Rail logistics is a critical part of the global transportation industry, connecting people and goods across vast distances efficiently and cost-effectively. Despite its importance, there are several clichés about rail logistics that persist in popular conversation. These clichés often have misconceptions about the industry, hindering its progress and potential as well as impacting rail shippers supply chains.
In this blog post, we will explore the top five clichés about rail logistics that you should avoid. By dispelling these misconceptions, we hope to provide a more accurate and nuanced understanding of the rail logistics industry, its challenges, and its potential for the future. Whether you are a logistics professional or simply interested in the transportation industry, this post will provide valuable insights and help you avoid common pitfalls.
- Accept Demurrage Charges Blindly
- Forgetting about Transloading
- You’re Stuck with the Routes You’re Given
- Industry Metrics Doesn’t Matter
- Not Paying Attention to Industry News
1 – Accept Demurrage Charges Blindly
Demurrage is a charge that rail carriers levy when railcars sit in a location for an extended period while waiting for placement. This fee was designed to encourage efficient use of railcars on the network so that traffic flows smoothly and railcars don’t sit and create railcar jams; the more shippers are encouraged to keep cars moving, the more open rail serving yards can be. In theory.
In practice, since rail shipping can be unpredictable, movement of cars can be unpredictable, which means demurrage charges can be unpredictable. While the reasoning behind demurrage charges is solid, receiving the fees can be problematic for budgeting. Since the fee is charged for a railcar not moving, it is a loss of money on top of the loss of revenue from the lack of the railcar moving.
The solution seems obvious – budget for demurrage! However, that is easier said than done, as modern demurrage calculations can be convoluted. As a result, many rail shippers see the charges and just accept them. It’s difficult to budget for them or understand the formula, so it becomes a charge that is begrudgingly accepted without working through to see if the charges are correct or not.
Make Efforts to Increase Demurrage
Avoid the cliché of accepting demurrage charges blindly by taking proactive steps to lower demurrage from the get-go, and dispute unfair demurrage charges.
Strategies to reduce demurrage proactively include:
- Improve the flow of your cars – Improve the management and flow of your cars and align them with your facilities’ capacity.
- Know the tariff rules – Know the railroads’ rules and your options.
- Keep proper records – Maintain proper records, including daily rail orders and switching.
- Analyze and find alternative solutions – Track the root cause and find alternative solutions.
For more information on proactively taking steps to reduce demurrage, read our Strategies to Reduce Demurrage blog.
If you see that you have discrepancy(s) in your demurrage charges, you can dispute those by submitting a case on the railroad’s websites. Disputing demurrage can be difficult, the critical part is to make sure you have the proof to back up your claims. For instance, if you are charged with demurrage for a missed switch that was the railroad’s fault and not yours, having the missed switch records will help you when you open a dispute with the railroad.
2 – Forgetting About Transloading
Transloading is a method of moving goods from one mode of transportation to another using various equipment at a bulk terminal facility. Usually, this involves taking goods from a railcar and transferring them to a truck or transferring them from a truck to a railcar. This can be done with various goods, including perishables and non-perishables, dry and liquid bulk, chemicals, and more.
It is easy to focus on just using one mode of transportation when shipping; it is less to focus on and seems more streamlined. Instead of trying to transfer goods between rail and truck, it seems much simpler to simply find somewhere connected directly to rail or put it on a truck the whole way. However, transloading provides a wealth of new opportunities and is not any more difficult to understand and implement than other aspects of shipping.
If You’re Not Utilizing Transloading, Consider It
Using different modes of transportation allows you to potentially lower transit costs. Rail shipping is one of the most cost-effective modes of shipping over long distances, but it is somewhat inflexible. Trucking is incredibly flexible but is much more expensive over long distances. But when the two are combined, you can save money by shipping by rail most of the distance, then transloading to truck to be flexible enough to reach nearby locations.
This also means that your supply chain network can be flexible enough to ship practically anywhere, opening up new opportunities. Transloading bulk terminals are located across the United States and Canada; our transloading map can help you search for transloading locations near where you need them.
3 – You’re Stuck with the Routes You’re Given
One major challenge all rail shippers will eventually face is the lack of flexibility in rail shipping. Due to the rigid aspects of rail, new routes do not develop often, and it can be tempting to see it as an impossible task. It can also be comfortable to just stick with the route you know and have used repeatedly.
The difficulty in just assuming you are stuck with the routes you are given is that sometimes rail lanes are captive, meaning that that lane does not have any competition against other railroads. This lack of competition is bad for you, since it often results in the railroad having little incentive to compete with their costs or service.
