Companies that transport dry and liquid commodities utilize the modes of truck, rail, barge, ocean and pipeline. Some shippers are fortunate enough to be able to utilize barge, ocean and pipeline that can provide significant cost savings. However, most shippers rely on truck, rail, or a combination of the two. When comparing the costs of rail vs truck, rail offers significant advantages. Multimodal rail and truck shipping allows shippers to take advantage of cost savings even when receivers are not located on rail. Optimizing your shipping strategy to maximize the cost savings of rail transit can significantly reduce your logistics spend.
Comparing Modes of Transportation
Where pipelines and waterways are available, shipping via these modes can significantly reduce costs. However, these two options are limited by infrastructure and geography. Rail and truck however provide more versatile shipping options, especially when combined in multimodal transport. Comparing costs per ton-mile of each mode, you can see the advantages of each. Though these differences are small at first, cost savings add up quickly over longer distances and volume.
Trucking is the universal mode of transportation; every shipper can load and receive materials by truck. Rail, on the other hand, requires that both the shipper and consignee have the ability to load and unload rail directly. By comparison, the differential in cost between the two modes is $ 0.105 per ton-mile. Reducing truck transit and choosing the optimal rail transload facility will help to maximize cost-savings through rail.
Comparing Truck vs Rail Shipping: Example
To compare the costs of rail vs truck shipping, consider the movement of a bulk commodity from Houston, TX to Cleveland, OH. The truck cost in this example lane is approximately $ 5,159 per load, whereas rail would be $ 6,676 per car. However, when comparing the costs of rail vs truck shipping, you must apply a ratio of 1:4, since one railcar equates to four truck loads.
|MODE||ORIGIN||DESTINATION||MILES||TONS PER SHIPMENT||COST PER SHIPMENT||RAILCAR EQUIVALENT|
|TRUCK||HOUSTON TX||CLEVELAND OH||1378||24||$ 5,159||$ 20,636|
|MODE||ORIGIN||DESTINATION||MILES||TONS PER SHIPMENT||COST PER SHIPMENT||TRUCKLOAD EQUIVALENT|
|RAIL||HOUSTON TX||CLEVELAND OH||1378||95||$ 6,676||$ 1,669|
Utilizing Multi-Modal Shipping
Many shippers understand the savings potential in shipping rail versus truck, but, in many cases, receivers may only be able to receive material by truck. To take advantage of the economies of long-haul rail transportation and the speed and flexibility of local truck delivery, shippers rely on North America’s extensive bulk terminal network.
Let’s consider our example movement from Houston to Cleveland again, this time using multi-modal shipping. If we look at the costs of this movement while utilizing a bulk terminal in Cleveland, we will see that the costs of a multi-modal option are in between truck and rail direct.
|MODE||ORIGIN||DESTINATION||MILES||TONS PER SHIPMENT||TRUCKLOAD EQUIVALENT||RAILCAR EQUIVALENT|
|RAIL||HOUSTON TX||CLEVELAND OH||1378||95||$ 1,669||$ 6,676|
|TERMINAL||CLEVELAND OH BULK TERMINAL||$ 200||$ 800|
|TRUCK||CLEVELAND OH||CLEVELAND OH||15||24||$ 400||$ 1,600|
The cost to combine rail and truck using a bulk transfer terminal is approximately $95.54 per net ton. By comparison, rail direct is $70.27 per net ton, and over-the-road truck is $214.96 per net ton. Using multi-modal rail and truck transit compared to truck alone, you can cut transportation costs by more than half.
Railcar Equipment Costs
In addition to transit costs, it is also important to consider the cost of railcar equipment when using rail or multi-modal transit. This equipment cost adds about $900 per railcar shipment. However, these costs only slightly increase variable costs per net ton. Using multi-modal transit, the cost per net ton increases to $105.01. Compared to over-the-road trucking’s $214.96 per net ton, the savings for multi-modal transport remains significant.
The easiest or most direct shipping route is not always the most efficient, nor the most cost-effective. You can take advantage of cost-savings via rail shipping even when receivers are not located directly on rail routes. Use multi-modal strategies to reduce shipping costs, and assess your transloading facilities carefully to optimize cost-savings. With this strategy, you can keep your shipments on-time and on-schedule, while dramatically reducing costs.