Staggered

Staggered

Shippers were open about their frustration at a session at the Council of Supply Chain Management Professionals annual meeting on transportation capacity.

"Let me be clear what I have heard here," said one shipper, after hearing presentations by three transportation leaders before hundreds at the San Diego meeting. "What we can expect is more costs, less service and less flexibility."

The applause was understandable, given the dour view of capacity present and future they had just seen, but the frustration really hit a peak with the question from one very frustrated rail shipper after a presentation from Union Pacific Railroad. Is it time, he asked, "to nationalize the rails?"

"That's an interesting question," deadpanned Jack Kowalski, executive vice president of sales and marketing at the UP.

Interestingly, the question comes up not only at the CSCMP meeting but even in Washington, albeit couched behind more high-minded talk during the recent discussions about the 25th anniversary of the Staggers Rail Act of 1980. The truth is, for shippers and railroads alike, the act deregulating the rail industry should be the subject of celebration and questions and complaints about the impact of deregulation in light of recent rail service problems should be seen within the broader, very positive picture of developments in rail supply chains in the last quarter century.

This is a developing story, as it is in all modes that were deregulated between 1978 and 1980.

Airlines are still feeling the impact of deregulation and sorting out their own operations and identities in a regulatory field that cleared the way for integrated air express operators to take away enormous loads of business from what are now called the legacy airlines.

Trucking, Schneider National CEO Chris Lofgren tells us, is perhaps only now coming to grips with the full impact of deregulation as the lineup of carriers that survived free market upheaval gains new experience in the changed landscape.

Like the transport operators, many shippers still are coping with the 21st century landscape.

But in his analysis of the impact of rail deregulation, consultant Clifford Winston says shippers are winners in the free market.

"Given the intensity of competition in surface freight transportation, rail passed on some of its cost savings to shippers in lower rates," he writes in a report on the Staggers anniversary.

Rail rates, he says, have declined some 65 percent since 1980, and perhaps 20 percent of the decline is because of the impact of deregulation. Coal shippers, "who are thought to have more captive traffic than other shippers ? experienced the largest rate declines during the 1990s," Winston wrote.

For all the complaints about rail service, the railroads are more efficient than they were in the years leading up to Staggers and they are more financially stable. Winston notes the railroads' return on investment was between 2 and 3 percent in the 1970s. At the CSCMP meeting, Kowalski said the ROI at the UP was 4.5 percent last year, down sharply from the last three years but still pretty good compared to the regulated era.

Certainly shippers would like to see a little of that ROI in their own service, of course, but the record of deregulation in trucking, airlines and even in rail, suggest that many will.