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Could Short-Haul Rail Speed Up the Supply Chain?

Port of Long Beach commissions study on feasibility, demand

April 4, 2016


When the San Pedro Bay ports launched their Supply Chain Optimization (SCO) Initiative last year, short-haul rail quickly emerged as a strategy with tremendous potential to sharpen the regional network’s competitive edge.

Acting on that opportunity, the Port of Long Beach commissioned a study to evaluate the business case for short-haul rail that is due to be completed in the coming months. The analysis will shed light on the market demand, the anticipated costs, and the next steps if the findings support shuttling cargo by rail between the San Pedro Bay port complex and the major consumer markets and warehousing districts within 100 miles of the harbor.

“Short-haul rail is a key component of a broader Port rail expansion strategy to enable our regional supply chain partners to achieve significant gains in velocity, throughput and environmental improvements,” said Port CEO Jon Slangerup. “We’re taking a comprehensive look at the feasibility of this concept.”

Up to 70 percent of containerized imports that move through the San Pedro Bay ports leave the harbor complex by truck. Of that total, about 40 percent are headed east for distribution centers and warehouses in San Bernardino and Riverside counties known as the Inland Empire.

At these facilities, cargo is transloaded to larger containers or trailers for shipment by rail across the country, or by truck to local destinations. This includes the Inland Empire’s own consumer market of more than 4.3 million people.

“We want to know if there is a valid business case for moving this transloaded segment of cargo to the Inland Empire by rail,” said Mike Christensen, the Port of Long Beach’s Senior Executive Lead for Supply Chain Optimization.

The short-haul rail concept is not new, but the idea did not pencil out when it was explored more than a decade ago. Today, the dynamics are different. The cost of drayage to the Inland Empire is substantially higher and freeway commutes are slower than ever. The greater Los Angeles area currently ranks as the most congested region in the nation based on average time wasted of 81 hours per commuter per year, according to the INRIX 2015 Traffic Scorecard.

At the same time, the Class I railroads are experiencing a decline in business due to a slump in commodities such as oil and coal. These trends have created an opportunity for the supply chain to reconsider a regional rail shuttle, Christensen said. “There is a new openness to this strategy on the part of both our Class I railroad partners and the cargo owners we jointly serve.”

For the ports and marine container terminal operators, a major driver is the growing number of megaships delivering more cargo in a single call and during the same four or five days per ship as previously with smaller vessels. Increasing the number of containers leaving the terminals by rail reduces gate waits and improves truck velocity. “Short-haul rail could allow the entire supply chain to manage those surges more efficiently,” Christensen said.


Along with cost, velocity and reliability are the core measures of supply chain efficiency, and the study will address all three. A short-haul rail service could strengthen the supply chain by taking more cargo off the highway and adding more consistency to delivering it inland. Regional benefits include reducing traffic on the region’s impacted highway system, with one double-stacked train eliminating up to 750 truck trips.

A clear benefit is cleaner air. Trains are up to four times more fuel-efficient and up to three times cleaner. “The environmental case is extremely strong,” Christensen said.

From terminals with state-of-the-art on-dock rail to the Alameda Corridor to the Class I railroads’ regional networks, the infrastructure needed to support short-haul trains is largely in place and has the capacity to accommodate more cargo. Still needed is an inland intermodal rail terminal. Potential candidates include open land near the Ontario International Airport and a site farther east on property belonging to the Morongo Band of Mission Indians.

Both are big spaces near existing rail lines and major freeway corridors. “These are among the options we are exploring preliminarily as part of our feasibility study,” Christensen said. “Everything flows from the business case. If the numbers pan out, the next steps would include figuring out where to build an inland intermodal terminal and who would do it.”


Exports are a crucial component. Under the best-case scenario, the trains are carrying loaded containers in both directions. Agriculture and scrap paper exporters are among those the Port’s team is working with to assess the backhaul demand.

Terminal operations are another important consideration, said John Doherty, CEO of the Alameda Corridor Transportation Authority (ACTA). Presently, on-dock rail is used for long-haul express trains carrying hundreds of containers headed for a single destination. “When you’re talking about getting containers to the Inland Empire, can you build enough of those in a single terminal or are you going to have marry them up with containers from other terminals? That’s where it can get logistically complicated,” he said.

ACTA conducted the previous short-haul rail study in 2004. The initial work led to a pilot project that was never implemented, even with a proposal to temporarily subsidize the differential between trucking and short-haul rail.

At the time, the business case was weak and the opposition from the Class I railroad companies was strong. “The concern was that the required subsidy would not be sustainable and that eventually short-haul trains would displace a number of higher profit long-haul rail trains,” Doherty said.

Much has changed since then, which makes now a good time to revisit short-haul rail, Doherty said. “It’s always good to refresh the analysis, especially when trucking rates are rising and we are seeing more peaks in cargo. The fundamental questions remain: Can you reliably deliver containers to the Inland Empire for less money than it would take to truck it there? And if the cost is higher, is anybody willing to pay the difference?”


The ongoing SCO Initiative has set the stage for greater collaboration. Union Pacific and BNSF are among the members of the SCO working groups, along with terminal operators and the cargo owners who ultimately pay the bills. “We have a much better framework for approaching this concept,” Christensen said.

The SCO framework also supports the study’s outreach to the cargo owners, and the initial response has been positive, Christensen said. “Dozens and dozens of cargo owners have said they would be interested in utilizing this service.”

Strategic Mobility 21 is the logistics consultant conducting the business case study. The firm was already under contract with the Port to provide rail planning support services when the Board of Harbor Commissioners voted unanimously to extend its contract through June 30 to study short-haul rail service.
The Port of Los Angeles is also a participant. Historically, the two ports have collaborated on rail planning and have a joint contract with Pacific Harbor Line Inc., the short-line rail company that provides railroad switching, dispatching and maintenance services connecting the harbor complex to the Alameda Corridor, and, subsequently, the UP and BNSF networks.

Optimal Optimization

Rail improvements are a major component of the Port of Long Beach’s $4 billion 10-year capital improvement program, with about one-fourth of the total budget dedicated to rail projects. All are designed to enhance on-dock rail capacity, velocity and safety and boost the rate of containers shipped directly to and from the waterfront by on-dock rail to 35 percent, up from Long Beach’s current average of 28 percent.

As the Port works to build the Green Port of the Future, its ultimate goal is moving 50 percent of all containerized cargo by rail. With a short-haul rail service that maximizes on-dock rail capacity, that target is within reach, said the Port of Long Beach’s CEO.

“Optimization means making the best and highest use of all our resources,” Slangerup said. “Taking the lead on short-haul rail reflects our ongoing commitment to leveraging our position as a world-class seaport to advance solutions that strengthen our entire regional supply chain.”

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