Challenging times ahead for railroad shippers and carriers on the brink of a crisis
With significant carrier and shipper imbalances across corporate North America’s entire transportation network, the already overstretched railroads, are about to hit a capacity crunch. Faster economic growth, increases in environmental restrictions and capacity reductions are hitting shipper costs, margins and delivery times. Freight prices are forecast to increase by 10-15% in the coming year, with companies reporting uncertain delivery times, deteriorating margins and some already set to issue profit warnings.
In the EU, the European Commission has already mandated a sector-specific reduction target of 60% of CO2 emissions by 2050 and is encouraging a shift of freight from road and air to rail and inland waterways. While the railways worry about their ability to rapidly increase capacity, shippers are concerned about higher overall costs for the customer and longer delivery times. Moreover, the customer often expresses dissatisfaction about the bad quality and lack of punctuality of railway transports, especially for cross-border intra-EU links.
With growth, margins, earnings, customer service and even corporate survival under threat, the key to success is greater collaboration both between rail carriers and shippers and between rail, road, air and maritime carriers.
How should rail carriers and shippers respond?
There are four fundamental things carriers and shippers should do:
- It’s imperative that shipper and carrier executives start driving collaboration and improving relationships. The objective is to create win-win partnerships that address the pressures and demands of both parties
- As the ‘Amazon effect’ takes hold across the transportation sector, shippers and carriers must harness the actionable insights provided by data analytics to gain complete visibility across the buy-make-move-fulfill supply chain
- Railroads and shippers need to evaluate their current buy-make-move-fulfill supply chain to eliminate bottlenecks, enhance throughput and optimize the size of shipments. The goal is to improve cost, cash, growth and share price performance
- These partnerships and improvement programs have to be put into practice across the carrier’s organization. This involves driving enhancements, change and collaboration right across the end-to-end supply chain from the client’s client, to the shipper, through to the carrier and its supply base
We can help
Maine Pointe’s team of rail specialists have a wealth of experience helping clients transport their products by rail while delivering significant growth and profitability improvements to their bottom line.
We’ve worked on major initiatives to enable clients to transform their rail and over all transportation capabilities, orchestrating game-changing partnerships at the CEO-to-CEO level that have produced far better results than the industry has traditionally achieved.
Maine Pointe helps companies:
- Overcome the challenges posed by a congested rail network
- Gain full control in transporting products to market
- Improve the efficiency and effectiveness of their rail logistics operations
- Optimize their rail logistics approach to top quartile for performance
- Achieve stronger, more strategic relationships with their railroad carriers
- Obtain greater reliability (minimal disruptions)
- Lower costs
- Gain easier and more direct route utilization
- Obtain intermodal optimization
- Increase optionality
What Maine Pointe Achieves
Driving logistics, plant and procurement optimization for a global nylon manufacturer.
What we did
- Worked with the manufacturer and its rail, road and ocean carriers
- Reconfigured the distribution network
- Build strong, collaborative relationships between shipper and carriers
- Reduced working capital by $30M annually
- Improved transit times from 7-12 days to less than 24 hours
- Enabled the manufacturer to grow from $1.8Bn to $4Bn within two years
- Carriers benefited from 80% growth in volumes and 22% margin enhancement
Integrated supply chain management and optimized velocity for the world’s largest phosphate and potash producer.
What we did
- Redesigned rail service across the client’s network
- Led the effort to gain carrier buy-in for the new network
- Coordinated and facilitated network modeling efforts
- Network-wide redesign of rail service
- Reduced average cycle time by around 50%
- Annualized savings in excess of $15M
- Increased rail fleet utilization, enhanced ability to profitably serve N American market
- Increased velocity through N American network
Improved rail logistics capacity and capability to increase fleet velocity at a midstream gas processing facility.
What we did
- Approached the rail carrier in a spirit of partnership and negotiated a quid pro quo arrangement
- Designed and implemented daily/weekly operating reports to identify operational issues
- Installed management tools to streamline work processes and increase human resource utilization
- Facilitated visibility around the total cost of the logistics operation
- 50% reduction in yard dwell time for outbound loads at the Class 1 railyard
- 43% increase in potential weekly takeaway capacity
- 67% reduction in railcar yard dwell
- 18% decrease in empty transit miles
Maine Pointe has been instrumental in helping guide us with our long-term transportation and distribution strategy. With a tremendous team possessing expertise in many disciplines, they were able to communicate knowledge, and effectively transfer it, to our people. We have been extremely pleased with their performance.”
G David Delaney, EVP & COO, Potash Corp