Back to the Future? Moving Intermodal in Mixed Trains

Transcription

1 Back to the Future? Moving Intermodal in Mixed Trains Monday, September 17 th, :00 am 11:00 am Long Beach Convention Center Long Beach, CA

2 Back to the Future? Moving Intermodal in Mixed Trains Moderator: Rod Case, Partner, Oliver Wyman Panelists: Doug Punzel, President, Celtic Intermodal Rob Nichols, Managing Director, Canadian Pacific Nate Asplund, Chief Executive Officer, FEC Railway

3 CONSIDERATIONS FOR MIXED TRAIN MANAGEMENT SURFACE TRANSPORTATION SEPTEMBER 16, 2018

4 Rail s conundrum Bigger trains $41 per 1,000 RTM Source: Bureau of Transportation statistics Photo source: left, Andrew Jennings; right, Getty Images vs. Smaller shipments $200 per 1,000 RTM 4

5 Worse rail is increasingly disconnected from the base growth of the economy and the most interesting areas of growth Key rail commodity volumes versus GDP 120% 110% 100% 90% 80% 70% 60% Source: Oliver Wyman analysis Grain Coal Intermodal Compound growth rate of US retail e-commerce, adjusted for GDP growth 120% 100% 80% 60% 40% 20% 0%

6 Challenge: Total supply chain costs can overwhelm rail tariff Queuing within supply chains drive massive costs that are increasingly under redesign to drive out the waste U.S. Business Logistics Costs Billions of U.S.$/% of Total $596 /43% LTL Full Truckload Private/Dedicated Truck $299/21.5% Rail $72 Parcel Air Water Pipeline Other Modes $410/29% Storage Financial Other Inventory Carrying Costs $88/6% Other Logistics Costs Source: U.S. Logistics Council, 2017 State of Logistics Report and Oliver Wyman analysis Carrier Support Shipper Admin Inventory carrying costs represent almost 30 percent of logistics costs Consist daily offerings drive down safety stocks and warehousing Consistent delivery is more powerful than speed to reduce total supply chain cost in rail offerings 6

7 What and Why are mixed-use trains? Mixed train operations drive frequency and service consistency with variable demand WHAT WHY Mixed-use trains carry multiple blocks from more than one business unit or customer type Daily Frequency for blocks that are less than trainload Stabilize and balance daily train operations Reduce Dwell to build large blocks Leverage the whole traffic base in a corridor 7

8 Multiple-block trains are common but mixed-use trains are rarer The opportunity is in leveraging multiple business units on the same train BNSF example: Example train makeup shows 2 block train for Intermodal Business Unit Stacks Trailers 8

9 Intermodal is as much about lane size as length of haul Significant lanes remain unserved in the rail network Rail intermodal length of haul share Share of revenue ton-miles per mileage bucket Total revenue ton-miles (billions) $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 500 Miles (Current point of indifference) Total revenue ton-miles Rail Market Share 0% ,000 1,250 1,500 1,750 2,000 2,250 2,500 2,750 3,000 Plus Source: Freight Analysis Framework, version 4; Intermodal Association of North America, Intermodal Market Trends and Statistics; Surface Transportation Board, 2014 Public Waybill Sample; and Oliver Wyman analysis 90% 80% 70% 60% 50% 40% 30% 20% 10% Rail market share 9

10 Multiblock train designs are common within Intermodal Often sub scale sized lanes are not included in the network offering Daily Origin Block size Typical Intermodal market potential Destination ,500 1,800 1,600 1,400 5,100 4,300 3,900 3,400 6,300 8,000 Sub Scale Lanes 0 2,000 4,000 6,000 8,000 10,000 10

11 Mixed trains can be a powerful Business Development tool Often sub scale sized lanes are not included in the network offering yet parallel blocks exist in other commodities Daily Origin Block size Typical Intermodal market potential Destination ,500 1,800 1,600 1,400 5,100 4,300 3,900 3,400 6,300 8, ,000 4,000 6,000 8,000 10,000 Destination Daily Origin Block size Typical Carload Hump Yard ,700 1,500 1,600 2,400 4,300 3,900 3,400 3,900 5,500 6, ,000 4,000 6,000 8,000 11

12 Mixed-use trains are sometimes seen on railways in North America There are some North American examples of mixed-use trains that cross business units resulting in higher frequency and fill rates North American mixed-use train example: Corridor train makeup shows only 15% of grain trains were pure Cars per train Month 1 Month 2 Grain Manifest Intermodal Other Pure grain train Consistent corridor train counts was key Daily operation of dominant anchor bock was core of the plan Grain blocks were subordinate to other commodities These block consolidations were performed on both a tactical basis and a planned basis 12

13 Railways have had inconsistent success on growth Using the power of rail network flows and orientation to daily offerings in emerging lanes has proven to accelerate traffic growth Operational Excellence Complexity well managed and more levers available Service and Network Design Tighter connections More trains on the same network PROFITABLE GROWTH OUTPACING GDP Rapid product deployment Fewer assets lower inventory Rail-based supply chain gains Market Innovations Traffic growth in a decade Change in revenue ton-miles, 2015 versus 2006 US Rail Merchandise Mixed Train Class 1 US Trucking -2% 18% -5% 0% 5% 10% 15% 20% 22% 25% 13

14 Why are mixed trains not more common? 14

15 2018 Intermodal Association of North America. This presentation was produced for the use of IANA members and may not be reproduced, re-distributed or passed to any other person or published in whole or in part for any purpose without the prior consent of IANA. IANA, Beltsville Drive, Calverton, MD