Whether you’re in Augusta, Maine, Olympia, Washington, or any point in between, you’re probably no stranger to ordering goods online — from Christmas decorations to furniture and clothing.
And you probably expect your package to show up at your door quickly after clicking “place my order.” It may seem like magic, but it’s actually the logistical marvel of freight railroads. The U.S. freight railroad system, capable of moving huge volumes of goods across its vast, highly-integrated network, is always delivering for you.
Intermodal is the long-haul movement of shipping containers and truck trailers by rail, combined with a truck or water movement at one or both ends of the trip. Intermodal containers are a principal means of movement for products sold by some of the largest e-retailers, such as Amazon and Walmart, and their “last mile” delivery services, UPS and FedEx. It is no mere coincidence that these four powerhouses are also major customers of freight railroads and it is this partnership that will make this holiday season bright for consumers.
A Holiday Season Like No Other
Retailers are anticipating an explosion of e-commerce in the run up to the holiday period, as shoppers steer clear of brick and mortar stores due to the coronavirus pandemic.
E-commerce has surged through the pandemic. According to a recent forecast by eMarketer, U.S. ecommerce sales will reach $794.50 billion this year, up 32.4% year-over-year. As the holidays approach, experts predict even more growth. A survey of consumers by the National Retail Federation found that 60% plan to purchase holiday items online this year. Rail traffic data bears this out. “Thanks largely to rising imports and inventory restocking in preparation for the holidays, October was the best month ever for U.S. rail intermodal, with volumes up by a third from April of this year. That’s a stunning increase in six months,” says AAR’s Policy & Economics Senior Vice President John Gray.
This exponential growth of e-commerce is thanks to the logistical feat provided by freight rail.
While railroads are not directly involved in last-mile delivery, they are integrated into many aspects of delivery fulfillment — from servicing U.S. ports where consumer goods manufactured overseas enter the country to transporting the cardboard used for shipping boxes. As evidence of how important freight railroads are to the delivery of consumer products: railroads move approximately half of incoming and outgoing volume at the UPS’s Chicago facility — the world’s largest ground package sorting facility. The feat requires approximately 92 trains per day, serving the facility’s 13 intermodal ramps.
Meeting Growing Consumer Demands
Freight railroads have a long history of moving industrial items including sheet metal for automobile manufacturing, lumber for construction and chemicals for manufacturing. But over the last several decades, a shift has taken place in the composition of rail shipments that parallels the meteoric rise in e-commerce. Rail intermodal volume has grown from 5.6 million containers and trailers in 1990 to 13.7 million in 2019. In 2019, intermodal accounted for approximately 25% of rail’s business — more than any other single commodity.
The rise in intermodal volume is a direct result of the targeted and massive investments railroads have made to accommodate the growing needs of e-commerce customers. Railroad investments over the last several years have helped provide truck-like service at a rail-like rate. In practice, that means boosting speed, reliability and visibility. Railroads have worked with e-commerce retailers to meet these demands through a combination of operational modifications, technology and customer engagement.
- Railroads are partnering to create new, high-speed intermodal corridors across their regional networks that will speed deliveries on routes once dominated by trucks. Examples include intermodal service linking Toronto and Montreal with New York, New Jersey and Philadelphia.
- Retailers are locating fulfillment centers and distribution centers closer to population centers to meet two-day delivery windows and keep transportation costs down. Railroads work with their customers to co-locate railroad logistics parks alongside e-commerce distribution facilities to minimize unnecessary transfers between modes and provide direct access to high speed intermodal rail corridors.
- E-commerce facilities carry larger inventories than brick-and-mortar stores, so they need more consistent and reliable service to maintain and balance stock among regional distribution and fulfillment centers. Railroads have adapted their operations to provide more efficient, more reliable and consistent rail service for e-commerce customers.
Consumer Benefits for the Long Haul
What does this mean for you as the consumer? More money in your pocket and more boxes at your door. Transportation logistics is a big slice of the final price of consumer goods. With average rail rates 15 to 20% below truckload rates, the affordability of rail intermodal allows shippers to keep logistics costs down and prices low for shoppers. As railroads continue to improve their service for rail customers and attract greater market share, shippers and consumers will benefit. So the next time you click “place my order,” keep in mind the logistics of freight rail that help deliver the goods you want and need.