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November 26 2018

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38 The Journal of Commerce | November 26 2018 Land lines Lawrence J. Gross WITH MORE CLASS I railroads jumping on the "precision scheduled rail- roading" (PSR) bandwagon, it seems timely to step back to take a look at what it means for intermodal. PSR seems to hold the prospect of improved service even in the name. After all, what could be wrong with an approach that makes intermod- al trains run "precisely" and on a schedule? But it may be a mixed picture, because some of the changes intended to bring greater consistency are simplifications of the intermodal network that may reduce its reach and disenfranchise some customers. To the extent that PSR makes the rest of the railroad run more consis- tently and "on schedule," it can only be regarded as favorable for intermod- al. There are other considerations, however. As with other trains on the system, PSR generally means longer intermodal trains, which, given a fi- nite amount of volume, results in less frequency and more terminal time. More importantly, the drive for simplification inherent in PSR puts a relentless spotlight on the complexity of operating a dispersed intermodal network with numerous terminals. The difficulties and expense of operating a complex network with the attendant intermediate switching and sorting required run counter to the PSR ethos. The result has been a drive to simpli - fy the intermodal network, with whole- sale pruning of secondary, low-volume lanes that have been judged to add complexity and cost without adequate commensurate revenue. Steel-wheel in- terchange has also been de-emphasized in favor of grounding units in gateway cities and using the streets of those cities for the classification function between east and west. The goal is to put together large, high-volume trains between selected high-volume terminals, using highway dray to extend service from there to secondary points. The limitations of this strategy can best be illustrated by what I will call, "The One-Third Highway Rule." This is a very broad but generally useful generalization that states that for intermodal to be competitive for a given move, the highway dray portion (on both ends) cannot account for more than one-third of the total door- to-door highway miles. Put another way, you need to have enough low- cost rail miles to more than offset the costs of the intermodal terminals and expensive short-haul dray miles. While still greatly over-simplify - ing the situation, this is nevertheless a far more accurate way of looking at intermodal's potential than the sweeping assertions that often appear in the press along the lines that intermodal can compete with truck in general for hauls of more than a certain number of miles. The One-Third Highway Rule explains how extremely short hauls, such as the 210-mile run between the Port of Charleston and the Greer Inland Port can still make economic sense. Sure, it's very short-haul, but since the train is made up on-dock in Charleston, there are virtually no highway miles on one end. Further, a major user, BMW, has its assembly plant located next door to the terminal in Greer. The highway miles are minimal. You could even reach as far as Ashville, an additional 65 miles farther away and 269 highway miles from the port. The 65-mile dray is only about 25 percent of the total direct highway miles, so intermodal is still in the ball - park. It is important to note, however, that it greatly matters in which direc- tion the shipper lies with regard to both the point of origin and the intermodal terminal. If the intermodal option in- volves a substantial amount of circuity, or worse, outright backtracking vs. the direct highway move, then the highway mile maximum is reduced. What does the One-Third Highway rule tell us about a place like Chicago? There's good news for those moves being railed from the West Coast. With more than 2,000 low-cost rail miles to work with, extended drays farther east of hundreds of miles can be supported while maintaining intermodal's com- petitive posture. However, what does this rule say about the prospect of getting back on the rail in Chicago for the move farther east? From a modal choice perspective, this is essentially a fresh move. From the western railroad's terminating ramp on the west side of Chicago, the choice to final destina- tion is between a direct truck move and intermodal and truck. For example, let's look at an inter- modal move off the West Coast into one of the Joliet, Illinois, intermodal terminals but ultimately destined for a consignee in the vicinity of Pittsburgh, Pennsylvania, about 480 highway miles farther east. One obvi- ous option is to take the load straight there via highway. The intermodal option involves a 50-mile rubber-tire transfer to the eastern railroad terminal in Chicago. Running the math and utilizing the One-Third Highway Rule, intermod- al can then compete in a zone that begins about 80 miles west of Pitts- burgh and ends about 160 miles to the east. This means that the effective competitive radius around the Pitts- burgh terminal is rather small. Further, if the load doesn't go to Pittsburgh but rather is routed to a more distant large hub terminal, then the numbers won't work. The general rule is, the shorter the haul, the closer the shipper/receiver needs to be to the intermodal ramp in order for intermodal to compete. Large load centers work well for long hauls, but not so well for short hauls. Whether the revamped, simpli- fied networks inherent in the applica- tion of PSR principles to intermodal are a good or bad thing will differ for each shipper. It all depends on the particulars of the situation. Favorably situated shippers will probably expe- rience superior service. But shippers in the wrong place could well find themselves back on the highway. JOC Lawrence J. Gross is president of Gross Transportation Consulting in Mahwah, New Jersey. Contact him at and follow him on Twitter: @intermodalist. Mixed benefits in precision railroading

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