Report on Inter – modal growth and impact on the rail industry in America

Several changes and new policies are introduced in United States of America and other developed countries around Europe with the purpose to bring improvement in overall industry. Rail industry has the reputation of one of the most important and highly revenue generating industry in this area (Shashikumar and Schatz). Considering the importance of this industry government and other regulatory institutes are personally interested in the development and growth of rail industry. Inter-model growth is the real translation of this vision (Shashikumar and Schatz). The main aim behind introducing and implementing was to increase growth and profitability in the rail industry. Currently, a research study conducted on this rail industry has projected that profitability and economic stability are influenced by rail industry in America (Jec. senate. gov). The present work will cover all major points and dimension regarding the American rail industry and intermodal of growth. Intermodal of growth is basically referring to the movement of containers and shipment particularly related to the rail industry (Jec. senate. gov). Basically, present work will emphasis on impact generated by this intermodal growth on Rail industry of America. It will also discuss the major challenges faced by rail industry and implementation of appropriate strategies of growth and expansion (Shashikumar and Schatz).

History of Inter – modal growth and impact on the rail industry in America

In North America, the intermodal network is becoming more competitive in the rail inter model system of the world. The transportation history of the United States illustrates four Major modes of transportation that were used to carry goods and provide services to the customers (Jec. senate. gov).  These four modes of traveling are rail, water, Road and air. The water transport system is mainly used to transport bulky goods for long distances around the globe. Road transportation system moves Limited cargo at short distances (Joc. com).  There is a number of factors that play a sufficiently significant role in the Transportation system of volume cargo scheduled at long distances. The focus of the intermodal network system is on the customers, deregulation, and recessive partial implementation of the Transportation system. Prior to 1980, the transportation of Freight services in the United States was heavily regulated (Joc. com). The particular improvement was in service routing and mandated tariff rates of government. As a result, limitations of economic scale for the operation was identified in the fragmentation of delivery services and overcapacity (Aar. org). At that time lack of innovation was revealed by services in the railroad's bankruptcy was observed and the rate of accidents was higher due to failure of equipment and railway tracks. Only 21% of railway tracks installed Nationwide operating (Shashikumar and Schatz). In 1980, The Stranger rail Act was passed by the United States Congress the deregulated many terms and conditions to improve the rail transport infrastructure, development processes, and service provision (Aar. org). Particularly, for the stranger act, the government regulated tariff was eliminated and confidential contracts were negotiated to improve the customer services level for the supply and demand service levels. The Stranger Act allowed rail carriers to discontinue the services for the Special lines that were financially nonviable or not profitable (Brightkite. com). In order to protect the captive’s shippers, the rail access was provided with a single career. The regulatory Agencies were assessing and ruling different potential behavior of carriers regarding market dominance (Shashikumar and Schatz). 

Impact of intermodal in US

The deregulation operational routing and pricing conditions in the US rail transport sector resulted in the sufficiently high gain of carrier, Shippers, and economy. Over 30 years of history, the revenues per ton-mile reduced about 44% and productivity increased with the adjustment of operating expenditures (Shipag. com). After the implementation of intermodal considerations, the operating expenses increased and became double, the train accident rate has fallen about 82%, and annual ton-mile volume was increased as double. Besides other benefits, financial benefits for productivity improvement was about 20 million US Dollars per year (Jec. senate. gov).  The rail intermodal increased services in market and manufacturing network were shifted towards Rapid acceleration of freight flow in the United States (Shashikumar and Schatz).

Figure 1: Annual compensation of U. S. rail roads

Source: https://www.aar.org/wp-content/uploads/2018/05/AAR-Economic-Impact-US-Freight-Railroads.pdfAccording to a report presented on rail intermodal of American societies present that total volume calculated in 2017 was more than 13.7 million trailers and containers (Shashikumar and Schatz). Association of American Railroads (AAR), published a report regarding intermodal volume expansion and latest up-dates. According to the report, expansion is recorded as almost 5.3% with the slowest growth rate of 4.8 in 2017 (Aar. org).  International and domestic pressures cause to decrease growth rate of intermodal volume. Somehow, there are a number of reasons that cause to make over intermodal growth influencing and correlated with the success and failure of rail industry in USA (Brightkite. com). Over intermodal growth related into the increase of profitability of rail industry in America. The following figure represents benefits and advantages taken by the rail industry of America during last year because of over intermodal growth (Shipag. com; Shashikumar and Schatz).

