Railroads’ Role in the U.S. Supply Chain

The Blume Global Team | February 26, 2019

Railroads are a popular way to move raw materials, parts and products around the United States. This railway infrastructure is critical to a healthy, functioning supply chain. In this article, we dig into the facts and figures that explain the role of railways in ensuring the efficient transportation and distribution of goods.

The Amount of Freight Moved in the U.S. Each Year

Railway freight is the second most popular way to move goods, after road transport.

According to the Bureau of Transportation Statistics, this breaks down as follows:

  • In 2015, the total amount of freight moved domestically in the U.S. was 15.9 billion tons.1
  • Of that, around 10.8 billion tons was moved by truck, followed by 1.5 billion tons being moved by railway.
  • Imports and exports by railway accounted for around 144 million tons in 2015.
  • The amount of freight moved by railway is expected to rise to almost 2 billion tons by 2045.
  • The total value of domestic shipments in the U.S. in 2015 was almost $15 trillion.
  • Of that, around $10.9 trillion was transported by truck, with railway transporting almost $445 billion.
  • Transporting goods by railway is most popular for distances between 250 to 500 miles and 1,000 to 1,500 miles.
  • Around 600 freight railroads operate in the U.S. and together they earned nearly $75 billion in revenue in 2017.10
  • Around $1.15 trillion of goods was transported overall as freight between Canada, Mexico and the U.S. in 2017.
  • Of that, just over $700 billion was moved by truck, followed by almost $180 billion sent by railway.
  • Pipeline, air freight and vessels rounded out the transportation of goods, each responsible for less than $100 billion worth.

Although transportation of goods by railway is somewhat below the capacities offered by trucks, rail freight still accounts for a fairly substantial portion of supply chain movement.

The Size of the U.S. Rail Freight System

The U.S. freight rail system owns and operates almost 140,000 miles of railway tracks.3 This includes 95,000 miles owned by Class I railroads. A large proportion of goods transported by railway are sent in intermodal shipping containers. Freight railroads moved almost 14.5 million intermodal shipping containers in 2018. Intermodal transport accounts for nearly a quarter of all U.S. freight rail revenue.9

Class I Railroads

Class I railroads are the main freight rail networks that distribute goods around the U.S. Class I railroads are defined as having revenues of at least $457.9 million in 2015.3

According to the Bureau of Transportation Statistics:3

  • The median age of the Class I Railroad locomotive fleet ranged from 16 to 20 years in 2015, compared to 11 to 15 years in 2010.
  • Class I railroads added more than 12,000 new locomotives between 2000 and 2015.
  • On average, about 3% of all locomotives are new in any given year.

Although there are only seven Class I railroads in the U.S., together they account for nearly 70% of rail freight mileage and 94% of rail freight revenue.10

Here’s an overview of the six main Class I railroads.11

Union Pacific

The Union Pacific (UP) railroad was founded in 1862. It is the largest railroad in North America and operates almost 52,000 miles of track across 23 states. The company has almost 45,000 employees, owns or leases over 8,500 locomotives and primarily ships goods like coal, food, chemicals, agricultural and automobile products.

BNSF Railway

Burlington Northern and Santa Fe Railway (BNSF) was founded in 1849. It operates in almost 30 states and three Canadian provinces. BNSF has 32,500 miles of tracks in its railway network and more than 8,000 locomotives. It specializes in intermodal transportation and is the largest intermodal railway in North America.

CSX Transportation

CSX Transportation was founded in 1827 and owns 21,000 miles of railroads across 23 states, the District of Columbia and two Canadian provinces. Its network reaches nearly two-thirds of the nation’s population. They provide traditional rail freight services and intermodal shipping.

Norfolk Southern Railway

The Norfolk Southern Railway was founded in 1838 and today it is a major carrier automotive products, industrial parts and coal. It operates almost 20,000 miles of track and runs over 4,000 locomotives and over 60,000 railcars. The railroad is a major transportation provider to ports on the east coast, from New York to Florida.

