I think this time around all the good arguments are on the side of the shippers. Since moving to various forms of precision scheduled railroading (PSR), railroads have been passing longer delays on to customers. They don’t have the cover of good servi8ce right now, and I bet they lose on this one.
It seems clear that the major rails have leaned out their systems so much that they can’t respond to anyone’s exceptional needs. A shift to reciprocal shipping for a larger group of customers would help that out, and foster more price competition as well as simple competition for cargoes.
Rails can’t argue that they are making investments in new lines to serve more customers. What investment there is in rail infrastructure is on maintenance, and on expanding trunk and yard lines where great congestion has occurred. It’s almost impossible for a new business to get a rail spur, let alone service at a spur. Rails don’t see themselves providing this kind of service anymore, though they continue to support those who have it. Letting other rails use the rail lines via reciprocal switching would help the shippers a lot. It would induce competition where there isn’t any now.
The rails have lots of ways to react to new rules. All the schemes contemplated would allow fair compensation for the use by other lines. And I bet there will be some limitations in who can negotiate shipper reciprocal switching rights. So big rails will continue to have enough leverage to make it a business option.
Big rails need to staff up and get more rolling stock anyway. They have cut too close to the bone to provide good service today, and everyone from ag shippers to container shippers knows it. they should make the system and infrastructure work for the customers.
Long delays for trains on rail networks are worrying for farmers and users of grain. Significant delays have been observed, including full trains sitting while customers waited for the grain onboard. Rails have been suffering trying to keep trains moving. Many of rails’ complaints seem to be related to the workforce. However, it isn’t clear that rails have actually reached the point where they can impact these delays.
The figures shown in the graph are marked. Norfolk Southern seems to be far and away the worst offender in delays at the origin of train service. But the delays still seem to be large.
Grain consumers and producers rely on train service to move the product. And rails have a responsibility to provide it. How can the two be gotten together?
This article spells out some of the issues in demurrage charges rail lines are charging for cargoes that are not being removed from their premises.
Demurrage is charged, say the rail lines, when cargo is left at a rail terminal beyond a specified number of days. Charges vary by railroad. The chart they provide, reproduced below from Supply Chain Dive, shows how the seven Class I rails charge demurrage rates.
How individual railroads charge for demurrage varies
$100 to $225, depending on container dwell time, facility and whether the equipment is for domestic or international use
SOURCE: Letters in response to the STB, as linked. Union Pacific did not disclose its specific fees in the letter, but its rates are available online.
Shippers complain that sometimes the demurrage is due to the fact that rail lines have canceled trains that they previously were running. The shift by all of the Class I rails to some form of Precision Scheduled Railroading (PSR), a system of lean operations in which only the movements required are made, is responsible. If a shipper delivers a cargo, but then the train is canceled, who is to blame?
And it’s understood that regardless of what they say, all of these rail lines have adjusted capacity in line with the principles of PSR, even if they won’t call it that. But setting capacity based on experience is not easy when we are experiencing not only a surge in customers, but also many abnormal conditions throughout supply chains that disrupt the standard patterns. Decisions about PSR, such as reducing the number of locomotives or yard staff or engineers, are based on forecasts, and forecasts are always wrong; so it’s a question of whether the rails have left enough slack in the system to handle the variation in the rest of the system. The answer appears not.
One particularly vexing problem with the current system is being addressed by the Surface Transportation Board (STB) which governs rail operation in the US. In the past, demurrage was viewed as something infrequent that did not matter much, and railroads did not develop systems to capture and bill for it in a regularized way. But now, it’s essential that the accounting for it be accurate and transparent, and that bills be sent in a way that shippers can handle digitally and determine the facts from their side about each incident. More accurate and standardized billing is key. That’s what the STB wants to achieve by regulating the nature of demurrage charges by rails.
Already in place at the end of 2020 are new rules requiring bills to be sent to shippers rather than intermediaries, and
“provide machine-readable access to minimum information on billing, including details on the billing cycle covered by the invoice, the car involved, the commodity being shipped, and railroads’ original estimated time of arrival for the cargo in question”
As expected, some rails complain this will lead to more litigation and questioning. Of course! But in fact no one wants the delays that cause demurrage, and it’s in everyone’s interest to understand exactly what happened to cause the problem. The new billing standard will clarify a lot, and get into shippers’ hands so they can do something about the problem.
I think it is a big step forward in the rail arena. I wish it were as clear in ocean shipping, in the port and terminal arena.