Rail logistics provider Tiger Cool Express is making strides with equipment purchases and a growing customer base. Its success is all the more impressive given that service from Class I freight railroads experienced a difficult 2014 and continues to struggle. Cool Cargoes spoke with CEO Tom Finkbiner to get his take on where the intermodal rail industry is failing and how and where it can make improvements to better support time- and temperature-sensitive shipments such as fresh produce.

CC: Are perishable food shippers embracing rail as part of their overall supply chain strategy? Why or why not?

Finkbiner: I think you have to separate perishables such as produce from prepared food or frozen foods. Perishables are the last major long-haul commodity not penetrated by intermodal. There are good reasons for this: First, the equipment really doesn’t exist. Second, there are many reefer carriers trying trailers on flatcar with little success. Third, the commodities are sensitive, so shippers show a natural reluctance to commit those commodities to a mode that is slower than truck. And finally, the railroads are just doing a poor job of meeting their on-time commitments.

CC: Why are reefer truck services having a tough time with trailer on flatcar?

Finkbiner: In the truckload industry, most of the services evolved around shorter-haul regional traffic — hauling a load 500 miles, then the driver goes to bed and the next morning picks up a couple loads and hauls it back. For long-haul irregular routes, or the 2,000-plus-mile hauls that weren’t necessarily regular shipments, you at least earned enough to pay the bills. Today, if you look at the top 10 reefer truck carriers, they’re mostly carrying regional traffic. However, customers want them to provide long-haul needs, too, so carriers are responding by putting their reefer trailers on flatcars on the railroads.

But you really need to know what you’re doing for TOFC. For example, you need to understand cutoff times — what time the trailer needs to be in the terminal in order to make the train — and availability times. Equally important, you need to spec the reefer trailer by putting lift pads on it. Most rail carriers will tell you that you don’t need lift pads, but you do. A trucking company may not want to do it because it adds about 900 pounds to the reefer trailer, but we hear complaints all the time from trucking companies about how the railroads banged up their equipment, and that happens when it’s not spec’d right.

CC: Advancements in software, technology and equipment that monitor and support cold chain integrity are among the main reasons food shippers, including perishables, are transitioning to rail. What developments in the rail sector are helping support temperature-controlled shipments?

Finkbiner: The railroads have and continue to be unsupportive of any type of equipment other than dry containers and chassis. I can’t say I blame them given the expense of reefer trailers ($60,000 per unit), containers ($50,000 per unit) or boxcars ($270,000 per unit). One really needs unusual equipment productivity in terms of utilization to justify this equipment and, of course, four or five dry units can be purchased for the price of one reefer unit. I do not see the railroads supplying refrigerated equipment or even replacing that which they own at a one-to-one ratio.

CC: Why are so many of the Class I freight railroads experiencing such severe service issues?

Finkbiner: I think service reliability is the No. 1 issue for railroads today. In the past eight years, the rails have collectively spent about $150 billion in capital on the networks, including intermodal as well as new locomotives, hiring crewman, and track and terminal infrastructure improvements. One would certainly expect better service than we’re getting. However, some of the difficulty can be explained by unintended or unforeseen issues like more oil and coal train traffic, which was not foreseen five years ago, or the more recent disruptions to east-west traffic due to West Coast port issues, which was also not foreseen. As for BNSF, when it got overcrowded with oil, service suffered and a lot of customers went to Union Pacific. In turn, UP’s service suffered.

Another difficulty is that railroads haven’t been able to accurately predict where growth will happen. For example, Norfolk Southern’s growth in eastern terminals, like Bethlehem and Harrisburg (Pennsylvania), has been extreme. They’re spending money, but they’re not able to stay ahead of the growth. UP’s Global II facility in Chicago is growing quicker than anticipated, but there’s not room for expansion because it’s landlocked.

All of these one-time and unforeseen types of events are really difficult to explain to new customers. The auto guys and big-box retailers went through this 20 years ago, but many of the food guys are relatively new to intermodal rail and they just don’t get it. I don’t blame them. However, it’s a testimony to the need for rail service and the patience that customers have been willing to extend. They’ve stuck with us, and we’re very appreciative of that, and we believe we’ve given them better service than most intermodal customers receive today — and they need it considering the type of time- and temperature-sensitive commodities they are shipping.

CC: On the topic of recent U.S. West Coast port disruptions, a lot of agriculture and food shippers were hit especially hard. A lot of shipments weren’t able to be delivered, and shippers lost millions of dollars to spoilage. Do you think this is forcing some food shippers to change their supply chain strategy, including use of rail?

Finkbiner: There is a lot of speculation about this in the industry. I believe a significant and long-term change is occurring in the movement of international traffic to and from North America that will have further impact on the rail networks.

CC: Tiger Cool Express has been on an equipment-buying spree in recent months. Give us a rundown of what’s been purchased and what the future plans are.

Finkbiner: We are currently operating 231 domestic refrigerated containers and have on order 200 that we are starting to take delivery on. We have an option on 300 additional containers and just completed a financing deal that will allow us to exercise that option. We expect to have over 700 refrigerated 53-foot containers by the end of the year with an average fleet age of less than 1-year-old. Most of this capacity has been presold to our current customers. However, this will allow us to expand to additional geographies, and we are particularly interested in the cross-border Mexican produce business.

CC: The U.S-Mexico trade lane sounds promising. What are the challenges and opportunities associated with expanding there?

Finkbiner: Because there isn’t a lot of trans-border rail business, BNSF and UP haven’t constructed service levels that would make you want to use intermodal. For instance, most of the business that moves through Laredo or San Antonio, Texas, to the northeast connects through Chicago, which is very far out of the way. With intermodal, you’re already “truck plus a day,” so you can’t afford “truck plus two or three days” transit time.

So, railroads need to reorient themselves and construct a service that allows them to compete effectively with trucks. Those services already exist in/out of Washington and in/out of California, but they don’t yet exist in/out of Texas or Arizona. This is an important consideration on the part of railroads, because they’re clearly the biggest expense for us. If they can do that, then the cross-border Mexican produce business will work. If they don’t, then it won’t work.

Furthermore, we have to work with the customers to make sure the freight crosses at the right places. For instance, most Mexican produce crosses in McAllen, Texas, and then goes to Pharr. But, that’s about 120 miles from Laredo and 180 miles from San Antonio. That’s a very long dray. But, those same trucks could easily cross at Laredo and be transloaded into one of our containers and then you’d only have an 18-mile dray. Most of the customers have expressed a willingness to make that routing change. We think the cross-border trade is worth it, but it will take a lot more work and preparation to be successful.

In general, we believe the produce market and the temperature-controlled food market are wide open. We are excited about the prospects. Our expectations are that the railroads will improve their service, and we have communicated that expectation to them. That will be the biggest boost to the market. The long-haul food market is still dominated by independents and owner-operators, yet clearly that capacity is most at risk in the future. Fuel prices have no place to go but up, which is a big part of the intermodal advantage. Our plan is to acquire at least 2,000 refrigerated intermodal containers in the next three years, and we are excited about the opportunities.

Contact Lara Sowinski at lsowinski@gmail.com.

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