Norfolk Southern Less-Than-Carload Service (Thoroughbred Freight Transfer Service)

NS is dipping their toes back into a market that railroads abandoned long ago, less-than-carload boxcar service.

From Trains Magazine:

NS launched the door-to-door service this month as an experiment in the Chicago-Atlanta-Miami corridor. Trucks pick up small loads and deliver them to a rail-served warehouse where the shipments are cross-docked into waiting boxcars. The boxcars then move in intermodal trains. The process is reversed at the destination, with trucks making the last-mile delivery.

At a recent meeting of the Midwest Association of Rail Shippers (MARS), NS VP of Industrial Products Ed Elkins described the new service. It is a true LCL freight service with pallets of freight moving in boxcars which are transloaded to trucks at each node. They are experimenting with Chicago-Atlanta, Chicago-Miami, and Atlanta-Miami (those last two in conjunction with the Florida East Coast) corridors but want to expand the service to more lanes.

I think this is a great idea with a lot of potential, especially when combined with the Rail Pluse GPS-tracked railcar technology that NS is working on with G&W and Watco. There is a massive amount of traffic that could be wrestled away from trucks, especially in short to medium-haul corridors like Atlanta to Miami. Perhaps in 20 or so years boxcars will become a common sight on the back of intermodal trains.

I especially like this quote from Elkins:

NS has an experimental mindset and a willingness to fail when it tries new ways to tap the flexible freight market. “We think experimentation is incredibly important,” Elkins says.

“If you’re not failing, you’re not trying,” he adds.

Great mindset to have, but it remains to be seen if NS fully adapts this mindset. If it does, this service will succeed.

The railroads did that for many years, with merchandise trains operating on hot schedules similar to intermodal trains today. Many railroads assigned sales representatives to the LCL market exclusively, and it took a significant number of them to contact individual shippers directly; NS management will have to recognize that some individual attention to small as well as large shippers will be needed, although a well-constructed telemarketing program may be able to do the job using today's technology, which was undreamt-of back then. Also, the use of rail-served, rather than rail-owned warehouses should help keep costs under control with pallets and forklifts replacing hand trucks, one man to a truck.

How about making things really efficient:

This is an interesting attempt at a boutique service, but, the long-term opportunity for LCL competing with LTL (or other distribution strategies) will very likely be restricted to the niche of highly imbalanced markets within the heaviest commodities above 30 lbs. cu ft density, perhaps within some segments of the paper market or for canned goods or other heavy food products. Obviously, they must see some potential and I like their philosophy of giving it a go, but, I wouldn't give it long-term strong odds of success and think a serious attempt of more fully entering the the LTL market would be better served by just using containers riding on those intermodal trains. I wish them success and look forward to seeing how it works out.

Anyone have any insight into how this service has been performing? Per Trains News today, they’re seeking rights for “premium boxcar” service over the Meridian speedway as a giveback for the merger so presumably they see a future for the traffic. However, based on my (totally anecdotal) sampling of reports, traffic has yet to rise above the occasional boxcar on intermodal trains in participating corridors.

Seems to continue to be generating less-than-daily volume (1-2x/week) in the lanes they're running from what I have also seen anecdotally. The general opportunity has grown during the pandemic with LTL traffic up and carriers raising rates and shedding less-desirable traffic. Ed Elkins, NS EVP/CMO, was quoted as saying "the potential market...includes freight that's heavy or odd-sized, a segment that LTL carriers try to avoid".

But, in terms of heavy freight, where boxcar can have advantage, that is generally desirable traffic for LTL carriers, except in the niche of highest-end weight, with some carriers' commercial strategies targeting ton-miles, seeking traffic with higher weight moving longer distances as a mix amongst many lighter, cube-consuming shipments in the marketplace, for greater profitability. Because of this, as a target I would think success would tend toward higher lane imbalance; for those very niche upper-end heavy shipments; perhaps in some middle ground between LTL and full-boxcar-crossdock-to-LTL services found elsewhere as well; and/or, some measure of aggressive pricing since it is lucrative business that LTL carriers aren't generally avoiding.

In terms of "odd-sized", generally excessive-length with the shipment exceeding 8 feet in length, including heavy as well as lighter-loading and extreme-length shipments over 12-14 feet, and unattractive with plenty of surcharging to limit that segment of freight amongst many LTL carriers moving through the pandemic, that could be a more-competitive target for NS to the extent they can effectively mitigate those issues that makes this subset of LTL freight unattractive. Additionally, though likely very limited, might be a segment that is excessive height that has to move on flatbed highway equipment but would fit in a higher boxcar door opening, though requiring flatbed pick-up and delivery.

As to their inclusion of premium boxcar in the Dallas market within their CP/KCS STB filings, beyond, for what it's worth, currying favor with STB Chair Oberman, would make sense in building out more lanes with Atlanta serving as a hub to the extent the service can be sustained. Memphis would be another good market to add for expansion with an Atlanta hub, but it lacks dedicated NS intermodal service in the lane.

Overall, as I see it first and foremost, unless NS can at the least successfully double-tier the freight primarily/stack to the extent they can (like many LTL carriers do) in those boxcars to fully utilize its advantage for what is the heavier/est and unattractive freight moving in LTL to overcome the sizable disadvantages they face, at best this will remain a low-volume niche service at risk for discontinuance or evolution to a more-traditional cross-dock service moving beyond this introductory trial phase and over the longer run. In any case, it remains a commendable foray into an interesting and growing segment of the freight transportation market and bears continued watching.