“Railroads did particularly well on intermodal as shippers sought alternatives to trucks,” according to the report’s executive summary. “Rail productivity continued to improve as the Class I railroads that adopted ‘precision railroading’ principles achieved ever-lower operating ratios.”
With high demand and limited capacity, all logistics providers experienced a sellers’ market carried over from 2017 into the first half of 2018 and that contributed to overall business logistics costs increasing by 11.4% last year, CSCMP says. Rail costs showed a 12.9% increase.
Shippers complained of “what for most was the worst year in memory in terms of cost and capacity availability.”
Some shippers moving toward intermodal caused it to show the highest modal cost increase 2017 to 2018 at 28.7% which contributed to an overall transportation cost jump of 10.4 percent.
The sellers’ market began to weaken in the second half of 2018 “as capacity started to catch up with demand and the quarter-on-quarter pace of GDP growth began to slow,” according to the report.
U.S. import and export tariff tensions resulted in inventory buildups late in 2018 and made inventory carrying costs the largest increase in logistics costs at 14.8 percent. Ever-changing strategies and innovations by Amazon continue to disrupt some aspects of the logistics marketplace “and the discernible winner at this point is the consumer,” the group says.
The report is “optimistic,” regarding the economy but notes the current “longest-running period of economic growth in U.S. history” faces some economists predicting recession and “the longer the growth, the longer the period of pain.”
June marked the fifth month of U.S. carload and intermodal decline stemming from drops in manufacturing and housing and because of trade tensions, says the Association of American Railroads.
“U.S. import and export tariff tensions resulted in inventory buildups late in 2018 and made inventory carrying costs the largest increase in logistics costs at 14.8 percent. Ever-changing strategies and innovations by Amazon continue to disrupt some aspects of the logistics marketplace “and the discernible winner at this point is the consumer,””
This favors trucks, especially if service levels are stagnant or dropping. I think there is a truck-plus-a-day sweet spot for intermodal, particularly for a party (truck line, 3PL) with more supply chain visibility than the rails have. But it requires better and especially more reliable less variance service. The biggest rub would be success, which would then require massive capital spend on terminals and some line haul segments to grow the pie.
When volume on a carrier drops the carrier’s On Time performance increases as there is less traffic to be accommodated. If these ‘Logistics Managers’ had their way, only their traffic would be moving and only when they wanted it to move.
“June marked the fifth month of U.S. carload and intermodal decline stemming from drops in manufacturing and housing and because of trade tensions, says the Association of American Railroads.”
The Association of American Railroads needs to find a better source.
Mr. Fowler, I must say I didn’t see anything in this article about stock prices. Seems it’s all about customers noting service improvements and switching to rail from trucks. Their complaints were about price increases and capacity constraints. Sounds as though the RR’s are running full trains at higher prices for more customers. Sounds to me like changes were well overdue…
It is great if you’re a rich stock holder. All psr does is strip the company bare and fire everyone they can to get the stock price as high as possible. If that doesn’t work then start the stock buybacks to artificially raise the stock price. Don’t worry about the future because you’ll be gone to strip another company bare. Doesn’t have to be a railroad. Any company will do. In the 80s this was called corporate raiders. The tactic is the same only the name has changed.