Why the "Same Place" is not the Same Place on the Railroads
Posted on Thu, Mar 18, 2010 @ 04:58 PM
“Just give me a rail car rate from Seattle to Chicago. I am pricing out some customers in that area,” someone will inquire.
“What railroads are they on, and what is the commodity?” we will ask.
“I don’t know exactly, but they are on the railroad and it is some kind of metal. I just need a basic rate,” comes the reply.
But therein lays the dilemma. In conventional rail car business, depending on which railroads are actually involved, and the specific commodity involved, the price of the move, and the potential to actually get cars for the move, can vary significantly. There are several types of rail carriers that might be participating in a move. There are linehaul carriers and switch carriers and sometimes you can have several of each involved in a rail route. Each has different ways of setting charges and sharing through rates.
Facilities that are on railroads might be on switch carriers who could connect to one or several railroads. This often enables different price options by comparing the pricing over the different railroads. They might be captive on a linehaul carrier, meaning that there won’t be options on getting into the facility. In cities like Chicago, where virtually all of the major railroads (and many small railroads) come together, there can be big difference in rates between facilities that are only a block apart, or if they are on different railroads.
In the example of finding a rail car rate from Seattle to Chicago, there are two main carriers coming out of Seattle, the UP and the BNSF but in Chicago there are those two as well as the CPR, CN, NS, CSXT, EJE, CSS, IHB, BOCT, ICE, and a few others, so the move could be anything from a single line linehaul on the UP or BNSF to a combination of one or more of the others.
The pricing models of different railroads can vary significantly and also vary by commodity and the amount of particular types of equipment they have available. In some cases the pricing differential can be $25 a ton, and sometimes even more. So, “Just give me a rate” won’t necessarily get someone what they need.
It always comes down to the details.
Article submitted by Steve Klok, Director- Distribution & Logistics