Canadian Pacific Railway

Founded in 1881, the Canadian Pacific Railway owns and operates around 15,000 miles of railroads. They provide important rail connections between ports of the east and west coasts, major distribution centers and other railroads. CP primarily carries fossil fuels, automotive products, agriculture and food and shipping containers.

Kansas City Southern

Kansas City Southern mainly operates between the US and Mexico and was started in 1887. Although they only operate around 6,000 miles of track, they provide vital freight services through three subsidiaries: Panama Canal Railway Company, Kansas City Southern Railways Company and Kansas City Southern de Mexico. They specialize in transporting loose goods, food, chemicals, appliances and consumer goods.

The Economic Impact of Railroads Carrying Freight

Railway freight has a significant impact in the U.S. economy.4 It creates high-paying jobs, supports employment across related industries and provides a greater connection to the North American and global marketplaces.

Railroads spend, on average, around $25 billion a year on their networks, mainly on infrastructure and equipment. That’s a rate six times higher than the average American manufacturer.5 According to the Association of American Railroads, “in 2017 alone, major U.S. railroads supported approximately 1.1 million jobs, nearly $219.5 billion in annual economic activity, $71 billion in wages and almost $26 billion in tax revenues.”6

Railroads also haul over a third of all U.S. exports and provide a major boost to worldwide trade. Because the railroads can haul hundreds of truckloads of goods at a time, they also reduce the burden on the highway infrastructure and road systems in the U.S.

According to The Economist, “[American railroads] are universally recognized in the industry as the best in the world.”7 Between 1981 and 2000, the productivity of the freight railway network rose by 172%, while rates decreased by 55%.

There are good reasons to send freight by rail. It’s cost-effective and up to four times more fuel-efficient than sending freight by truck, and that’s better for the environment. A rail freight shipment company transports can move nearly double the quantity of goods they could in 1985, for about the same price.5

Rail Freight Safety and Monitoring

The American Society of Civil Engineers gave top marks to the U.S. rail freight system for safety on the network, while overall U.S. infrastructure only scored a D+.8 Massive infrastructure spending, combined with smart monitors and IoT devices helps to keep railways, locomotives and carriages safe and secure. As a result, there’s been a 28% decrease in the train accident rate over the past 10 years. Railroads today have lower employee injury rates than most other major industries.

Railway freight has a lower environmental impact, too, according to Gorail, “If just 10 percent of the freight shipped by the largest trucks instead moved by rail, annual greenhouse gas emissions in the United States would decrease by about 17 million tons—the equivalent of planting 400 million trees.”5

Railroads and railway freight are a vital part of supply chain infrastructure, allowing for efficient, low-cost, environmentally-friendly distribution of goods over large distances.

Find Out More

Learn how Blume Assets enables carriers, service providers and enterprises to manage their key assets—including rail cars, containers and more—across the entire supply chain lifecycle.

Plus, for better logistics execution from the first mile to the last mile, Blume Logistics provides real-time shipment visibility across all modes, event-based POD and automated invoicing and financial settlement. Not only will you reduce costs, but you’ll also improve your customer service and vendor relations.

References:

  1. https://www.bts.gov/bts-publications/freight-facts-and-figures/freight-facts-figures-2017-chapter-2-freight-moved
  2. https://www.bts.gov/newsroom/2017-north-american-freight-numbers
  3. https://www.bts.gov/bts-publications/freight-facts-and-figures/freight-facts-figures-2017-chapter-3-freight
  4. https://www.aar.org/wp-content/uploads/2018/05/AAR-Economic-Impact-U.S.-Freight-Railroads.pdf
  5. http://gorail.org/infrastructure/five-reasons-freight-rail-is-an-infrastructure-leader
  6. https://www.aar.org/issue/freight-rail-economic-impact/
  7. https://www.economist.com/briefing/2010/07/22/high-speed-railroading
  8. https://www.infrastructurereportcard.org/cat-item/rail/
  9. https://www.aar.org/issue/freight-rail-intermodal/
  10. https://www.aar.org/wp-content/uploads/2018/05/AAR-Overview-Americas-Freight-Railroads.pdf
  11. https://arcb.com/blog/rail-freight-shipping-class-i-railroads-in-america

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