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INFRASTUCTURE/LOGISTICS
Rail Gains Advantage Amidst Supply Chain Snarls Rail lines, which link international cargo gateways to U.S. population centers, offer companies a cost-effective, sustainable transportation option. By Rich Thompson, International Director, Supply Chain & Logistics Solutions Leader, JLL
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or companies around the world, supply chain snags have been top-ofmind for much of the past year. Delays are common, and U.S. domestic shipping rates for moving goods are up approximately 23 percent over 2020 levels, according to Cass Information Systems, Inc.1 High demand continues to outpace logistics capacity, and the chronic U.S. truck driver shortage only exacerbates delays. Amidst these trends, rail has become an important option for shipping goods across the United States — especially as trucking costs rise, too. Many companies rushed to stock inventories in 2020, and they now need help distributing goods to consumers. Remarkably, international trade accounts for approximately 35 percent of U.S. rail revenue, 27 percent of U.S. rail tonnage, and 42 percent of carloads and intermodal units, according to the American Association of Railroads (AAR), an industry trade group.2 The flow of goods arriving or departing by ship has led to record levels of demand and huge year-over-year growth — along with significant congestion — at top U.S. ports. By 20-foot-equivalent unit (TEU), which is the standard measure of container volume, the top U.S. container ports are Los Angeles/Long Beach, New York/New Jersey, Savannah, and Seattle/Tacoma. Other key U.S. ports by container TEU volume are Houston, Norfolk and Oakland (San Francisco),
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and Charleston, S.C.3 From these ports, the majority of consumer goods flow to the interior of the country to inland hubs and distribution nodes. Interstate highways and rail lines are the barbells that link international cargo gateways to U.S. domestic population centers. For most companies, trucking is the primary shipping method, and one often combined with rail in intermodal shipping strategies. Unlike a train, a truck does not require a rail terminal at every delivery point and can navigate dense urban markets. However, rail is gaining advantage as the price gap narrows between freight rail and trucking, and rail becomes more effective from a service perspective. Port congestion has led to very long waits for ships to load or unload cargo containers, and long waits for cargo to be loaded to and from trucks or railcars. Delays add to the costs, as ports charge fees for container storage and other services. Further adding to trucking’s downsides are the chronic truck driver shortage, rising fuel prices, and corporate environmental sustainability concerns.
Freight Rail’s Inland Reach Inland hubs such as Kansas City, Dallas, Chicago, Memphis, Atlanta, and eastern Pennsylvania benefit from direct rail service from major U.S. seaports. Containers are shipping via expedited unit trains,
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5/26/22 12:56 PM
