Have you ever taken the challenge on of putting together a large complex say 500-piece jigsaw puzzle? You know the kind that has a theme of some kind that has a color and background scheme that looks all the same with maybe two or three variations of pattern that gives you hope of being able to complete the puzzle. Well today I’m going to give you a look at and walk through several of the most important pieces of the rail shipping puzzle.
Locate a shipping site. Pretty basic isn’t it? Just find someplace to your product onto a railcar and ship it off. However, if you don’t have an existing site your work starts here and even if you do have a site, you’ll want to check on the capabilities of your rail site and see if they match up with current railroad requirements. Location is key to supporting a rail site by the railroads, e.g. does it physically work for them from a capabilities and access viewpoint? How does it fit in with their distribution network and how often do you need service?
There are three types of sites that are options.
The Greenfield Site is where a site is built from the ground up. This is by far the most expensive option and requires the most capital and involvement. The benefits are generally you get exactly what you want to support your operations possibly creating internal operational savings. The downside is that it will take you several months to work thru the railroad onboarding and approval process to support the railroads physical operations requirements, e.g. if they’re going to serve your industry the track construction must meet a minimum set of requirements. If you’re connecting to a Class I railroad (one of the major railroads) you’ll have a different set of criteria than if you connect to a shortline or industrial park. All the Class I railroads have detailed requirements listed on their websites. Usually, this information is under the Industrial Development link. You can look up you’ll need to do but rest assured you’ll want to engage the railroad from the inception of your efforts to insure they will serve your industry. Shortlines and small regionals may have publicly available information but direct contact is generally the best option.
The Class I existing siding track. When reviewing this option, you’ll want to dig a bit deeper than a casual observation. Many times, track that appears not to be in use has prior commitments on it that require some finesse to secure. Class I’s in particular are committing to shipments but not over committing to track space. If you think there’s room and there very well may be but there’s a prior commitment on the track often times the railroad won’t double up and allow you to ship on the same track. A case in point. I was working on an origin site in Nevada for a mineral shipper. There was a track that upon research originated 4-6 carloads a month from a non-competitive shipper. Our shipper anticipated 30-40 carloads a month. A win for the railroad we’d add out shipments to the existing shipments and create a substantial increase in business for the railroad. It was not to be. The railroad had dedicated that site to the original customer. It was up to us to contact the customer and work out service requirements so that we could satisfy the Class I railroad requirements for track space.
Shortlines, Industrial Parks and Team Tracks (SIPTT). SIPTT are generally the easiest and most customer friendly of the three site definitions. SIPTT generally really want your business and thru there very nature a viewed as feeder lines to the Class I railroads. Whether you’re shipping unit trains or single carload shipments SIPTT will find you a place to load or unload as the case may be. If you need to install a Greenfield Site, they seem easier to work with due to less restrictive requirements than Class I’s. A subtle difference of the Team Track is that it is generally a shared track that has various traffic scheduled to it to load or unload via a transload operation. It essentially has several customers for which it will coordinate between to mitigate disruption in product flow all being processed at one location on one or several tracks.
Obtaining Rail Rates. Early on in the process you’ll want to obtain rail rates. To get rates you’ll need a loading and unloading location identified even if its in process as defined above. Here’s where things get tricky. The railroad being a free-market entity will price your shipment where they can obtain the best margins. That’s their job, expect it. If you have any options such as dual access to competing railroads, a shortline that connects with more than one Class I railroad or other origin locations that you can leverage from a rate standpoint you’ll want to identify them in the negotiations. Better yet identify them before meeting or discussing rates with the Class I to formulate a strategy around your advantages. A way to start this base information gathering is to review online tariffs for your commodity to obtain an indicative rate to determine a baseline and help identify options to align your rail rate with commodity expectations. For a more in-depth rate review use the Universal Rail Costing System (URCS) as provided by the Surface Transportation Board to determine variable cost ratios and obtain a better understanding of what a competitive rate may be for your movement. If you don’t have a good understanding of how to use this system you may want to engage an expert to get the full benefit of the URCS. After you’ve gathered as much information as you can and formulated a strategy call your marketing or sales representative and start the process.
Identify Operating Resources. What are you going to need to ship your product? Operating resources can take the form or railcars, locomotives, mobile railcar movers, rail scales, etc. These are all an intricate part of the jigsaw puzzle. Railcar requirements and the number of railcars required are calculated on the type of railcar (what works best for the product?), it’s capacity and the number of trips or cycles it will make per a defined time frame. Information on the railcar type can be researched via the internet or best provided by manufacturers, railcar suppliers, transportation consultants or those currently shipping similar products by rail. An initial cycle time will be required and can be obtained directly from the railroad or if you want an estimate before engaging the railroad review published railroad performance measures for your geographic area. Take into consideration potential bad order railcars when planning the number of railcars required. Locomotives and railcar movers will depend on how many railcars you need to move at one time thru your industrial track. If you require a lot of internal movements setting railcars over pits to unload or aligning them with docks or loading spouts to load you may consider your own railcar mover or locomotive. If neither of these options fit with your operation the railroads may supply you with switching service at a price. Additional resources may be required depending on what you’re shipping or receiving. These could include rail scales, commodity probs for testing commodities, unloading pits, hose connections, air flow connections, railcar shakers, railcar overhead unloader backhoe operations, etc. Lastly, you’ll want to have some basic mechanical tools and parts on hand so you can repair the basic items on a railcar to keep it operational. These may be brake shoes, air hoses, unloading tube caps, etc.
Managing the Shipment Process. Here’s where you’re going to find out how many puzzle pieces you’re missing. The shipment process can be taxing. To start you need to have technological capabilities to connect and interact with the railroads. Initiating electronic waybills, providing shipment instructions, managing accessorial charges, ordering railcars, managing demurrage exposure, tracking railcars for location and scheduling, managing bad order railcars are all a part of managing the shipment process. Don’t forget these puzzle pieces. Another important piece of the puzzle is qualified personnel. Anyone can learn this stuff but it may be an expensive lesson. It’s best that you start with someone with the knowledge and experience to keep you out of the pitfalls and not interrupt your supply chain.