Figure 2: Intermodal of growth in Rail Industry

Competitive provision in the United states

             In the United States, the contribution of the competitive provision of rail intermodal services was in reducing the emission of greenhouse gases (GHG), lowering of Logistic cost, and the elevation of highways that enables international trade at a higher level with the other countries around the globe. Activity at domestic manufacturing processes also increased (Logisticsmgmt. com). Regarding the logistic cost, the intermodal of rail was neither a panacea nor it was a cost-effective solution for the logistics of commodities. The inventory carrying cost and transportation cost increased commodities for long distance conditions. The significant beneficial impact deregulation was from the perspective of cargo owners and shippers (Shashikumar and Schatz). The transport cost was reduced, and eventually, the unreasonable rate of end user increased. Considering the greenhouse gas effect, the rail intermodal produces only one-third of the emission from the truck Transportation system (Shashikumar and Schatz). The statistics were found by the environmental protection agency of the United States.  Mobilization of single- and double-unit trains increased that is equal to approximately 200-300 containers (Jec. senate. gov).

Figure 2: U. S. Freight Rail border crossing lines and intermodal hubs

Source: https://www.jec.senate.gov/public/_cache/files/81cffbd0-c720-499c-bf1e-d17bac429f9b/final---growing-economic-impact-of-us-freight-railroads.pdf

In 2014, the improvement in the international trade services changed for approximately 35 percent at the US rail revenues. The increase in tonnage of rail in the United States was 27%. The intermodal units for the railroads were 42 percent. The inter-model of rail replaces about 280 trucks from the highways (Shashikumar and Schatz). In 2014, the major support for America's freight railroads was through 1.5 million jobs for the workers, $274 billion output and $88 billion wages in the economy of the United States. After the implementation of the intermodal for rail services in 2016, the wages earned by the employees reached approximately $84, 800 with the fringe benefits of $35,000, the total average compensation of $119,800 and the total average wages for the employees in the rail was $74,400.  The average freight rail rates in 2017 were lowered than 1981 (Jec. senate. gov; Shashikumar and Schatz). Records present that over intermodal growth related in the progress of rail industry. In 2018, growth of rail industry business was increased by 6.7% that is almost double to the percentage of 2017 reports. Closely comparing these statistics we can say that intermodal revenue or income per shipment is increased by 11%, but considering the cost factor overall percentages are not as high as this (Logisticsmgmt. com; Shashikumar and Schatz). Reports presents that operating income is getting improvement of 35%. Basically, these impact and influences are not limited to rail industry only as it has direct impact on the overall national economy of the country. Rail industry and freight system improvement support in enhancing international trade between different neighborhood countries (Shashikumar and Schatz). As a result of this, national GDP and economy will definitely get positive impact and stability. In the past, rail system was not really improved therefore, country had problems in international trades (Shashikumar and Schatz). Thus summarizing statistical results we can say that profitability of rail industry depends upon the right strategies employed by the Administration of Rail industry and their vision about future growth and expansion in geographical segments (Shashikumar and Schatz; Jec. senate. gov). 

The real inter model provides a wide range of advantages to the customers such as environmentally friendly services and cost-effective services. The customers are provided with the flexible services at the competitive rates it is only possible due to intermodal implementation in the rail services (Shashikumar and Schatz). While considering the benefits of the general public, implementation of rail intermodal reduces harmful emission of toxic gases and Highway congestion. The world-class intermodal rail network of the United States ensures Competitive advantages (Shashikumar and Schatz). The other advantages and disadvantages are listed below,

The expanded, as well as new intermodal terminals at the Inland and ports, have implemented advanced technology for the transfer of

containers from one to another truck in minutes.

The advance signaling system, rail capacity, and truck capacity enable to move faster with frequent intermodal trains (Shashikumar and Schatz).

The tunnel and Bridge improvement in the railway tracks accommodate additional height for double-stacked trains.

 Intermodal trains and new locomotives are handling higher traffic growth (Shashikumar and Schatz).

The intermodal rail is benefited by the customer at competitive rates the average rail rates are fallen 46% since 1981. The services are

committed with growing and maintaining processes for the effective intermodal rail network and the cost-effective networks (Jec. senate. gov).

The average values for the railroad fuel efficiency increased four times as compared to the trucks. In 2017 the average fuel of 479 miles per

gallon was consumed to move 1 ton of freight in railroads (Shashikumar and Schatz).

