Production of next-generation Acela Express fleet underway
Stadler unveils TEX Rail Flirt DMU
Siemens invests in remote monitoring specialist Wi-Tronix
DB consortium selected for California high speed rail
Judge puts the skids on state’s proposed rail trail
Amtrak's CEO shares his vision for rail's future
Flight Rail: a new type of train?
America’s short lines play the long game
New York rail operator bolsters security after London bombing
Railroads operate in a broad economic environment, and the U.S. economy appears to be in pretty good shape, fundamentally. Consumer spending, Dr. Rebelo told attendees, may lead the U.S. recovery in 2021. Data shows that household savings has increased as the government has provided stimulus payments to citizens.
Corporate debt remains inexpensive. Lower debt costs and a corporate focus on resiliency over efficiency has the potential to encourage growth in near-shore manufacturing. Near-shoring is supported by a mix of factors made more important by the pandemic: lower energy costs, security of the supply chain, and the potential for automation.
Corporate resiliency will also focus on several other key factors such as keeping supply chains diversified with fewer strategic high-volume terminal hubs and route links; decreased focus on the “lean logistics” of just-in-time (JIT) parts arrival; more financial resilience with diversified access to financing; and an increased focus on relationship selling and managing.
— Recent past emphasis on productivity gains from, for example, railroad models like PSR, are still valid goals, said Dr. Rebelo of Northwestern University’s Kellogg School of Management.
But the lesson learned from the 2020 global trade disruption: Cost cutting alone is insufficient. —
U.S. debt levels are sustainable as long as nominal GDP growth exceeds the yield on government bonds. As debt levels increase, yields may need to rise. If yields become higher than nominal GDP growth, there are swift negative repercussions. Looking to fiscal policy lessons from Japan, inflation may stay contained at reasonable levels. However, the additional stimulus being provided by economic relief packages and by the Federal Reserve could lead to an increase in asset inflation and in general inflation in the economy. These are factors that require constant observation.
Using Wright’s Law, Dr. Rebelo discussed the decreasing price of solar panels and renewable energy. Wright’s Law states that an item’s cost declines roughly 15% with every doubling of total cumulative units produced. This is due in large part to upfront (catalytic) costs of technological development vs. reduction in production costs as demand and capacity increases. According to Dr. Rebelo, batteries will ultimately follow a similar trajectory to panels as much of the catalytic capital is flowing into that technology today.
Recent past emphasis on productivity gains from, for example, railroad models like Precision Scheduled Railroading (PSR), are still valid goals, Dr. Rebelo said. But the lesson learned from the 2020 global trade disruption: Cost cutting alone is insufficient. There must be a balance going forward.
New goals like network or service resiliency—and assurances against random disruption—are likely to take center stage as transport networks are rebuilt and adjusted. And shippers will be the change-driver.
Dr. Rebelo noted that freight rail is still facing competitive threats from highway trucking technology and fuel improvement advances. Additionally, efficient highway systems and autonomous driving represent competitive threats to railroads and railroad revenue. Railroads need to capitalize on their existing broad infrastructure and address competitiveness to continue growth and prevent revenue loss.
The REF Virtual Conference was hosted by REF President and Railway Age Financial Editor David Nahass.
Independent railway economist and Railway Age Contributing Editor Jim Blaze has been in the railroad industry for more than 40 years. Trained in logistics, he served seven years with the Illinois DOT as a Chicago long-range freight planner and almost two years with the USRA technical staff in Washington, D.C. Jim then spent 21 years with Conrail in cross-functional strategic roles from branch line economics to mergers, IT, logistics, and corporate change. He followed this with 20 years of international consulting at rail engineering firm Zeta-Tech Associated. Jim is a Magna Cum Laude Graduate of St Anselm’s College with a master’s degree from the University of Chicago. Married with six children, he lives outside of Philadelphia. “This column reflects my continued passion for the future of railroading as a competitive industry,” says Jim. “Only by occasionally challenging our institutions can we probe for better quality and performance. My opinions are my own, independent of Railway Age. As always, contrary business opinions are welcome.”
The post What Do Shippers Seek From Railroads? appeared first on Railway Age.
This article first appeared on www.railwayage.com
About this website
Railpage version 3.10.0.0037
You can syndicate our news using one of the RSS feeds.