If you have large volume, a little more time, and a long way to go, railway transportation is still the most effective and viable means of transporting product or materials to its next destination.
Like other supply chain channels, railcar transportation needs to be strategically planned to maximize fleet efficiency. If your railcar assets are underutilized, you may be spending more money than you need to be.
How to Trim Your Railcar Expenses
- Optimize your shipping schedule: One of the easiest ways to decrease your expenses is to plan out your shipping demand schedule strategically for optimal efficiency. When demand is high, shippers put their best effort forward trying to satisfy it. However, that may mean leasing or owning many more railcars to get the product to its multiple destinations promptly. When the demand has lowered from higher levels, the shipper is left with these railcars that they no longer have a use for at low demand times. To mitigate the extra railcars in their fleet, shippers should attempt to smooth out their demand schedule. By extending their shipping season, shippers can have a lower number of railcars that consistently keep busy, reducing storage costs and leasing expenses.
- Invest in railcar management software: Although this would be an expense at first, railcar management software can provide shippers with real-time data that can help save them money. Railcar management software can provide storage cost information that gives a more accurate cost of operation profile. Management software can also keep track of important contracts such as leasing agreements so you can quickly see which railcar leases are soon expiring. Additionally, it simplifies fleet storage management—an expense that can quickly deplete budgets. Railcar management software enables you to calculate the number of storage days and costs for every single railcar at a storage location. Auto alerts assist with both long-term and short-term storage requirements by notifying shippers when to add or remove railcars from storage.
- Store Smart: If you must move railcars into storage, assess all your options for the most cost-effective model. Storage locations generally bill stored railcars by the day. If the location's prices are on the higher side, and you have multiple railcars there, that can be a significant expense. Instead, consider leasing nearby tracks or unused sidings from shortlines which may have a lower price tag than that of other storage facilities. Try to ensure that you are picking a location where access is easy to facilitate, otherwise getting the cars lifted when you want them may be a challenge. It's important to understand the terrain around your storage location, because winds can create mountains of snow surrounding your railcars in the winter. Digging them out and preparing them for service may not be an easy task. If you do choose to store a railcar on a shortline, you must understand you may not receive the railcar quickly when you need it. The car would have to be switched over to the railway where it is needed, which takes time.
- Minimize demurrage and private car storage costs: Private car storage fees are applied by the railway when a private (non railway owned) railcar is sitting too long on a section of railroad property. In addition, the railroad charges demurrage fees to shippers if they use railroad owned cars too long during loading and unloading periods. The demurrage clock starts ticking on 12:01 the day following placement. To avoid demurrage costs, it is good business practice to maintain close communication between shippers and receivers to avoid having too many railcars in the pipeline. To mitigate these charges, shippers should closely monitor switching activities, the movement of railcars from origin to destination, when a bill of lading is sent on loaded cars, and when empty cars are placed at the plant for loading. When there are too many railcars in a fleet, bunching or congestion of railcars can cause delays, which cost money.
Railway assets need to be strategically optimized to reduce overall storage costs. By decreasing the number of railcars in your fleet, you can avoid unneeded storage. Smoothing out your demand schedule should eliminate the need for a higher number of cars. Investing in railcar management software can help you keep track of the costs you are accruing, whereas leasing nearby tracks may make more sense financially. Minimizing demurrage charges will also help you effectively manage your railcar assets.