Fuel consumption is directly related to Greenhouse gas emissions for moving the bright of rail. According to statistical analysis, approximately

75% emission of greenhouse gases was reduced by using rail freight instead of a truck (Shashikumar and Schatz). Additionally, The Other types

of gases particularly nitrogen oxide gases emission reduced in railroad instead of trucks (Aar. org). The statistical analysis of 2015 for Texas

transportation institute increased mobility scorecard, the congestion cost of American was reached at 160 billion dollars with the wastage of fuel

at approximately 3.1 billion gallons (Shipag. com).

Challenges in the United States transportation

In the United States transportation, intermodal of 2018 was introduced with the big changes in service offering and intermodal network the implication was for industry growth perspective (Shashikumar and Schatz). The challenging market of United States image exceptionally to high truck capacity and tightest hours of service regulations. The level of services is managed through electronic logging devices that used powerful enforcement of hours of service regulations (Shashikumar and Schatz). The rational reaction was observed from truckers related to running out of hours and risk of tightest schedules of shippers. As a result, the productivity of United States transportation reduced, and capacity decreased by gaining enough drivers to increase the size of the fleet according to the demand (Jec. senate. gov). In the case of inter-model, the success of the market is based upon the available capacity of shipper structures and rail services. Consequently, different limitations are associated with rail service deterioration such as in inadequate supply for different types of domestic containers, dray capacity for storages, limitations on the gain sectors and service sectors. These issues resulted in crisis and responses. The average United States economic growth is a major wildcard (Jec. senate. gov). The increase in government spending and tax cut boosted the economics general expectation, near term GDP, and trend level of trains for next year.  For the inter model, the focus is shifted from the terms and conditions of capacity towards the competitive services of rail (Shashikumar and Schatz). According to the research approximately 60 or 70 percent intermodal activity is associated with import export flow, North American free trade agreement for cross border movements, and Transloads (Logisticsmgmt. com).

The United States intermodal network uses a source of uncertainty for ongoing reconstruction. In the rail services, the Steel wheel interchange conditions are considered for many curtailed lanes (Shashikumar and Schatz). The potential of the setting is related to the extension of the BNSF railway network in the region of eastern areas and transportation Northwest ramp. The general theory about the simplification of the network is the streamline intermodal product services of Railway (Shashikumar and Schatz).

Impact of US regulatory changes by the implementation of intermodal services. The developers and initiatives of container intermodal track rail and water rails that help right movement are liner service Ocean careers. The land-based careers are followed by the development and movement of regulatory (Shashikumar and Schatz). The Other Ambulatory, as well as regulatory barriers, are managerial myopia. The Ocean Shipping Reform Act of the United States has reduced regulatory barrier from International intermodal freight movement along with the development of the relationship between the more shippers and ocean careers. The comprehensive survey of intermodal implementation shows the potential improvement of international intermodal movements (Shashikumar and Schatz).

Conclusion on Inter – modal growth and impact on the rail industry in America

The whole discussion conclude that rail industry in one of the most revenue generating industry in US and Canada. In these regions rail industry need appropriate attention and specific logical strategies for business expansion. Inter-model growth particularly over and increase in inter-model growth can have not only positive and long-term impact on rail industry but in general on the whole national economy and GDP of America. Statistical results used in this discussion are concerned with the increase of productivity. The results published by some of official reports we can say that rail industry has received positive impact over intermodal growth. Rate of growth as an average between the last few years is around 7.1% that is really high from percentages of rail industries prior to 2009.  Moreover, there are some challenges presented that can reduce efficiency and overall financial profitability of rail industry in America. In case of future positive growth industry need to have control over these challenges in a positive way with appropriate strategies and actions.       

References of Inter – modal growth and impact on the rail industry in America

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Jec. senate. gov. Growing Economic Impact of U. S. Freight Railroad . 2017. <https://www.jec.senate.gov/public/_cache/files/81cffbd0-c720-

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<https://www.logisticsmgmt.com/article/aar_reports_annual_gains_for_u.s._rail_carload_and_intermodal_volumes_in_ma>.

Shashikumar, N. and G.L. Schatz. "The impact of U.S. regulatory changes on international intermodal movements." Transportation Journal 40.01

(2000): 1-14.

Shipag. com. What is Intermodal Transportation and When is it the Best Choice? 18 06 2017. <https://www.shipag.com/blog/2017/07/what-

intermodal-transportation-and-when-it-best-choice/>.