Rail logistics providers in North America are moving deeper into the perishables market with new services aimed at shippers looking for dependable and cost-effective transportation options, particularly for long haul moves.
Although falling fuel prices and other factors are contributing to the current softness in the market, it’s full steam ahead for Railex, which partners with Union Pacific and CSX to provide coast to coast expedited rail service for shippers of perishables.
Paul Esposito, executive vice president, corporate affairs for Railex, says, “The truck market is collapsed right now. We’re currently dealing with 2005-06 rates for refrigerated transportation across the U.S., which makes it very difficult for anyone in rail to compete (against the trucking sector).”
It’s not just low fuel prices that are making trucks more competitive, but also the longstanding drought in California, he said. “There hasn’t been a lot of inventory coming out of California,” which means there has been a lot more truck capacity, Esposito said.
A spokesman for Montreal, Canada based CN Rail concurs. “Over the years, drought conditions in California have created a significant impact on crop yield.” And while low fuel prices are also a challenge, “over and above that we have currency exchange and weather that plays a critical role when you are sourcing products. While one impacts your costs, the other influences product availability. All these factors lead to shift in markets, which means as an industry we need to be nimble to adapt to these changes.”
Despite the challenges, Railex’s Esposito sees a silver lining for rail logistics providers vis-a-vis the trucking sector. For example, the Federal Motor Carrier Safety Administration’s hours of service rule adds even more regulatory constraints for long-haul truck drivers, giving rails an edge. Likewise, the Food and Drug Administration’s Food Safety Modernization Act is working in Railex’s favor, he said.
“The FSMA, while proving onerous to many in the transportation sector, including trucking, actually enhances the marketing program at Railex because we are Safe Quality Food (SQF) and HACCP (Hazard Analysis Critical Control Point) certified at the highest levels at each one of our facilities. We make sure the equipment we’re using is of the highest quality, including our short haul trucks as well as the boxcars we’re utilizing either from Union Pacific or those we lease ourselves.”
The right technology and equipment is key to supporting cold chain integrity. Five years ago, Railex made a significant investment in technology and brought on an entire tech team to tailor a strategy for Railex and its customers.
In addition, Railex partners with Midland Carriers to provide GPS-enabled real-time information on the location and temperature of each shipment.
“We’re continuously monitoring the long-distance haul when customers’ inventory is in our care, custody and control. We make sure the environment for that product is correct during the entire transit, and provide customers with visibility into that environment,” Esposito said.
The EINSTEIN system — a thermal energy auditing methodology for industrial and nonindustrial users such as hospitals, office buildings or sports halls— is used by Railex to closely monitor the efficiency and operation of their coolers in each of the company’s facilities. Furthermore, Railex custom built a barcoding track-and-trace system for virtually every pallet that moves through its network, giving customers visibility for pallets from the time they originate at the Railex facility all the way through to the destination.
CN’s CargoCool service features ReeferTrak technology that tracks customers’ shipments door-to-door with automated customized temperature reporting, including historical reporting on location and temperature parameters. The service helps customers achieve complete cold chain traceability through remote GPS track-and-trace systems and even allows remote temperature adjustments.
“Food security and cargo integrity are core to our program,” CN’s spokesman said. “There are many established products and technology within the market, and it’s a segment that is evolving fast,” he said. “Real-time monitoring and post audit capability within the rail sector have benefitted shippers within the perishable segment. With scheduled transit, consistent capacity and low seasonality spikes, rail is able to offer a sustainable program that meets industry expectations. Providing visibility within the entire cold chain is crucial, and that is what our focus has been through our investments in assets and technology within the CargoCool service.”
CN’s units are equipped with alarms that sound when temperatures deviate from preset thresholds. In addition, gensets are equipped with two engines for redundancy — if one fails, the other starts automatically.
Last June, CN announced a C$20 million investment in its cold chain capacity, including the purchase of an additional 200 domestic, 53-foot temperature-controlled containers for its North American reefer fleet. The company also acquired 32 electric generators to move 40-foot international marine reefers to and from CN served ports on CN intermodal trains. The power packs provide economies of scale by connecting up to 17 international marine reefers at a time.
Railex realized that it needed to make similar investments in equipment when it launched its service 10 years ago.
“We knew that we needed to enhance the Union Pacific boxcar fleet and that we needed a better box for the commodities we were moving. We secured a leasing company and got 50 of our own boxcars, utilizing a 72-foot boxcar instead of a 64-foot boxcar,” Esposito says, which could potentially open up new business for Railex to transport other commodities.
Both Railex and CN are confident in their ability to remain competitive and grow, even with the pressures of the current market.
“We do not consider ourselves a railway, but rather a supply chain enabler,” CN’s spokesman said. “This allows us to think outside the box and connect the dots within the food supply chain. We are always working with our customers and stakeholders to build new products and services to drive more value to the supply chain. For instance, CN is the first railroad offering containerized reefer to and from Mexico.”
In addition, “The majority of the challenges within this industry are around reliable capacity, transit, food security and monitoring. At CN, we have been successful in building a food safety culture that drives our behavior and program. Our team of specialists addresses each of these areas with a high sense of urgency.”
Railex also looks for opportunities to better serve its customers, Esposito said.
“We’re always looking at expansion and enhancing our distribution platform and the footprint of the food supply chain network. A Midwest expansion is being researched continuously as is a gateway to Mexico, along with a presence in the Southwest, such as Texas.”