Page 189 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes Historically, railroads have handled the largest number of ton-miles within the continental
United States. A ton-mile is a standard measure of freight activity that combines weight and
distance. As a result of early development of a comprehensive rail network connecting almost
all cities and towns, railroads dominated intercity freight tonnage until after World War II. This
early superiority resulted from the capability to transport large shipments economically and to
offer frequent service, which gave railroads a somewhat monopolistic position. However, with
the advent of serious motor carrier competition following World War II, the railroads’ share of
revenues and tonmiles declined. Railroads once ranked first among all modes in terms of the
number of miles in service. The extensive development of roads and highways to support the
growth of automobiles and trucks after World War II altered this ranking. In 1970 there were
206,265 miles of rail track in the United States. By 1998, track mileage had declined to 128,730
miles due to significant abandonment. Over the last few years, track mileage has stabilized.
The capability to efficiently transport large tonnage over long distances is the main reason
railroads continue to handle significant intercity tonnage. Railroad operations have high fixed
costs because of expensive equipment, right-of-way and tracks, switching yards, and terminals.
However, rail enjoys relatively low variable operating costs. The development of diesel power
reduced the railroads’ variable cost per tonmile, and electrification is providing further
reductions. Modified labour agreements have reduced human resource requirements, resulting
in variable cost reductions.

As a result of deregulation and focused business development, rail traffic has shifted from
transporting a broad range of commodities to specific freight. Core railroad tonnage comes
from raw material-extractive industries located a considerable distance from improved
waterways and items such as automobiles, farm equipment, and machinery. The rail fixed-
variable cost structure offers competitive advantages for long-haul moves. Starting in the mid-
1970s, railroads began to segment the transportation market by focusing on carload, intermodal,
and container traffic. Marketing emphasis became even more segmented following passage of
the Staggers Rail Act. Railroads became more responsive to specific customer needs by
emphasizing bulk industries and heavy manufacturing, as contrasted to standardized boxcar
service. Intermodal operations were expanded by forming alliances and motor carrier ownership.

Example: United Parcel Service, primarily a multifaceted motor carrier, is the largest
user of rail service to transport trailers in the United States.

India’s transport sector is large and diverse; it caters to the needs of 1.1 billion people. In 2007,
the sector contributed about 5.5 percent to the nation’s GDP, with road transportation contributing
the lion’s share. Good physical connectivity in the urban and rural areas is essential for economic
growth. Since the early 1990s, India’s growing economy has witnessed a rise in demand for
transport infrastructure and services. However, the sector has not been able to keep pace with
rising demand and is proving to be a drag on the economy. Major improvements in the sector
are required to support the country’s continued economic growth and to reduce poverty.
 Railways: Indian Railways is one of the largest railways under single management. It
carries some 17 million passengers and 2 million tonnes of freight a day in year 2007 and
is one of the world’s largest employers. The railways play a leading role in carrying
passengers and cargo across India’s vast territory. However, most of its major corridors
have capacity constraint requiring capacity enhancement plans.
 Roads: Roads are the dominant mode of transportation in India today. They carry almost
90 percent of the country’s passenger traffic and 65 percent of its freight. The density of
India’s highway network at 0.66 km of highway per square kilometre of land – is similar
to that of the United States (0.65) and much greater than China’s (0.16) or Brazil’s (0.20).

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