Executive Commentary |
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NFI Industries
Brian Webb
President , Port Services www . nfiindustries . com
The US surface transportation industry faces mounting cost pressures in 2025 , with rates at historic lows while certain operational costs remain a stubbornly high climb from origin to shore . Smaller carriers with lower overhead and residual
Oliver Wyman
Adriene Bailey
Partner www . oliverwyman . com
Intermodal ( especially domestic ) is the only avenue for US railroads to realize growth that meets or exceeds GDP / overall freight growth . Taking intermodal share from trucks is the largest untapped opportunity , but kickstarting this growth will take more than just higher truck prices or tighter truck capacity . Realistically , railroads must learn how to hold on to freight through truck cycles to ensure longer term growth .
If rail cannot convert truck freight at current 90 % -plus on-time intermodal service levels , that tells us the industry needs the following :
New commercial structures : These structures should be in place alongside domestic container channel partners to drive more penetration in truck lanes where conversion is already possible . It ’ s important to do this without destroying the economics of the existing business — how railroads and box operators structure deals and share information must evolve and mature . New lanes / offerings : Oliver Wyman estimates there are 760,000
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excess capacity from COVID-19 are driving prices down to meet demand , but this race to the bottom risks sacrificing service quality . Larger companies are responding by prioritizing excellent service , rationalizing fleet size and leveraging technology to reduce costs and remain competitive .
The driver shortage , both voluntary and involuntary , compounds these challenges .
Drivers are leaving due to pay that isn ’ t keeping pace with the cost of living . Linehaul rates for independent contractors and licensed motor carriers aren ’ t rising at the usual rates , leading to high turnover and reduced service quality as less experienced
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annual loads available in longhaul lanes with interchange — if railroads can fix their interchange performance . Rail intermodal could serve as many as 27 million out of the 41 million truckloads in lanes under 750 miles using the current terminal and railroad network .
Pricing made right : Truck rates move up and down much faster than railroads react . Therefore , margin is left on the table when truck rates rise , and volumes are sacrificed when truck rates fall . Fuel surcharges need to be reconfigured to a mileage basis . Rampto-ramp rates fail to account for individual shipper origin / destination locations . As length of haul shrinks , rail must be more targeted in ramp-to-ramp pricing to get door-to-door economics right for incremental volume .
Currently , capacity is not an issue — we estimate the domestic container fleet could handle 20 % to 25 % more loads . But the railroads and their channel partners must figure out how to do what ’ s needed to pick up those boxes and put them to work .
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“ As smaller , lowercost carriers close their doors , maintaining a high quality of service will be crucial , as the cost pendulum will eventually swing back toward those who can deliver value .”
Brian Webb
“ The industry must prioritize resilient networks through technological innovation , operational excellence and collaboration across the supply chain .”
Claude E . Elkins
“ As length of haul shrinks , rail must be more targeted in ramp-to-ramp pricing to get door-to-door economics right for incremental volume .”
Adriene Bailey
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drivers are hired at lower wages .
To address these issues , the industry needs to offer broader service packages that allow customers to see their entire port-to-door expenses . This holistic approach can drive down overall costs through technology solutions , providing visibility and more efficient management by bundling multiple services with a single provider . Additionally , as smaller , lower-cost carriers close their doors , maintaining a high quality of service will be crucial , as the cost pendulum will eventually swing back toward those who can deliver value .
Consolidating operations in larger markets and bundling services that look at total supply chain expenses can reduce total spend without compromising service . By focusing on cost reduction more broadly for beneficial cargo owners , we can address both price pressures and the challenges posed by driver shortages — ultimately sustaining long-term competitiveness and service quality in the market .
Norfolk Southern
Claude E . Elkins
Executive Vice President and Chief Marketing Officer www . norfolksouthern . com
The biggest challenge facing US surface transportation in 2025 is the need for agile and adaptable operations in response to significant disruptions in the global supply chain , such as weather and geopolitical impacts . To tackle this , the industry must prioritize resilient networks through technological innovation , operational excellence and collaboration across the supply chain .
At Norfolk Southern , we see strong demand for intermodal services , which requires renewed collaboration and technological investment . By streamlining operations and enhancing customer partnerships , we can leverage capacity and present intermodal as a reliable , cost-effective and carbon-efficient alternative .
We also anticipate increased
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