Some time back, we had a pretty good discussion about just in time shipping, on a thread Gabe started about why intermodal trains are run so fast. The general thought was, that it had to do with getting all those containers from L.A. to distribution centers of people like Walmart.
I’m reading an anti-Walmart book right now. I know- there are literally 100’s of them out there, and it’s not nearly as exciting as reading about trains. Among other things, I think Walmart makes other companies-competitors and supplies alike-rethink how they do business. Vendors, for examlpe have had to figure out how to be more competitve, and how to survive on thinner margins. Walmart contends that they have pushed companies to do a better job at what they do, in order to get Walmart’s business.
Has this change in retailing, by Walmart, and the other big boxes greatly affected how railroads do business? In essence, has it caused railroads to do a better job at what they do?
( Please- interested in the railroad aspect of it, not the pro/anti Walmart aspect of it. The anti-Walmart sentiment is so widespread, that an anti-Walmart book sells for about 99 cents. That’s probably a supply and demand issue, as there are lots of those books out there.[;)].
Help me out here-is the proper word effect, or affect ?
If Walmart was relying heavily on RR service, they probably wouldn’t have sited one of their distribution centers in St George, Utah - which is decidely not very close to the UP’s line in southern Utah. I also heard that they were hurting from the rise in diesel prices since they were heavily dependent on trucking for getting the goods to the store.
My guess is that Walmart’s impact on railroads is more negative than positive - and the operative word here is guess.
I know from my experience that here in Joliet LPCHI they are our largest customer making up nearly a third of all inbound containers , there is a a large Wal Mart distribution warehouse about a mile from the intermodal ramp , so here any way Wal Mart is positive for the rail business.
For better or worse, large retailers effect consolidation of purchasing, manufacturing, logistics, and sales, all of which redounds to the benefit of railroads because it creates larger and more predictable volumes on fewer lanes. The intensive off-shoring of labor-intensive assembly processes has created substantial volumes of container traffic from ports to inland distribution centers.
Railroads are fundamentally a consolidation business. Economies appear only in trainload volumes. While offshoring has wiped out labor-intensive low-tech manufacturing in the U.S., e.g. clothing, shoes, and cheap household appliances and electronics, that business was increasingly not railroad-available after about 1920 anyway.
Murph, as to your question about which came first, retailers demanding better economies and railroads responding, it’s a chicken-and-egg question. The change in retailing certainly created conditions that enabled railroading to leverage its intrinsic economies. But without those intrinsic economies big-box retailing would have nothing to demand. Retailing, railroading, trucking, and warehousing are old, mature technologies, and innovation occurs in tiny increments. All of these industries are good at knowing exactly where the edge of their envelope lies, and when structural changes move the envelope edge one way or the other, they react very quickly. There are individual companies that for internal cultural reasons learn slowly or quickly, or trap themselves through contractual agreements, but those aren’t hard to see.
From time to time I’ve seen Walmart listed on intermodal train lists. A distribution center wouldn’t have to be on or near a railroad. Most likely anything received from a domestic supplier will arrive by truck. Something from overseas by container, which also will arrive over a highway for final delivery.
What containers that would go partly by rail would probably depend on how far the distribution center is from a port.
Every store is within an overnight truck run from a distribution center. They track what a store sells through their scanners and they can restock for the next day overnight. (I know, they tend to be open 24 hours, but this overnight system works.) If a product is flying off the shelves they can keep it in stock. If it’s not moving, they don’t make the stores take it.
Their efficient distribution and restocking has just left Sears, etc. in the dust. How the product gets to the DC is a matter of efficiency and timing. And they do sell US made products, not just things made in China.
One case in point is Pampers, a disposable diaper. Now you can imagine how a young family with both parents working and a baby is stressed for time and money. They tend to buy disposable diapers at Wal-Mart. Traditionally, Sears would have bought the Pampers from Procter and Gamble, received them at a DC, then distributed them to the stores.
That ain’t the way it works at Wal-Mart. They never buy the diapers from P&G, but they sell the diapers in their stores. P&G delivers the Pampers to the WM DC by the most efficient means. WM keeps track of individual store sales and restocks overnight. When the Pampers scan at check out, Wal-Mart electronically transfers an agreed upon amount of money to P&G. It’s as efficient as Hell.
Wal-Mart is a largely untapped gold mine for railroads. So far, the Florida East Coast is the only railroad to figure this out. They opened a new intermodal terminal at Ft. Pierce to serve a south Florida Wal-Mart DC. (They’ll also handle other freight there.)
