The US rail network has a high market share for moving vehicles and may still have excess wagons in storage, but the future balance between bi-levels and tri-levels is causing some concern. Flexible wagons may be the answer, writes Barry Cross.

In the early 2000’s, increasing vehicle production in North America resulted in a steadily growing demand for bi-level and tri-level rail wagons (railcars or auto racks in the US). The so-called Multi-level Reload fleet, which is centrally managed by TTX on behalf of North American Class I rail operators, ramped up capacity to ensure available traffic could be efficiently moved. However the massive drops in production during 2008 and 2009 prompted many older multi-levels to be scrapped and others stored.

“This has forced all of the participants in this business to rethink their fleet size approach and car-type makeup. Storage is costly, inefficient and a poor use of assets,” says Norfolk Southern’s Richard Kiley. While production and sales have rebounded somewhat, there is still a capacity surplus in the pool. Currently, just 10% of the fleet remains in long-term storage, compared with 50% in early 2009.

Steve Tripp, Chrysler’s head of vehicle logistics, says,“There is an adequate number of bi-levels in operation, but we foresee shortages of tri-levels as OEMs ramp up production of smaller vehicles. Furthermore, there isn’t a significant number of trilevels in storage, so we don’t think that should be a barrier to investment in more of that type of equipment.”

To keep up with projected demand, Tripp believes the railways will need to start building new wagons this year. Although some have announced plans to do so, he has concerns that this will be too little, too late. Tripp believes that one short-term fix could be to improve current transit times, thereby squeezing higher utilisation out of the existing fleet. Richard Kiley says, “The current mix of bi-levels and trilevels is close to a reasonable balance. Certainly, there is more pressure on the tri-level fleet as smaller cars stay in fashion, while at the same time many aging tri-levels have been withdrawn. It has nevertheless been surprising to see high demand for even the larger vehicles despite higher gasoline prices.”

Marc Allen, from BNSF, believes there is currently enough surge capacity in the system to allow operators to react to any sudden rise in demand. The overall Reload fleet, for example, ran about 10% slower in 2010 than it did in 2007, so potential capacity is definitely there.

Julie Krehbiel from Union Pacific notes that, in terms of ownership, UP has around 17,000 multi-level wagons, representing more than 31% of the total national fleet, but that current loading levels are still 20% below those of recent years. “We feel comfortable that we can handle additional volume with that fleet. Any decision to purchase new multi-level cars would be based on both long and short term planning, while our forecasting looks several years into the future to help ensure our railcar ordering is as accurate as possible,” she says.

Towards more flexible wagons
But Krehbiel confirms there could be a shortage in the number of tri-level wagons as a result of demand. She adds that UP’s new ‘Autoflex Railcar’ will therefore initially be produced in a tri-level configuration as of the third quarter of 2011 to supplement demand for this wagon type.

An Autoflex can be converted from one configuration to the other in 20 man hours time, and it is this flexibility that it is hoped will allow the rail industry to quickly adapt to changing car buying trends. High doors and other features have also been designed to promote a better level of security.

Asked what role designs such as the Autoflex multi-level will play in the future, Kiley says that there is a need for flexibility to be engineered into assets with life cycles as long as rail wagons. The Autoflex design has therefore caused the industry to rethink how units can be re-configured rapidly and at an acceptable cost. Not all units need this capability, he stresses, but the availability of a core number of convertible multilevels would certainly be highly beneficial.

BNSF’s Allen points out that forecasts for smaller vehicles mean that railways are being increasingly asked to increase trilevel supply. But simply saying that tri-levels are for cars, while SUVs are for bi-levels, is not always so simple. “In reality, many of the new generation of fuel-efficient vehicles do not fit into conventional tri-level railcars, because consumers are still demanding increased head room,” he says. As a result, BNSF has thrown its support behind the Automax, a wagon which offers not only more clearance on all three decks, but also the possibility to adjust the decks to accommodate significant swings in market demand or new vehicle design. As a result, 80% of all vehicles shipped can be accommodated in a three-high configuration.

“We believe the Automax railcar is even better than the Autoflex adjustable multi-level, since it offers the same ability to adjust deck heights, but also provides a full foot more of clearance on all three decks,” he says, although adds that the Autoflex is preferable to a fixed, multi-level unit. While the adjustment implies some extra cost, it is more than compensated for by the extra flexibility.

Yet even flexible equipment cannot accommodate all of the vagaries of the market, Allen says, citing an example whereby BNSF is converting a small number of its wagons to a bi-level configuration to accommodate shipment of a new delivery van that is 104” high (2.64 metres). Chrysler–which will be building and distributing the small, Fiat 500 to the US from Mexico–insists that railways will definitely need to add more tri-levels in the near future. However, Tripp concedes that, because wagons have a long life, it is difficult to maintain a balanced mix. For that reason, Chrysler applauds innovations such as the Automax and Autoflex designs, stressing that they are important for the industry, although not necessarily yet perfectly developed.

Thumbs up for TTX
Despite potential shortages, the North American pooling system for multi-levels is judged a general success. Tripp says it generally works well and helps to cut out unproductive repositioning of equipment. Nevertheless, he admits to concerns over periodic shortages of capacity, especially for loading, and would like this issue addressed. According to Julie Krehbiel, “Pooling utilises multi-levels to the greatest extent possible, plus we have the ability to respond to demand surges.” As for improvements, these could be made if manufacturers loaded on a consistent basis, she argues. Current practice, with variable volume, makes demand for multi-levels more dynamic and challenging to manage.

