A number of new and continuing developments have affected the road and rail modes in North America over the past year. The implication of this year's fuel-price increases differs depending on who is telling the story: Carriers and industry analysts cite minimal effects, but shippers are noticing the change. Putting further pressure on prices is tightening capacity, which has shippers scrambling for service. The rail industry is facing the threat of re-regulation, which looms as a backlash for the decreased service levels that resulted from the mergers and consolidations of the past decade.

There's No Room in the Truck

Hyundai Motor America, Inc., a Fountain Valley, California-based automobile manufacturer, imports parts from Korea. Says Ray Roche, parts transportation manager, "The problem began in August of last year when the Y2K threat had carriers afraid of being stuck with extra capacity. Today, we have difficulty in booking trucks. Every carrier tells us they are at full capacity, and there are driver and equipment shortages. If you have to call in a shipment, it is difficult to get same-day service. Carriers have to turn away customers. Our freight that is under contract is okay, but if it is a one-time or a truckload shipment, we are told that we will have to wait." Carriers acknowledge that this is a problem. Ed Alderman, vice president of marketing at American Freightways, an Arkansas-based LTL carrier, says, "There is less excess capacity and capacity is not growing as rapidly as demand."

Seaports As Bottlenecks

Another problem facing shippers is congestion caused by inadequate facilities at the major ports. Says Basil Brentwood, North American director of Cargo Carriers, Ltd., a White Plains, New York-based international freight forwarder, "The recent takeover of Sealand by Maersk has caused major problems at the port of New York. Traffic that used to go through two terminals is now going through only the old Sealand terminal, creating a huge congestion problem for truckers, and this is reflected in higher costs to the shipper. [Another terminal is slated for service soon, however. -Ed.] On the West Coast, growing container traffic at the port of Los Angeles makes it increasingly difficult for truckers to get to and from the port. Roche says, "Shippers may now need to rethink how they do business at the port. There are four- to five-hour waits to pick up containers."

Not all of the news is bad, though. On the Mexican border, for example, "The new bridge from Laredo to Nuevo Laredo, which opened this past April, has reduced transit time from four hours to twenty minutes", says Alderman.

Fuel Surcharges Disputed

One of the more recent issues confronting international shippers is the increase in fuel prices. Although it affects all modes of transportation, including rail and motor, it is more pronounced in motor. "The cost of fuel is an issue," says Brentwood, "because it makes things more difficult for shippers. Truckers tack on a fuel surcharge and add as much as five to ten percent.

Truckers are still applying the surcharge, although rates are going down." Brentwood wonders whether point they are using it just to make extra profits. "The surcharge may cost exporters an additional $100 to $150 per container. It does affect exports, because the prices are quoted weeks in advance."

Roche believes the fuel-price increases are significant and notes that higher rates are also a result of the motor carriers providing better benefit packages for their employees. But some industry experts discount the effect of fuel-price increases on international trade. Steven Lautsch, for example, a partner with the Kingsley Group, a San Francisco-based international transportation and logistics consulting firm, says fuel-price increases have had no effect on trade.

Railways Find Big Isn't Always Better

The major railways have been merging and consolidating for the past seven to eight years, and this spring the Surface Transportation Board (STB) intervened. It issued a moratorium on further railway consolidations, and, in July, the BNSF and CN railways announced that they would suspend the pursuit of a merger that would have created the largest railroad in North America.

Says John Grocki, executive vice president of Gelman Research Associates, a Jenkintown, Pennsylvania, firm specializing in transportation consulting, "Shippers have become leery of more mergers because they haven't seen the benefits of the ones which have already been completed. Two of the past three major mergers were operations disasters."

A major problem with railway mergers has been the deterioration in service, says Grocki: "One of the premises for railway mergers is that they would alleviate congestion on the highways, but it hasn't happened."

Shippers are well tuned to their rail service. "Railways are not as aggressive in marketing their services as they should be," says Brentwood, "and more international traffic that should be moved by rail is being moved by truck. Railways are still focused on the large bulk shippers, not on the smaller shippers or international shippers."

Poor service has prompted shippers to ask the federal government step in, but the railroad industry objects, contending it would trigger a return to the inefficiencies of the 1970s. "A new trend", says Grocki, "is that railways may abandon the retail portion of their industry and move toward the wholesale side. They would provide integrated logistics services using middlemen, which would take care of the retail function."

Congestion at ports is also a concern for rail shippers. Lautsch says, "With the growth in vessel size, there has been a tremendous surge in traffic on certain days of the week, since ocean carriers may call on the same day. One solution has been to improve the infrastructure at ports, which has been going on for a few years. Another is better use of intermodal equipment and improving the scheduling capacity of railways."

Sidebar:The Dot-Com Revolution for Land Transport Not Quite There Yet

The Internet is still in its embryonic stage when it comes to the services of rail and motor carriers. So says Steven Lautsch, partner at the Kingsley Group, a San Francisco-based international transportation and logistics consulting firm, although conceding. "It is the next revolution in transportation communication." But what results have carriers seen so far? Sources agree that it is too early to say.

Says Ed Alderman, vice president for international marketing for American Freightways, an Arkansas-based LTL carrier, "E-commerce and the use of Internet technology will be the most significant differentiation among forwarders, logistics providers, et cetera. But there is still relatively little B-to-B and it is too soon to judge how it will affect our profit margin. E-commerce is used by all types of parties, including those who do not have credit, as well as bad-risk customers. So there are some problems with it. There are no windfalls and there is a question about whether or not this will even last in the middle term."