Every time we get an opportunity, we assert that rail transportation can often help you reduce shipping costs substantially without disrupting your overall supply chain. However, it is not as easy as just transitioning to rail and picking the first rail lane that presents itself. There are situations when captive lanes create a lack of competition, which increases costs since there is no incentive to be competitive. As a result, knowing when and how to identify alternative rail routes can help you streamline and optimize operations, save on costs, and simplify your supply chain.
In the first part of this blog, we will talk about and examine when you should be identifying alternative rail routes. In the second part of this blog, we will discuss how, when the opportunity arises, you can determine alternative rail routes.
When to Identify Alternative Rail Routes
Captive lanes refer to rail routes where competition is not available. On captive lanes, only one rail carrier, usually a Class 1 railroad, controls the rail route. In these cases, it can be more difficult to negotiate rail rates; since the railroads on captive routes have little incentive to negotiate, captive routes often end up with higher rates than routes where competition is available. Identifying alternative rail routes can help to solve this challenge.
To identify alternative rail routes to captive lanes, transloading is usually required. Transloading is the process of moving a product from one mode of transportation to another; in most cases from rail to a truck. In other cases, it is beneficial to transload from truck to rail at the origin.
Transloading can overcome some rail specific challenges, such as captive rail lanes or reaching locations that are not served directly by rail. Utilizing trucking and transloading facilities, you can ship materials via truck across shorter distances while relying on rail for the longest stretch of the route, as well as make new routes available that would not be otherwise. To find alternative rail routes for captive lanes, it is helpful to first identify transload facilities within your target market, or geographical area. If you find a facility, it is possible that you can circumvent or bypass the captive lane.
Learn more about transload facilities and alternative rail routes
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If your goods or materials are traveling a long distance via truck transportation, shipping costs can quickly add up due to a combination of factors, including lack of drivers, weather, traffic, and road regulations. Compared to the cost of shipping by truck, for a long haul, rail shipping is the more economical and cost-effective option. Railroads are typically not as affected by outside factors as truck transportation and can carry bulk cargo items much more efficiently.
But what do you do if your customer is not rail served? In some situations, it may seem like long-haul trucking is the only option. Many areas are not easily accessible by rail due to the confines of the rail system and the cost of building new rail lines. However, locating transload facilities can help you reduce overall trucking miles and reduce costs significantly. Trucking between transload facilities can help to fill in parts of the journey, while cost-effective rail transit fills in the majority of the long journey.
This is another situation where it is helpful to identify alternative rail routes. Although it can take some up-front time and effort to find a route utilizing rail to replace part, or all, of your supply chain that is currently truck transportation, in the long run the cost effectiveness of rail will see a return on investment. And if you are concerned about shipping to areas that are not rail served, transload facilities can help you get your product from the railroads to your facility via a much shorter truck haul.
High Fuel Prices
Unfortunately, fuel prices have fluctuated significantly for many years, this fluctuation is a reality of supply chain economics. International conflicts, consumer demand, taxes, the refining process, as well as other issues, make it difficult to accurately predict fuel prices. When the price of fuel goes up, so do most transit costs due to the intrinsic relationship of fuel in shipping. However, since trains are four times more fuel-efficient than trucks, trains are the go-to alternative for medium to long distance transportation when fuel prices rise. Identifying alternative rail routes in these cases can help you reduce shipping costs long-term and minimize the effects of fuel price hikes in the future.
Identifying and utilizing rail routes takes time and generally is not a quick, overnight fix for suddenly rising fuel prices. However, identifying alternative rail routes can help you prevent losses due to fuel price spikes in the future. Since fuel prices are unlikely to substantially decrease in the future, and volatility is likely to increase, businesses who utilize rail shipping can stabilize some supply chain costs long-term.
As previously mentioned, shortages among supply chain personnel can impact shipping and transportation; a prominent recent example is the shortage of truck drivers. American Truck Associations estimate a shortage of about 80,000 drivers in 2022, with a total shortage of 160,000 by 2030. Labor shortages in trucking have already caused extensive delays and price increases, and as can be seen, this problem is unlikely to be solved soon. Contrastingly, staffing in rail operations tends to be more stable. Rail operations require fewer workers in general and are less susceptible to swings in demand. When labor shortages create challenges in other industries, identifying rail routes can provide a solution.
How to Identify Alternative Rail Routes
Identifying rail routes can seem complex at first. The process can be intimidating and complex; especially because rail, unlike truck shipping, is confined to already developed tracks and systems. However, there are a few strategies that can help to make shipping by rail and getting started in rail transportation more accessible. To identify rail routes and solve shipping problems you may be experiencing, consider the following:
Rail rates, shipping costs, mapping tools and other data can show where the best opportunities for improvement exist. Visibility and data analysis can help you make smart decisions about which rail routes can provide an answer to your challenges. Consider data tools like our railcar tracking software RSInet to help make these decisions. These sorts of data tools allow you to track shipments in one place, manage your railcar fleet, automate reporting, and streamline your freight bill accounting; with all this information, finding an alternative rail route is less of a challenge.
Talk to Experts
Rail transportation experts can help you assess alternative routes and balance costs. Even with a good data tool, plenty of visibility, and the desire to move to an alternative rail route, it can still be a complicated process, even for experienced rail shippers. And the complication level only rises if you wish to implement transloading into your supply chain; the logistics of switching between two modes of transportation is a challenge. Sometimes you need someone, an expert, that you can bring your questions to and get an honest response. Fortunately, here at RSI Logistics we have several experts who are rail shipping professionals, and our Transload team is always happy to help you find alternative rail routes. Request information to get a conversation started.
View Transloading Facilities
Transloading facilities can provide access to rail routes in areas where direct rail access is not available. However, as we saw earlier, transloading can be a particularly difficult challenge. A big part of that is deciding where you can transload to minimize the costs. A transloading map like our Transload Terminal Directory can help you identify these opportunities and locations.
Knowing when and how to identify alternative rail routes can help you increase the stability and cost effectiveness of your shipping and supply chain operations. Consider these decisions carefully, calculate costs thoughtfully, and you can take advantage of long-term improvements.