STEEL WHEEL VS. RUBBER TIRE INTERCHANGE—THE PROS AND CONS

JULY/AUGUST 2020

Photo Courtesy of CSX

For decades, the choice of using steel wheel or rubber tire interchange to move intermodal freight has been weighed from a cost and a service standpoint by providers and users of intermodal services. The issue is particularly important in Chicago, the intermodal crossroads of North America.

So what exactly are steel wheel and rubber tire interchanges? When multiple railroads are involved in container transport, interchange of the cargo is required. Containers or trailers that are interchanged between two railroads while on the railroad flatcar are referred to as "steel wheel" interchange. While rail carload traffic can only be interchanged by terminal switching, this "steel wheel" interchange isn’t always standard for intermodal traffic.

Intermodal traffic arriving at the first railroad’s destination terminal is often unloaded, then trucked to the next railroad and loaded by that railroad or further movement to the final railroad destination terminal. Because of this process, called a "rubber tire" interchange, the cross-town move results in two more gate moves than what would typically happen in a steel wheel interchange.

Chicago, which is unique in that all six major railroads operate in the area, is a huge rubber wheel mover. Experts who are in the area or are familiar with it say that both rubber tire and steel wheel options each have their own advantages.

"There are certain benefits to each—steel wheel depends on volume, so they’re going to pass off a whole train," explained Reliable Transportation President Kevin Lhotak. "Rubber wheel has benefits when the rails are close together but not the nucleus, that spot where the tracks cross and they can hand off the train to each other."

Michael Grace, president of Belt Railway of Chicago, a switching terminal railroad that is owned by six Class I railroads, added that he thinks rubber tire is the easier option.

"It is quicker, and it can respond more adeptly, whereas steel wheel, you’re locked into rail routes, particularly in a city like Chicago, where you’ve got commuter train windows twice a day during the week where you just can’t run trains through a lot of these interchanges," he explained. "That’s the disadvantage of steel wheel."

However, industry expert Jim Hertwig, the senior chair of the Transportation Institute at the University of Denver, said steel wheel can be very effective.

"Steel wheel interchange is very efficient and reduces costs as long as a car blocking plan is adhered to by the originating carrier," he said. "Rubber tire is efficient in the case of mixed or smaller blocks, wherein switching costs outweighs the cost of drayage and lift costs."

"The steel wheel option can be a lower cost solution," added Celtic Intermodal President Doug Punzel, "but the rubber tire crosstown could give the provider better control over the transit time on a given lane."

Todd Davis, vice president of transport, KLLM Intermodal, said that currently, his company chooses to conduct its interchanges via rubber tire in order to refuel the unit.

"However, our new container units have 27% more fuel capacity than our trailers so we are weighing some opportunities for steel wheel service from California to Pennsylvania via BNSF [and Norfolk Southern]," he explained. "No decision or timetable on this but we are weighing this, which will help dray driver capacity, coordination and productivity in the Chicago market."

"The rail cost is slightly more than when doing the two legs individually but when we factor the internal cost of the crosstown, it becomes a wash," he added.

Operational Shift

Punzel also said that he’s seen one type of interchange start to trend.

"The railroads have driven more of a shift toward rubber tire crosstowns in recent years," he said. "This is driven by the railroads wanting to hold equipment within their local networks as well as to avoid the cost of reworking train sets that are handed off to them before taking them to the final destinations."

"There still is a general desire to try to take traffic off of the highways, so as enough density gets built up on lanes, there are some steel wheel options that are being implemented again," he added.

Hertwig, the former president of both CSX Intermodal and Florida East Coast Railway, remarked that another shift in use options is being caused by precision scheduled railroading.

"I am hearing that with PSR, many carriers have reduced service points on their network and are only accepting larger blocks to preferred destinations, thereby reducing switching costs and improving locomotive utilization," he remarked.

Hertwig said that freight distribution patterns and terminal location are very important factors in interchange decisions.

"Freight patterns dictate [the] terminal network and train plan required to efficiently handle customer requests," he explained. "For example, the flow of imports or exports coming off of larger ships can impact terminal and network congestion and the train plan."

Lhotak said one trend he’s taken note of is that alliances are being formed by railroads.

"They realize that they can’t do this all by themselves—go from the East Coast to the West Coast or the West Coast to the East Coast—and so what I’m seeing is more and more partnerships between different railroads that provide different services," he remarked. The more and more volume there is, the more that railroads can partner up and hand off a full train to another railroad to take it to its final destination. To hand off a whole train, you’ve got to have a lot of volume. When you have that volume and that concentration it works, and it works well."

Punzel added that changes in freight distribution patterns can alter the freight flows, which can impact the balance between railroads, which in turn could alter the railroad’s desire to execute steel wheel crosstowns.

"Terminal locations being built outside of the metro areas can generate longer rubber tire crosstown drays," he said. "A rise in e-commerce is resulting in an increase in expedited traffic. In order to better control the transit between the railroads, this could lead to more rubber tire crosstowns."

Hertwig also said that the rise in e-commerce is having an impact.

"Parcel and LTL [less than truckload] carriers can create the necessity for reduced transit time due to e-commerce requirements and similarly can create conversion from intermodal to over-the-road truckload to achieve delivery requirements," he explained.

Potential Improvements

Regarding whether there are ways that processes can be improved to enhance the benefits of either steel wheel or rubber tire interchange, Punzel said part of the challenge the railroads have had is building clean car sets at origin.

"If executed properly," he said, it would "generate efficiency in the handoff between the railroads and would improve the efficiency of the destination railroad."

"The benchmark for what intermodal interchange should look like is Amazon—Amazon makes shipping stuff so simple," Grace said. "Having the visibility and flexibility for tracking planning and seeing what traffic’s going to arrive in your terminal in the next 72 hours—having a clear picture [is optimal]. There’s a lot of opportunity from a visibility standpoint for the railroads to each see traffic approaching from the other railroads. Technology is the biggest piece that could be developed."

A big plus, he added, would be greater introduction of appointment systems at commercial rail terminals.

"That’s where technology ought to come in," he explained. "It ought to be on a reservation system, and if you don’t have a reservation, you don’t ride the train, unless there happens to be somebody else that didn’t show up."

Other potential improvements, Hertwig added, include frequent review of freight patterns to allow network planning to better assess information for more efficient car blocking, reduced switching cost and building larger trains.

"This applies also to evaluating rubber tire efficiency that must take into consideration driver availability, terminal and highway congestion," he remarked. "Rail customers play a major role in this process, as they look at total door-to-door costs and required BCO transit times."

Lhotak said that one thing that’s likely to play a role in improving processes going forward is technology.

"I think technology’s going to be an important part of not only steel wheel, but rubber wheel," he said. "I think as we progress and we get more technologically advanced, that’s going to develop efficiencies and it’s going to be able to develop time savings."

"Anything we can get to save the drivers hours running, (save) fuel and make ourselves efficient," he said, "that’s the more freight that someone can handle."

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