On December 13, ILTA submitted comments to the Surface Transportation Board (STB) regarding first-mile/last-mile railway service.
While first-mile/last-mile service issues are longstanding challenges, the adoption of cost-saving measures collectively classified as Precision Scheduled Railroading (PSR) have amplified their impacts. Under PSR, railroads have cut staff, closed railyards and limited the availability of locomotives, leaving them with significantly reduced capacity to allow them to respond and ameliorate disruptions. Moreover, railroads are initiating, or threatening to initiate, embargos more frequently than in the pre-PSR era, in what appears to be a strategy to leverage terminals to add private track capacity or services that were previously performed by railroads themselves.
ILTA President Kathryn Clay stated, “We believe that we, as terminal companies, have the responsibility to be accountable to our supply chain partners, and we believe our partners should be accountable to us as well. We offer these comments to initiate a discussion with the STB and our railroad partners about how we can move forward together to bring greater accountability and transparency to supply chain functions overall.”
Increasingly, terminal operators must expend additional resources (or charge shippers) to compensate for these frequent disruptions and the decreased ability of the railroads to “self-correct.” In some instances, railroads are increasingly withholding normal last-mile services such as the “blocking” and “spotting” of railcars without explanation for the changes in service. The net effect is that the railroads gain the ability to report higher efficiencies and increased operating ratios when, in fact, they have merely shifted a portion of their operational burdens and costs to terminal operators and shippers. The supply chain overall has not gained efficiency and, if anything, the lack of accountability makes the system as a whole less efficient.
The actions of the railroads impose direct costs to terminal operators in the form of additional labor requirements and other resource needs, as well as indirect costs due to the increasingly onerous tasks associated with disputing demurrage claims.
ILTA believes that only action by the STB can counteract the unintended consequences that PSR has introduced to first-mile/last-mile performance. In most interactions between private sector companies, market forces provide adequate mechanisms to incentivize performance and address non-performance. Terminal operators have very limited ability to address the non-performance of the railroads, because of their special status as regulated monopolies. If railroads are not held to account for service delays of their own making, there is no incentive for them to take corrective action.
The STB has the ability to significantly improve the visibility of the overall efficiency and reliability of supply chains by instituting a manageable number of first-mile/last-mile performance metrics. By requiring Class I carriers to be responsible for the efficiency of the entire line haul by which their tariff compensates them, the financial burdens, penalties, and claims will be placed with the accountable parties.