Union Pacific Railroad will close an intermodal terminal this July in Rochelle, Illinois. The company wouldn

Union Pacific Railroad will discontinue service into its Global III terminal in Rochelle, Illinois, this July, and segment domestic and international intermodal containers into two different terminals as part of precision scheduled railroading (PSR), a move that could result in better service and lower cross-town drayage costs for shippers.

The goal of simplifying its Chicago hub of terminals is to provide rail shippers with better service by routing containers to specific locations, rather than a hodgepodge operation. Domestic intermodal volume will go to the railroad’s Global II facility and international containers to Global IV, but the impact on Global I on 14th Street in downtown Chicago is unclear.

One of the core tenants of PSR is the efficient use of assets. But simplification of the network is another core PSR principle. Let’s assume an airline has 10 daily flights from Chicago to New York, and 10 from Dallas to New York. The airline can either mix the 20 flights between LaGuardia and John F. Kennedy International Airport with no real organization, or it can route all Chicago flights to LaGuardia and all Dallas flights to JFK.

It’s even more complicated in UP’s Chicago rail network since there are five terminals and a depot. The realignment of domestic intermodal, though, to Global II and international intermodal to Global IV simplifies operations.

“Many of our ramps handle a mix of domestic and international business. Operating six facilities with a variety of equipment at each creates complexity for Union Pacific (equipment issues, additional switching), as well as our customers (complex drayage arrangements and vendor management), creating a greater likelihood of supply chain failure,” Kenny Rocker, UP’s executive vice president of marketing and sales, wrote in a May 2 customer notice.

Rail shippers will also benefit financially from UP’s decision because Rochelle is 70 miles west of Chicago. Drayage from Northlake (Global II), Joliet (Global IV), and Dalton (Yard Center) is shorter and cheaper to CSX Transportation’s 59th Street Terminal and Norfolk Southern Railway’s Landers Terminal near 75th Street. UP wasn’t able to share further details beyond the customer notice.

UP will also shutter the Canal Street Container Depot shortly after shutting down Global III this summer. Yard Center will primarily receive auto parts and north-south shipments.

“Currently, many customers must arrange drayage and pick up loads at multiple ramps. By condensing specific shipment types to a single facility, customers will likely benefit from fewer vendors to manage, simplified billing and, in some cases, reduced chassis repositioning costs,” Rocker wrote.

References to the Global I terminal were noticeably absent from the service advisory.

An intermodal marketing company, speaking on the condition of anonymity, offered one possible explanation. UP’s Global I is the only active intermodal terminal within Chicago. Global II is in Northlake, Global IV is in Joliet, and Yard Center is in Dolton, each outside the city limits.

This source speculated there might be political ramifications from closing down a terminal in Chicago without consulting the city. Regardless of the reason, shippers would welcome a simpler network if it unfolds the way Rocker outlines in the customer advisory.

Contact Ari Ashe at ari.ashe@ihsmarkit.com and follow him on Twitter: @arijashe.