Norfolk Southern: New intermodal era about removing rail friction

In that context, trucking’s advantage is not always transit speed alone. A truck move can appear simpler because it typically involves one provider, one movement plan and a more direct line of accountability. Norfolk Southern’s opportunity, Tureman said, is to offer comparable ease and certainty while retaining rail’s ability to move freight at scale.

The railroad has recently shown stronger intermodal momentum. Norfolk Southern’s intermodal volume rose 13.7% year-over-year this past week, pointing to evidence that rail can capture business from the highway when its service offering is competitive.

Three eras of intermodal

Norfolk Southern’s view of the business can be divided into three distinct periods: Building the network, competing for the customer, and removing the friction that continues to constrain rail’s ability to win freight from trucks.

The first era centered on network construction. Following railroad consolidation in the late 1990s, Class I railroads invested extensively in intermodal terminals, double-stack routes, port connections and long-haul freight corridors. Those investments created the backbone of the U.S. intermodal system and established rail as a viable long-distance alternative to highway transportation.

For Norfolk Southern, that meant developing what Tureman characterized as the most extensive intermodal network on the East Coast. The railroad added terminal capacity, built or upgraded routes connecting major freight markets and improved access to East Coast ports and inland distribution centers.

The investments gave shippers an additional way to move goods over long distances and helped turn intermodal from a developing freight option into a central part of the transportation market.

But the network buildout did not eliminate the complexity facing customers.

Long-haul rail moves frequently involved multiple railroads, terminal transfers, drayage providers and service handoffs. Even in lanes where intermodal delivered a cost or efficiency advantage, customers could face service variability and uncertainty that made rail more difficult to incorporate into tightly managed supply chains.

“Cost alone does not shift a supply chain,” said Tureman.“Customers need confidence.”

The first era demonstrated that intermodal could scale, but it did not fully resolve the customer experience. In many cases, customers had to adapt their operations to the railroad rather than receiving a product designed around their needs.

Service becomes the product

The second era, which Norfolk Southern places largely in the past 15 years, shifted the industry’s attention from physical network development to customer service, terminal performance, visibility and consistency.

Shippers began to judge intermodal differently. Rather than asking only whether rail could move freight at a lower cost, they increasingly asked whether it could help them operate more effectively.

Could they plan around transit times? Would service be consistent from week to week? Could they track freight and anticipate exceptions? Would the rail service be simple for their operations teams, drayage partners and customers to manage?

That change raised the importance of the intermodal terminal, where shippers and truck drivers often experience the railroad most directly. Norfolk Southern said it has focused on terminal flow, bottleneck reduction, capacity management and tools intended to make it easier for customers and drayage providers to transact with the carrier.

The railroad also has continued investing in the underlying infrastructure that supports the service product: East Coast port connectivity, inland ports, double-stack-capable corridors, strategic terminal capacity and high-performance routes serving growing freight markets.

When terminals operate smoothly and connections are dependable, customers experience fewer pickup and delivery surprises, more reliable cutoffs and better freight visibility, the executive said. They also have a better ability to recover when disruption occurs.

That progress does not mean the railroad considers its intermodal network finished. Tureman acknowledged Norfolk Southern is not “perfect,” but said the company’s customer experience has improved materially as the railroad has placed greater emphasis on continuous improvement.

The fundamental goal is to make rail service something customers can confidently plan around rather than a lower-cost alternative that may carry too much operating complexity.

UP–NS combination seen as next step

Norfolk Southern’s proposed combination with Union Pacific (NYSE: UNP) is central to its vision for a third intermodal era focused on removing structural friction from the freight network.

The proposed transaction would link Union Pacific’s western network with Norfolk Southern’s eastern system, creating a single-line railroad connecting major West Coast markets with the Southeast, Northeast and other eastern markets. Supporters argue that a combined UP-NS railroad would reduce the complexity now associated with interline freight moves that cross between carriers.

Chicago and other major rail gateways remain a particular source of complexity for transcontinental intermodal shipments. A handoff between railroads can introduce another point at which containers must be transferred, plans can change and delays can occur. From a customer’s perspective, those handoffs can add time, uncertainty and additional coordination requirements.

Those concerns can be enough to leave freight on the highway, even when rail is otherwise a suitable transportation mode.

Under the proposed Union Pacific–Norfolk Southern combination, the railroads said about 10,000 existing lanes could shift from interline service to single-line service. The application filings also project the elimination of approximately 2,400 railcar and container handlings and 60,000 car-miles per day.

The proposal calls for seven new premium intermodal lanes and would give customers broader single-line service options across the country, according to the companies.

Single-line service can change the commercial and operational proposition for shippers. Instead of working across separate railroad commercial teams, contracts, invoices, information systems and accountability structures, customers could work with one provider for more of the coast-to-coast movement.

The result, Norfolk Southern argues, would be fewer handoffs, fewer touches, fewer potential delays and a more direct chain of accountability.

For a shipper moving cargo from a West Coast port to the Southeast or Northeast, that could mean less need to build buffer time into the supply-chain plan for an inter-carrier handoff. For logistics providers, it could reduce the effort required to manage a move across multiple railroads. And for customers choosing between rail and truck, it could make intermodal look less like a complicated exception and more like a practical, dependable option.

The broader strategic argument is that simplifying the product could help railroads capture a larger share of the long-haul truck market while reducing highway congestion and strengthening domestic supply-chain capacity.

Terminal readiness remains decisive

A transcontinental network alone will not determine whether intermodal gains share from trucking. Customers still encounter the railroad at terminals, gates, ramps and drayage handoff points, making terminal performance critical to any effort to expand rail volumes.

“The terminal is our storefront,” Tureman said.

That means terminal readiness must advance alongside network integration and commercial simplification. A railroad can offer a longer single-line route, but the value proposition can erode quickly if drivers face excessive gate queues, containers are unavailable when expected, chassis and capacity are constrained, or service exceptions are difficult to identify and resolve.

Norfolk Southern has emphasized the need for readiness before volume arrives. That includes adequate terminal capacity, staffing, processes, power, technology and operating discipline to support higher throughput.

When terminals are designed and run for velocity, customers can see the benefits directly through faster gates, lower driver dwell, smoother connections, improved visibility and quicker recovery from disruption. Conversely, an unprepared terminal can make intermodal difficult to use regardless of the strength of the broader rail network.

The railroad has linked its ongoing terminal work to the larger potential created by a combined UP–NS network. Norfolk Southern is seeking to improve the daily customer touchpoints in its existing system while supporting a longer-term vision of more integrated, accountable transcontinental rail service.

From competing with trucks to standing out

The progression Norfolk Southern describes is straightforward: first, railroads built the network; then they worked to improve the service product; now they must remove friction at terminals, interline handoffs and other points where complexity discourages customers from choosing rail.

The objective is not to ask shippers to accept the operational complications of intermodal in exchange for a lower price. Instead, it is to redesign the rail product so that complexity is absorbed by the carrier network rather than passed on to the customer.

That would allow intermodal to compete on the factors that increasingly drive freight decisions: Predictability, transparency, simplicity and accountability, in addition to cost and capacity.

If railroads can provide dependable terminal experiences, clearer visibility, fewer inter-carrier handoffs and a single accountable partner across long-haul lanes, Tureman say, intermodal can become more than an alternative to over-the-road transportation. 

“It can become a preferred option for moving the country’s freight.”

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Read more articles by Stuart Chirls here.

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