Alternative Rail Routes
If you are using the same route repeatedly and find that it is time for a change, consider seeking alternative rail routes to mitigate the problems you are having. Some shippers do not consider finding an alternative route because they either do not realize they can, or do not know how to begin.
We suggest utilizing data and talking to experts to get started. Rail rates, shipping costs, mapping tools, and other data can show you where you can make changes in routes and help you make smart decisions. And if you find yourself stuck, talking to rail experts like those here at RSI Logistics can help you work through the issue with an experienced rail logistics provider. If you need help, don’t hesitate to reach out; we thrive on helping rail shippers overcome challenges.
4 – Rail Industry Metrics Don’t Matter
This is a cliché not just for the rail industry and rail shipping, but for all businesses in their respective industries. With everything going on in your business, it is easy to overlook insights, metrics, and raw data from the industry. Macroeconomics don’t seem to have as much of an impact as microeconomics. That, or we’ve resigned ourselves to the concept that what happens in the bigger industry is beyond our control and not worth the time to pay attention to. It can be overwhelming, trying to comprehend the vast amount of data that comes from the rail industry and how it can impact you.
While it is true that the results of the metrics you look at from the rail industry are out of your control, that does not mean your response is. And while it is true that the data from the industry is vast and sometimes difficult to comprehend, there are tools out there to provide tailor made insights for you.
It does take time and effort to find data and insights on the rail industry, but putting in that effort can provide rewarding results for your organization.
Study the Rail Shipping Data
Studying rail industry data in its raw form, often from large organizations such as the Surface Transportation Board or The Association of American Railroads, can make it difficult to find helpful insights for your industry amongst the sea of data. That’s why we recommend deciding ahead of time what metrics you need to focus on for your business and finding somewhere where those metrics are easily translated into insights.
For instance, if your shipping varies seasonally, it is helpful to have an idea of what rail performance trends look like for the major railroads during the seasons you ship more and less. If you can see the railroad’s performance trends, it can help you see ahead of time if you will be struggling with a lack of railcars, working through slower performance and more crowded lanes, or if you can expect more to go smoothly. Tools like Rail Info can provide this information to you in comprehensive dashboards and graphs so you don’t have to dig through the raw data for yourself.
5 – Not Paying Attention to Industry News
Similarly to our cliché above, it can be easy as a rail shipper to not pay close attention to rail industry news. After all, if there is a problem with the route you are shipping on, you’ll hear about it when it impacts your shipments, right?
Although it can be a lot of work to pay attention to short- and long-term updates from the rail industry, it truly does matter. Pay attention to short-term challenges, such as major weather events or issues with strikes and derailments, to anticipate repercussions on your shipping. Since the rail networks are so interconnected, even if an issue with the railroads does not directly impact your lanes, it can ripple outward to cause issues regardless. And long-term challenges, such as changes to laws or railroad mergers and operating changes, can have an impact on your rail shipping in the future. If you must adjust how you ship on rail to accommodate for these changes, the earlier you are aware, the more you can be prepared.
Keep an Eye on Rail Industry Weather, News, and General Updates
Don’t be caught unprepared by the changes in the rail industry, whether those changes take place in hours or over the years. There are a variety of methods to keep an eye on the rail industry.
For local issues that can impact your shipping, we recommend signing up for alerts from the railroads. Most railroad websites give you the option to sign up for email notifications if their networks are affected or have the possibility of being affected.
For the longer issues, we recommend something similar; find where the news is collated into one location so you can get it all in one place. Often, this means going to the source, such as the Surface Transportation Board. It can also mean looking into comprehensive sources of news, such as prominent publications like Progressive Railroading.
Rail logistics is a complex and ever-evolving industry that is essential to the economy. Unfortunately, there are several clichés about rail logistics that persist, which can lead to misunderstandings and missed opportunities. By avoiding the five clichés we discussed – blindly accepting demurrage charges, forgetting about transloading, assuming you’re stuck with given routes, ignoring industry metrics, and neglecting industry news – you can stay ahead of the curve and find greater success in your rail shipping supply chain.
It is essential to stay up to date with industry news, understand the importance of metrics, and explore all available options for moving goods efficiently. By doing so, you can take advantage of the latest innovations and emerging trends to streamline your logistics operations, reduce costs, and improve customer experience. In short, avoiding these clichés is critical to achieving success in the rail logistics industry, and we hope this blog post has helped you gain a deeper understanding of the industry and its potential for the future.
