As the Freight Rail Crisis Threatens More Supply Chain Disruptions, Automation and Visibility Are More Relevant than Ever

Thousands of rail workers have followed through on their threats to go on strike for better working conditions. Rail workers have gone over 3 years without pay appraisals amid contract disputes, with talks interrupted over attendance, sick time, and scheduling issues. Only 2 of the 12 unions, representing less than 10% of the overall railway workforce, have approved new improved contracts with freight railways. The International Association of Machinists and Aerospace Workers last month announced that 4,900 of its members had rejected a tentative contract that the union had negotiated with the railroads. The Machinists Union, which is among the 12 unions in the middle of complex discussions among the railroad operators, workers, and federal officials, said its members would not stop working before the end of the month to give negotiators time to reach a better deal with the companies. The Association of American Railroads, a trade group, recently warned that a strike would inflict economic damage reaching US$2 billion a day for the world’s largest economy.

Rail moves close to 40% of long-distance American freight, 40% of imports, and over 32% of exports, making the stakes for the American supply chain quite substantial. In addition, rail is a central component of a complex global supply chain that depends on the coordinated movements of cargo ships, trains, and trucks. A full-blown railway strike could worsen the congestion that has already plagued American ports on both the East and West coasts. It would also place added pressure on trucking companies, which is the most obvious and feasible alternative. But that’s an industry that has already been compromised by staffing complexities surrounding driver shortage.

The effects of the pandemic have already put added pressure on the domestic supply chain. The unprecedented surge in imports overwhelmed ports, trucking companies, and rail networks. This year, the shutdown of Chinese ports, coupled with Russia’s invasion of Ukraine, hampered the availability of commodities, such as grains and crude oil, and entirely transformed supply chains as a result. The Pacific Northwest region, for example, used to import large amounts of oil from Russia. The region now depends heavily on North Dakota and Canada for oil. The effects of Hurricane Ian are already being felt downstream in the supply chain, particularly in Southeastern states. The 7-day average shipment volume for loads being picked up from Florida and delivered to Georgia was down 30% week-over-week as of last week. 

The biggest element of the underlying supply chain hurdles is undoubtedly the movement of containers between different modes of transport. Ships and vessels bring containers full of goods to American ports and they’re moved to hubs in the middle of the country via trucks or rail. The standardization of containers during the 1960s has been one of the key reasons behind the boom in international trade. Standardization of containers meant cranes, forklifts, and other material handling equipment could be leveraged, which would ensure efficient multimodal handover of goods from ships to rails and trucks. Despite rail being an obvious roadblock, ensuring containers are moved in the most efficient way undoubtedly holds the key to easing disruptions, especially with the holiday season looming. For this, there is a need for other modes of transport, such as trucks and maritime, to step up.

The use of container yard solutions, such as Automated Rubber Tired Gantry Crane (ARTG) systems and Automated Rail Mounted Gantry Crane (ARMG) systems, have been slowly gaining traction to move containers from terminals to multimodal handover depots at an interrupted pace with minimal latencies. Similarly, technologies like port gate automation, truck platooning, and horizontal transport automation technologies, such as Autonomous Guided Vehicles (AGVs), are being leveraged to ease port congestion and ensure streamlined multimodal handovers. Additionally, as trucks are the most favorable alternative for rail, trucking companies need to be more diligent with technological solutions adoption to overcome constraints. Processes like dispatch, route optimization and Service-Level Agreement (SLA) management are manual for a majority of the industry. Digitalizing these cumbersome, yet critical processes and complementing them with existing base telematics solutions can ease short-term pressures on freight rail.

Another piece to this is the long persisting issue of lack of visibility for retailers, wholesalers, and manufacturers. There is a growing need to know where exactly containers are and on which mode of transport in order to anticipate delays and plan accordingly in order to work around the given constraints. Visibility solutions pertaining to track and trace should be coupled with end-to-end visibility platforms provided by Project44, FourKites, Flexport, and FarEye to plan effectively and proactively mitigate any potential issues. Leveraging information from disparate sources in an actionable manner is unquestionably the most practical way to overcome supply chain hurdles.