One example. If the Union Pacific had a real marketing department, there would be an intermodal facility near the Wal-Mart DC in Tomah, WI. The UP has an underutilized line that goes right by there
Wouldn’t the value of that gold mine depend on the cost of the faclility construction, any necessary track upgrades (Adam’s line still has jointed rail ), finding extra crews/equipment, coordination of existant traffic, and what WM is willing to pay? I know that line isn’t very heavily used (IIRC) but I have heard that they are short of crews in certain areas.
All roads seem to lead to Walmart, even in transportation. Having had customers that move Walmart business, here’s a bit of an overview at least from my account management experience.
First, Walmart moves over 100,000 containers a year on the railroad for which I work. What happens with a lot of the traffic is that products come into the US in international containers and then move in traditional doublestack service to inland points.
Second, a lot of the freight is broke down and reworked. Depending on the port of entry, the box will be worked at a warehouse on site or move to another inland where it often gets reworked and reloaded into a domestic container. It just depends on the commodity, destination, and port of entry. Generally, because the traffic isn’t too time sensitive, the traffic generally moves in container versus trailer. Trailers move at higher priority, thus costing more. For general consumer goods, containers are the better price. And, we all know Walmart is the low price leader.
Overall, Walmart business on rail is big business. But to say they get preferential treatment, I wouldn’t say that’s the case. I’ve seen just about everything move for Walmart on the rail from Glade Air Freshners to Christmas ribbons and bows. Even lettuce and apples to Walmart touch the rail at some point, even in boxcars along the way into cold storage warehouses for distribution.
I read somewhere that Wal-Mart shipped 30% of their goods by rail, the rest being contracted out through other carriers like J.B. Hunt, Schnieder, etc. Once the containers are at the DC, they’re unloaded and re-loaded onto Wal-Mart trucks bound for the stores. Those distribution centers must be enormous.
What I’m wondering is how much of the railroad intermodal business is Wal-Mart’s? And how much more intermodal business could the railroads handle before being stuffed beyond capacity?
I think that one very important intangible is the way walmart has conditioned americans to accept flimsey trash so long as the selling price is low enough.
That way, if the widget you bought last time that you needed one, is broken before the next time you intend to use it, you run out and buy another cheapie…which the railroad gets an extra haul out of the bargain. This, as opposed to buying an heirloom quality widget that you would purchase once, and use the rest of your life, and eventually pass down for your progeny to use as needed during their lifetimes.
I thought we were not going to get into the pro/anti WalMart debate. But if you insist (I must, I must), last time I checked, there still are other stores that will sell you an heirloom quality widget. “Doctor, it hurts when I do this.” Doctor answers, “don’t do that.”
Last two words when unloaded and ready to leave a Walmart DC…
“Comcheck Please”
That is how they get thier low prices. Charging truckers without drop/hook accounts fees up to 120 dollars per load inbound to unload it.
That was before 9-11 I dont know if they still continue that practice. I usually selected employers provided they have drop/hook accounts for WM DC’s Drop a load, pick up an empty and gone in 20 minutes flat. Not wasting days waiting to unload.
Reality being that Walmart has been very influential in persuading American shoppers to place initial cost ahead of product quality in their list of priorities. And a fall out of that mentality is, that products made cheaply, are less durable.
So, It’s quite legitimate to contemplate that such products will require replacement more frequently than their more durable counterparts. Enter the deliveryman… do you think he’s sad over the repeat business?
How many times do you think a product is re-shuffled between railcar and a Wal-Mart DC…?
I live about a mile from a Wal-Mart distribution center and in 6 years I can count on one hand the number of times I’ve seen a truck w/a container behind it going in the gates. It all seems to be JB Hunt and Schnieder in, Wal-Mart trucks out.
Now…the number of times truck drivers turning down the frontage roads thinking they were on-ramps to the highway h
I’m not sure where you live, but a major portion (70-80%, by most accounts) of the merchandise comes in a container from China. If it’s showing up there, in a JB Hunt or Schneider truck, then it’s been re-shuffled at least once. Do you suppose any of those trucks move TOFC?
You’d want to at least start by using the RailRunner system (or alternative) to move containers. A terminal for such a system only needs:
An unused/underutilized side track near the DC 2) Some white rock dumped on that track to bring the rubber wheel surface up to track level 3) A local trucker with people trained to handle the RailRunner equipment
No significant expense there.
The RailRunner equipment is compatible with RoadRailers, so the existing RoadRailer trains on the route could handle the business. Make a set out NB and a pick up SB. (This may require that a brakeman be added to the crew for that district.) But otherwise, there are no new train miles and very minimal additional direct expenses. And no extra crews beyond the brakemen.