Daily, we are confronted with supply chain issues. Whether we are consumers waiting months for summer patio furniture or beverage production plant operators waiting days for ingredients sitting in railcars, these delays spotlight how broken parts of our supply chain have become. And recently allied food and beverage groups had an opportunity to sound off on a piece of this, demanding answers on egregious freight rail delays.
Under intense pressure to resolve significant freight rail issues, the Surface Transportation Board (STB) convened hearings aptly called “Urgent Issues in Freight Rail Service.” Our industry, represented through the American Beverage Association as part of the Food & Beverage Issue Alliance (FBIA) articulated painful delays in delivery of key ingredients to our production plants.
Dwell time is the kink in the supply hose, the sitting around not moving and a nightmare for our members waiting for supplies. Dwell issues in freight rail, especially switching in the first mile and last mile, cause production delays and occasional shutdowns. When this occurs our retail customers experience out of stock issues and consumers see empty store shelves.
To deal with this maddening issue, many producers have turned to trucks where they rack up additional costs and fight for scarce truck resources. I have commented repeatedly on the CDL driver shortage, so it is within this context that freight rail delays touch that raw nerve again for our industry and others.
The FBIA explains that when food and beverage suppliers can’t fix delays with trucks, they often add rail cars. What does this do to already crowded freight yards? According to FBIA, it creates bunching of cars, increased dwell times (!) and demurrage at destinations. Demurrage really stings because it means charges accrue on containers left at the rail yard longer than their allotted time.
Railroads counter that they have implemented something called Precision Scheduled Railroading (PSR) to increase efficiency. An oversimplified definition of PSR, established in 2017, means cargo must be ready to load when the train arrives, or risk being left. Union Pacific touts PSR on its website as a boon to customers who can expect “reduced transit times” as the practice will “reduce the costs associated with supply chain disruptions.”
The FBIA disputes these efficiency claims, countering that PSR has broken communications leaving facilities to wonder when the daily switch will happen. When cars fail to arrive, our members log repeated calls that go unanswered. And while the phone rings, demurrage charges mount.
Despite delays, staff cuts, facility closures and outdated equipment, railroads charges soar. Paying more for substandard service and destination demurrage has farmers, processors and every actor in our food and beverage supply chain demanding answers. And finally, the STB is listening. This independent board has demanded service implementation plans and weekly updates from each railroad.
I look forward to more discussion with Ohio’s Congressional delegation at next month’s American Beverage Association Fly-In. There is no single solution to our supply chain problems, but we have several ways to increase efficiency and make every mile by rail or truck count.