UPS switching some routes from rail to road

Package delivery giant UPS will move fewer parcels via railroads as it embarks on a plan to reduce ground delivery times.


What's being taken from the trains is going to trucks, which offer UPS faster transit speeds on certain routes, company spokesman Norman Black said.

The switch should have little effect on the nation's biggest railroads, including Norfolk-based Norfolk Southern Railway Co., as they are straining to carry record levels of cargo. In some cases, crowded tracks have delayed shipments, disappointing customers.

UPS moves about 15 million packages daily and about half a million of those will see faster transit times as a result of the changes, Black said. However, he would not say how many packages will migrate from rails to roads.
Even with the switch, Atlanta-based UPS remains one of the largest users of railroads, Black said. It spent $750 million on rail services in 2005, mostly for trips of more than 750 miles.

"We still do an awful lot of business with the railroads, and we still use their networks where we can," he said.

Under the plan, announced this month, packages moving via ground service among 11 major U.S. cities - a list that includes Washington but not Norfolk - will have at least a day cut off their transit times, according to UPS. The company has spent the past three months gearing up for the new system, including hiring additional truck drivers.

The move to trucks is one of a variety of strategies being implemented to reduce package transit times, Black said. Others include increased use of technology and reconfiguring distribution hubs.

Larry Kaufman, a columnist with transportation industry publication Journal of Commerce, said he sees UPS' switch having minimal effect on the railroads.

"Obviously, any loads you lose is revenue off the top and you don't want to lose it," said Kaufman, a former railroad official, "but from what I've read I don't think it's going to be a major impact."

Norfolk Southern spokesman Robin Chapman said he wasn't able to comment Tuesday on the effects of UPS' decision. However, he called UPS a "major" customer and noted the railroad's plan to invest $1.15 billion this year to upgrade its rail network, such as buying additional locomotives, railcars and laying and replacing track.

Such improvements should allow Norfolk Southern to carry more cargo at faster speeds. Last year, Norfolk Southern spent $938 million on capital improvements.

Together, the country's largest railroads are expected to spend about $8 billion in 2006 on equipment and improved infrastructure, up 21 percent from last year, according to the Association of American Railroads.

Some customers think those improvements can't happen fast enough. William D. Zollars, chairman, president and chief executive officer of trucking company YRC Worldwide Inc., told Wall Street analysts in January that the railroads' poor operating performance had hit YRC's bottom line.

"On-time rail performance continued at well below acceptable levels, which has caused additional inefficiencies in our networks," Zollars said.

UPS re-evaluates its delivery operations every year, Black said.

"We are in a very competitive business," he said. "If we don't stay out front, we're going to lose that business."