Can a digital transformation leverage growth in the future for rail?
Unlike the trucking industry, which faced consistent challenges during 2024, the freight railroad industry has experienced growth in 2024 over 2023 for certain weeks and commodities.
Rail Results in November
For the week ending November 23, according to the Association of American Railroads (AAR), weekly rail traffic was 520,798 carloads and intermodal units, up 25.6% compared to last year. This includes an increase in carloads of 17.6% and an increase in intermodal volume by 32.8%. Nine of the 10 commodity groups also increased over the same week a year ago.
Implications of Continued Railroad Market Share Erosion
At a recent Surface Transportation Board (STB) meeting, the board expressed concern about decreased market share by the Class 1 railroads. According to the US Department of Transportation (DOT), this trend is expected to continue until 2050. The DOT predicts the slowest growth rate among freight transportation modes through 2050, which means that railroads are expected to lose share to other freight modes over that timeframe.
In response to these concerns, the railroad industry testified before the STB. While it was unclear what conditions have resulted in the market share erosion, the rail industry views the impact of lost market share as detrimental to the railroads and the public, especially if more freight is being diverted from rail to truck.
Speaking on behalf of the AAR, Adriene Bailey, a partner with Oliver Wyman, a general management consulting firm, said, “Continued market share loss would impact the railroads’ ability to raise capital, to continue to invest in infrastructure and assets, and to employ a growing workforce, all of which benefits U.S. businesses and the economy as a whole.”
She also stated that growing rail market share would have a positive impact on the public because, “In the area of safety, rail has far fewer incidents each year than trucking that cause injury or loss of life.”
On a ton-mile basis, the AAR said rail is about 28 times safer for the public and workforce than trucking. Bailey said, “Our analysis estimates that if railroads could regain share, this would save approximately 16,000 lives and prevent 660,000 serious injuries between now and 2050.”
Another factor to consider is the cost of federal and state dollars that would need to be spent on maintaining and expanding road infrastructure if there were more trucks on the highways. Rail is also a better solution for energy efficiency than trucking, according to Bailey.
“In 2022 for example, US railroads accounted for two percent of transportation-related greenhouse gas emissions, while moving 40% of intercity freight. Trucking moves one and a half times as much freight, but to do so generates 11.5 times more greenhouse gas emissions,” said Bailey.
Strategies To Drive Growth In Rail Market Share
The rail industry plans to continue to be safe, environmentally responsible, and good stewards of infrastructure. However, addressing lost market share in 2025 will come through many efforts, including an aggressive plan to drive intermodal growth. The plan includes a digital transformation to promote safety and reliability, and enhanced customer service intended to make intermodal shipping an even more compelling solution for shippers.
According to the Intermodal Association of North America (IANA), total intermodal shipping volume rose 9.8% year-over-year in Q3 of 2024, the fourth consecutive quarter of YOY growth in intermodal.
“Intermodal is growing in popularity for good reason,” said a representative of the AAR. “It offers shippers many key advantages that align with overall operational and sustainability company goals.”
Rail Cost Efficiency
Intermodal shipping can provide a more cost-effective alternative to full truckload transport. By using rail for long-distance hauls and trucks for shorter distances, businesses can receive considerable cost benefits.
The increased use of Transportation Management Solution (TMS) technology allows supply chain managers to use AI to determine the most cost-effective way to move any shipment, based on the service expectations and the options available. By turning less-than-truckload shipments into a single truckload and mode optimization, moving freight from trucks to less expensive rail options is making it easier for supply chain managers to make informed decisions, with quantifiable savings.
Digital Transformation Enhances Reliability
Intermodal shipping offers flexible scheduling with additional shipping times. This option has become more reliable in the past year, as railroads have embraced digital transformation. Railroads have adopted advanced data analytics, AI, and IoT sensors to optimize operations, improve train scheduling, predict maintenance needs, and enhance overall network efficiency.
Focus On Safety Prevents Injuries and Service Disruptions
The rail industry continues to focus on safety initiatives including advanced safety systems, training programs, and technology. Some specific examples include an Automated Track Inspection system, which uses lasers and cameras mounted onto locomotives or railcars to inspect tracks as a train travels across the network.
The system tests each foot of the railroad track, detecting issues that may not be visible when a track is not occupied. The AAR notes that the use of track inspection vehicles, or “track geometry cars,” can measure hundreds of thousands of track miles yearly. Machine visioning technology is also in use by railroads. This technology collects 40,000 images per second of trains as they pass by at up to 60 MPH. According to the AAR, this technology reduces inspection times to mere seconds.
“A series of algorithms that analyze the images to identify anomalies, allowing railroads to resolve issues faster than they could with manual inspections alone,” said an AAR representative.
Additionally, heat-bearing detectors are strategically placed along the right-of-way to sense overheating bearings, allowing engineers to stop a train when necessary.
Customer-Centric Approach
The unspoken customer benefit of safety strategies is that shippers can count on railroads for safe, reliable service. The railroads are actively working to provide responsive service to shippers to attract more freight volume and improve customer satisfaction.
