As a third-party logistics provider that specializes in bulk rail transportation in North America, we manage rail shipments across all industries in the United States, Canada, and Mexico. Amongst our customers, one current common difficulty is that the railroads are struggling to deliver railcars. Across the networks of all railroads, railroad service issues continue to mount.
We hope to provide some insight as to why this is happening, how this is affecting industries, and if there is anything you can do about it.
Beginning in the early 21st century, the Class I railroads began to implement a new initiative, Precision Scheduled Railroading (PSR), which was developed during a period when the railroads had a renewed focus on efficiency. The goal of PSR is to maximize the railroad’s productivity by using departure schedules and point-to-point delivery methods to achieve low operating ratios. As part of their drive to achieve this low operating ratio and increase shareholder satisfaction, the railroads initiated big cuts in staffing levels.
In recent years, the global pandemic had a significant affect on already reduced railroad staffing levels. The pandemic caused variability and instability in the supply chain and shipping volumes, and impacted workforces throughout rail industries. Throughout this period, many individuals left the workforce, which added to the challenge of low staffing levels at the railroads.
It takes time for the railroads to adjust their staffing levels, so when shipping volumes started to quickly increase in the fall of 2021, the railroads could not adjust their workforce quickly. As can be seen in most industries, it is a slow process to hire new employees. Once the employees are hired, it is estimated to be a 6-to-9-month process for the new hires to be fully trained in the field.
How is This Affecting Industry?
Rail-served industries feel the impact of lower staffing levels in a variety of ways, none of them less challenging than the other. Focus on continued efficiency and a reduction in labor has resulted in instances where the railroad reduces the number of times they visit your location(s) within a period. For instance, if you were getting serviced 5 days a week, they might adjust it to 3 days a week; sometimes, this is not communicated within an adequate period.
When the railroads do not have enough employees, they are unable to appear for your regularly scheduled switch. This situation would compound shipping challenges if you already saw your service reduced within a period.
Fewer employees also means that railcars do not get processed at various yards while they are enroute. This can cause bunching issues, where several of your railcars get backed up and arrive at your facility all at once, instead of being evenly spaced out. If your facility cannot handle all the railcars at one time, the bunching might then lead to added demurrage charges, a charge for the expense incurred when rail cars are detained beyond a specified period.
When you do not get the railcars you need when you need them, this can affect plant production, operations, and supply chain management. You may have to limit or stop production if the raw materials did not arrive on time, or if empty railcars that are needed for loading did not arrive.
Special Switches and Shut Down Logs
Here at RSI Logistics, we are seeing an increased number of requests for a shutdown log or requests for a special switch so that shippers can get their railcars into their locations.
A shutdown is when an organization will be forced to stop production if a railcar is not delivered by a certain time and date. It is expensive and is avoided if possible. To help, if you are in jeopardy of a shutdown, we can enter a shutdown log on the railroad’s websites. It is how we notify them of the issue, which allows the railroads to put priority on it and work to help. A special switch is performed when an organization wants a switch outside of the normal schedule and is willing to pay for it. Railroads will sometimes perform a special switch to prevent a shutdown; however, this is normally only if they were the ones who caused the problem/delay.
Since these requests, in many cases, are due to the railroads being understaffed, they are unable to honor a special switch request or do anything extraordinary for the shutdown log, because they still do not have the staff to carry out those requests. We recommend you continue to make the request just in case, but to also keep expectations in check and work on a contingency plan in case the request is not fulfilled.
Overcoming the Challenge of Railroad Service Issues
The best recommendation we have right now is to stay informed!
The Surface Transportation Board is conducting a hearing on April 26th and 27th where they are meeting with most of the Class I railroads to discuss the topic of rail service issues and staffing. The basis of the hearing is that the major railroads are not staffed at levels to meet the needs of shippers. For more information about this hearing, check the STB’s announcement.
Furthermore, keep your eye on any of the Class I railroad’s announcements related to service and staffing. A few of them have been quite vocal about their efforts, which allows you to better be informed. For instance, recently the Union Pacific Railroad just started asking customers to cut back on their shipments. They said they will impose firm limits on shipments for some customers if they do not voluntarily cut back. The BNSF also said they started to try to reduce the number of railcars it is moving by 2% to help with congestion issues.
In terms of staffing, the railroads have begun to share their progress and initiatives:
- Union Pacific has hired 450 workers since January 2022
- BNSF is on pace to hire 1,000 workers in 2022
- NS is offering $5,000 hiring bonuses
- CSX has a web page devoted to its hiring progress
It is also important to document and track your challenges. Communicate these challenges to your railroad representative so they have a clear understanding of your needs and the difficulties you are facing. Your railroad representative will not be able to affect change immediately so keep expectations in check, but sharing the documentation with your railroad representative gives them information that they can use internally to help make improvements.
Another possibility is other modes of transportation. We know there are challenges finding truck drivers right now, but a different mode of transportation can sometimes help to overcome your rail service issues.
As a responsible shipper, we encourage you to do your part to make sure you do not have excessive cars that are unnecessarily sitting on railroad property. This helps with congestion and will help the network to operate more smoothly.
Are you having rail service issues? If so, we want to hear about it! Click the link to let us know about your issues.