• Fedex and Railroads

  • General discussion about railroad operations, related facilities, maps, and other resources.
General discussion about railroad operations, related facilities, maps, and other resources.

Moderator: Robert Paniagua

  by Gilbert B Norman
Today's Wall Street Journal carries an article that fortunately can be described as "upbeat":

Brief passage:

  • During the recession in the early 2000s, U.S. freight railroads slashed spending and services. When business revived, they were roundly criticized for bottlenecks and delays.

    This time around, the railroads have continued to spend heavily, plowing more than $20 billion into capital improvements to widen tracks and tunnels, upgrade cars and engines and enhance their technology.

    "Back in '03 and '04, we stumbled a bit. We really cut back too much, and when volume came back we were caught short," says James R. Young, the chairman, president and chief executive of Union Pacific Corp., the second largest U.S. railroad by miles of track. "That is not going to happen again."

    All the railroads' investment has left them in a position to improve service for their customers, and now that's paying off. For the first 23 weeks of 2010, freight volume grew 7.2% after plummeting 16% in 2009, the biggest decline on record, according to the Association of American Railroads.

    So far in the second quarter, the company says it has seen an 18% increase from a year ago in goods shipped.
What I find interesting are the comments made with regards to Fedex and UPS usage of the rails to handle their traffic. The comment is especially interesting regard the first:

  • FedEx Corp., which moves roughly 45% of its packages by air and 55% by ground, says it expects to use railroads more for ground shipping because of the railroads' improved reliability. Currently, FedEx uses rail for only about 1% of ground shipments.

    And United Parcel Service Inc. says it will continue to use rail as much as possible. "Any ground-service package that's going to move 750 miles or more we attempt to put on the rails" as long as the rails can meet service times, says UPS spokesman Norman Black.
While Fedex is an air transport company that has evolved into a ground (I was unaware that they are now more vested in ground than air) and UPS the opposite, it stands to reason why I observe very few Fedex trailers on the BNSF trains that pass my home. Those of us who follow railroad industry affairs can only be pleased to learn of the Fedex spokesman's comments and can only hope that there is substance to them.

Finally, although there is a file photo of a BNSF train passing through Abo Canyon(?) appearing at both print and web editions, the reporter did not include any comments from a BNSF spokesman. It seems strange that even if BNSF is now privately held, it still represents some 20% of the rail infrastructure out there, and still must make public disclosure of its operating and financial results. I noted such at the Reader's Comments attached to the article.
  by QB 52.32
The primary reason behind how and to what degree UPS and FedEx use intermodal is most related to one being unionized and the other not, followed by their own organizational histories. Intermodal has been a reliable mode in many key lanes since the 1980's, so FedEx's recent change of heart is more-related to their own outlook than the realities of intermodal service. While I'm unsure of the history of how UPS was able to negotiate with the Teamsters its wide use of intermodal for both baseload and peakload traffic, it certainly has provided a strong competitive lever in their on-going negotiated relationship. I'd have to believe the realities of higher fuel costs, highway congestion, and driver issues are on FedEx's mind in considering using intermodal in leue of their non-union driver team-based operation, but, if they're simply following the lead of truckload carriers' contemporary coversions from over-the-raod to less-expensive domestic doublestack, that might prove problematic in meeting their ever-competitive service requirements. While domestic stack offers a very economical mode, the intensely competitive package business requires high service standards which really have proven out during the past couple of decades with UPS to require faster single-stack, oftentimes trailer-based, service. And, that comes at higher rates than stack and the price FedEx has been unwilling to pay up until this point vs. their existing non-union over-the-road operation.
  by Cowford
Not sure exactly how FedEx now distinguishes their different divisions, but isn't the focus of their truck-intermodal conversion on "FedEx freight", i.e., their LTL operations as opposed to their ground parcel ops?
  by QB 52.32
Could be, Cowford, but from this WSJ article and an earlier article in the Journal of Commerce, sounds as if their boss is talking the package side of the business. Brings forth a couple of questions: with UPS a strong intermodal user and, like FedEx, owner of an LTL division, does UPS move LTL via intermodal? While the package side of the freight business hasn't been able to dig in deep with stack, have any of the big LTL companies been able to live with the slower, though cheaper, service offered by stack or are they, like UPS, only using single stack trailer-based service?