Marc Allen emphasises that, “The national reload pool has significantly improved utilisation and efficiency of multi-levels by identifying re-loading opportunities for empty equipment near unloading points, irrespective of carrier or manufacturer. This process enables BNSF to realise as many as three loads per month for each wagon, double the utilisation compared to if we had to run empties back to original loading points.” Richard Kiley agrees. “Under the old system, it took approximately 35 days to cycle one railcar. Pooling the equipment has cut that time in half.”

For its part, TTX is currently in the process of updating its modelling software to better determine the optimum empty routing and network flows of the entire Reload fleet.

Towards greater co-loading
Tripp says that co-loading plays a positive role in the rail network, but is not a panacea. Krehbiel, however, predicts it will become “highly important”. Marc Allen, for his part, suggests that co-loading will probably remain a niche product. Richard Kiley says that carmakers are placing more emphasis on co-loading capability. The key, he believes, is to offer either “per VIN” (vehicle identification number) or “per vehicle” pricing capability for both local and interline business. By doing this, multiple manufactures’ products can be loaded within the same wagon, with separate commercial agreements. Per VIN pricing, he suggests, could reduce complexities for the carmakers as the VIN is their common unit of measurement and is how they track their business. “By offering them pricing per vehicle, they can conduct business on their preferred level,“ he says.

All four interviewees concur that co-loading offers some definite advantages. Firstly, by reducing dwell times at loading points, improved vehicle transit times can be achieved. Secondly, the increased vehicle mix and density improves haul-away effectiveness. And, thirdly, operators achieve optimum loading of individual wagons, thereby further improving efficiency of available capacity.

At BNSF, Allen notes that, “Co-loading works well in regions where there are multiple production plants and where the shippers truck product to a common origin, such as a railhead or a given shipper’s plant to reach a common destination. The same is true in ports where you have multiple customers shipping from a common origin to a common destination.”

How to boost East Coast port traffic?
Significantly, rail’s share of traffic from ports is mostly lower on the East Coast than it is on the West Coast. “Vehicles brought in on the East Coast are generally destined for dealer markets within trucking distance of the port,” notes Kiley, who says that railways need to offer expedited delivery to be competitive with the highway. He nevertheless believes that there is potential to move more vehicles from East Coast ports. “These opportunities could come from reductions in trucking capacity, the availability of rail co-loading, greater per VIN billing, by a lack of on-dock or inexpensive close-toport handling capacity, or a combination of these,” he says. Krehbiel also thinks that expanding co-loading would allow smaller volume shippers to move vehicles to market faster from the ports. “We also favour development of a robust landbridge product. This would compete with the Panama Canal, which currently adds 12-14 days to the overall transit time for new vehicles,” she says.

BNSF’s network mainly serves the West and Gulf Coast ports, where vehicle supply chains are well established. Allen says that, for rail to win more business from trucks, the overall distance of the haulage is the main consideration. The majority of the vehicles entering North America by the West Coast, for example, travel in excess of 500 miles, thereby relying on rail’s effectiveness. However, on the much shorter distances common from the East Coast, it may be that co-loading offers bettter opportunities to increase rail’s share. From Tripp’s point of view, on-dock rail loading and unloading is very important for ports, which already exists in many terminals.

Further market potential
Asked whether he thought rail could attract more car traffic from other areas, Tripp suggests two main impediments: the need for extra handling and the level of rates charged. “In the logistics chain, there can sometimes be a truck shuttle to bring vehicles to the railhead and then an additional movement by road once the train has reached its destination. This erodes the cost advantage a rail-only haul offers. As a result, short hauls by rail can only be justified if the railroads make these less expensive or offer improved transit times,” he says.

However, Krehbiel does not accept this argument, pointing out that there is only minimal extra handling involved when vehicles are moved by rail. Today, most plants are rail linked, which allows them to load out directly at plant level, minimising extra handling. Furthermore, because vehicles that move by rail have a higher damage-free rate than trucking, there is nominal extra repair cost involved. Marc Allen remains realistic as to where rail can compete with road on car haulage, pointing out that on shorter distances rail only becomes competitive as fuel costs rise, since rail is more than three times more fuel efficient as trucks–but that is no small point as oil stays above $100 per barrel. Kiley notes that rail already has impressive market share in this sector, with about 70% of the vehicles produced in North America travelling at least part of their journey by rail. The key statistic, he stresses, is the total in-transit time, from plant release to delivery at the final dealership. To get the shortest time, both hauliers and railways have to work closely together.

Transit damage still an issue
Chrysler appears to be somewhat at odds with the rail operators when it comes to vehicle damage on rail, who on the whole think they are doing a good job.  Tripp acknowledges that fully enclosed wagons have resulted in significant improvements for both damage and theft issues, but these remain problems in some areas. Tripp would like to see railways become more proactive when dealing with these issues.

Krehbiel acknowledges that more needs to be done and points out that newer multi-levels include enhanced security features, such as theft preventative doors, with ladders mounted on the inside rather than the outside. She says efforts are also under way to ensure wagons keep moving, rather than standing idle in yards, since a moving wagon is more difficult to tamper with than a stationary one. Yet Tripp still wants more. “Although it’s true railroads do have to pay for any damage incurred while vehicles are in their possession, they don’t really bear the full cost. For example, the costs to the automaker of having vehicles delayed because of the need to repair or replace them and the subsequent reduced customer satisfaction that results don’t get added to the claims. Perhaps they should. To us, these are real costs, even though they remain invisible to the railroads.”