CSCMP's Supply Chain Quarterly
December 19, 2018
Direct Connection
Direct Connection

Collaboration is key to improving rail service

There's no question that there are opportunities to improve America's rail system, but carriers can't do it alone.

Transportation is a key element in many of the activities and transactions that occur throughout a product's life cycle. Without efficient transportation services, supply chains could not function effectively, and costs would be much higher for buyers and sellers alike. But it's not a one-way street. Without an understanding of their customers' supply chains, carriers could not provide their customers with the level of service they want and require.

That was one of the messages I conveyed in January, when I was a keynote speaker at a conference in Chicago put on by the Midwest Association of Rail Shippers (MARS). MARS is the Midwest arm of the North American Association of Rail Shippers (NARS), which serves companies that own and use rail service.

The talk, titled "Trends and Challenges in Today's Global Supply Chains," encouraged shippers and carriers to understand each other's challenges and to work together not only for the benefit of all participants in a supply chain, but also for the economy as a whole.

The presentation began with an overview of the economic outlook for U.S. rail carriers. While changing regulatory factors present a significant challenge for the railroads, the overall economic outlook has some bright spots. Despite the current whiplash in the markets, the U.S. economy is on fairly solid ground, with unemployment falling and real net income and household net worth inching up. Inflation is low to moderate and gas prices are tumbling.

That is all good news; a stronger consumer translates to more freight moving on the roads and rails. But consumers' buying patterns are changing. You can now order from anywhere and fulfill from anywhere, which presents both challenges and opportunities for carriers as well as for their customers.

At the same time, America's railroads are dealing with growing congestion. For example, according to BNSF Railway Executive Chairman Matthew Rose, approximately 500 freight trains and 800 commuter trains operate each day out of Chicago alone. This is a vastly complex system with a large number of variables to manage on a daily basis.

There's no question that there are opportunities to improve America's rail system, but carriers can't do it alone. They need help to make the process improvements that could eliminate congestion. That improvement starts with the supply chain community. In fact, it would be difficult, and perhaps impossible, for rail carriers to fully optimize the way they transport goods unless their customers engage in efficient supply chain management.

From specialized equipment to advanced technology to intermodal operations, our nation's rail system has changed significantly since its inception. While technology will continue to change and advance, the principles of effective supply chain management remain the same. We will all benefit when we apply those principles to the entire supply chain, including transportation.

Rick Blasgen is President and Chief Executive Officer of the Council of Supply Chain Management Professionals (CSCMP).

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