, reliable possibility.
The broader strategic argument is that simplifying the product may assist railroads seize a bigger share of the long-haul truck market whereas decreasing freeway congestion and strengthening home supply-chain capability.
Terminal readiness stays decisive
A transcontinental community alone won’t decide whether or not intermodal positive factors share from trucking. Clients nonetheless encounter the railroad at terminals, gates, ramps and drayage handoff factors, making terminal efficiency essential to any effort to develop rail volumes.
“The terminal is our storefront,” Tureman mentioned.
Which means terminal readiness should advance alongside community integration and industrial simplification. A railroad can supply an extended single-line route, however the worth proposition can erode shortly if drivers face extreme gate queues, containers are unavailable when anticipated, chassis and capability are constrained, or service exceptions are troublesome to determine and resolve.
Norfolk Southern has emphasised the necessity for readiness earlier than quantity arrives. That features ample terminal capability, staffing, processes, energy, expertise and working self-discipline to help larger throughput.
When terminals are designed and run for velocity, prospects can see the advantages immediately via quicker gates, decrease driver dwell, smoother connections, improved visibility and faster restoration from disruption. Conversely, an unprepared terminal could make intermodal troublesome to make use of whatever the energy of the broader rail community.
The railroad has linked its ongoing terminal work to the bigger potential created by a mixed UP–NS community. Norfolk Southern is in search of to enhance the day by day buyer touchpoints in its present system whereas supporting a longer-term imaginative and prescient of extra built-in, accountable transcontinental rail service.
From competing with vans to standing out
The development Norfolk Southern describes is easy: first, railroads constructed the community; then they labored to enhance the service product; now they have to take away friction at terminals, interline handoffs and different factors the place complexity discourages prospects from selecting rail.
The target is to not ask shippers to just accept the operational problems of intermodal in trade for a cheaper price. As a substitute, it’s to revamp the rail product in order that complexity is absorbed by the service community slightly than handed on to the shopper.
That might permit intermodal to compete on the components that more and more drive freight selections: Predictability, transparency, simplicity and accountability, along with price and capability.
If railroads can present reliable terminal experiences, clearer visibility, fewer inter-carrier handoffs and a single accountable accomplice throughout long-haul lanes, Tureman say, intermodal can develop into greater than an alternative choice to over-the-road transportation.
“It will probably develop into a most well-liked possibility for shifting the nation’s freight.”
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