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Negotiating Multiple Gateway Rule 11 Movements

Negotiating Multiple Gateway Rule 11 Moves

Negotiating Multiple Gateway Rule 11 Rates for Movements

Imagine you’re in the market for a brand new [insert large ticket item]. You think you have a good idea of the price range, but how do you know for sure? Next, you shop around to compare prices, availability, included perks, and interest rates. All these factors are critical elements to be considered before making your purchase. Sounds logical, right?

If you were to replace the “large ticket item” with “Rail Rates,” does the same premise hold true? It should! Especially considering the monopolistic power that railroads have over rail shippers and their rates.

It is always good to get more pricing options from railroads. One of the best ways of doing this is to use Request for Proposals (RFP’s) that have railroads provide Rule 11 rates through multiple gateways. I know what you’re thinking: is the juice worth the squeeze? Is the potential savings enough to justify the time and effort needed to generate these RFPs and analyze the responses? Let alone rearrange the segments to complete the move? What if this was easy to do? What if the RFP and bid evaluation process could be done in less time? Then there would be no reason for NOT generating multiple gateway RFP’s. This type of RFP and bid evaluation process can be a game changer for shippers looking to reduce rail expenses. The barriers for doing this have been eliminated by the Rail Cost Control (RCC) program.

The illustration below provides a real-world example of the potential savings that can be generated for a captive movement by having railroads provide Rules 11 rates through multiple gateways. The total rate and mileage for this complete movement, through three different gateways, is shown below.

Mileage for the move ranges between 600 and 800 miles. The total rate using the existing gateway is $4,600, while the rate through the low bid gateway is $3,600.

Total Rate for a Captive Movement Through 3 Gateways

The difference between the rate through the existing gateway and the low bid gateway is $1000. This move is for 50 annual carloads, which represents a savings of $50,000 on this one move. The low bid move also travels a shorter distance [200 miles shorter] thus improving transit times. Applying the full effect of this process on all of a shipper’s moves can easily add up to millions of dollars saved.

If you don’t go out to your railroads with multiple-gateway RFPs, how do you know you are truly getting the best rates possible? However, there is a harsh reality to generating Rule 11 RFPs for multiple gateways … Shippers can’t generate, analyze, and optimize multi-gateway Rule 11 RFPs for ALL their movements in excel.

To generate and evaluate multiple-gateway Rule 11 rates you’ll need a robust program that automatically does the work for you. This is exactly what the RCC – Cost Optimizer program does for rail shippers.

This comprehensive program allows shippers to AUTOMATICALLY generate multiple-gateway Rule 11 RFPs for ALL their railroads, for ALL their movements. Then RCC analyzes, optimizes, and even generates counterproposals the very same day responses are received from the railroads. Too good to be true? It’s not!

The Cost Optimizer generates RFP’s, evaluates railroad responses, determines win/win opportunities for both the shipper and railroads, creates counter proposals, and tabulates savings for management. The Optimizer is a finely tuned program that seeks out and quantifies your best opportunities for reducing the cost of rail freight.

Generating multiple-gateway Rule 11 RFPs is just one of many functions that the RCC provides rail shippers. If you’d like to expand your rate options, reduce your rail spend, and obtain immediate access to all your current and historical rates with just one click, schedule a RCC demonstration.

There is a better way to deal more effectively with railroads in less time.

See for yourself! Click this link to schedule a demonstration of the RCC program today.


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close up view of railroad tracks at dusk

Decrease Your Rail Rates by Increasing Your Pricing Options

Rail shippers all agree that it is better to have multiple rate options for a movement instead of just one.

The easiest way to increase your rate options is to have railroads provide Rule 11 rates through multiple gateways. 

The following bar chart provides an example of the potential reduction in rail expenses a shipper can obtain from using a Multiple Rail Gateway Request for Proposal (RFP) on Rule 11 moves.  Each bar represents the percent change from existing rates using a Multiple Gateway RFP and a RFP based on existing rail routes for captive and competitive moves.

 

 

The bars reflect an analysis of actual results from bid evaluations. The chart shows a reduction occurs in both captive and competitive rail expenses when Multiple Gateway RFP’s are used, but rate decreases are much larger on competitive movements.

Results normally vary based upon a shipper’s volume of captive and competitive traffic. However, having three rate options instead of one creates downward pressure on rates for both captive and competitive moves that simply doesn’t exist without this functionality.

The problem with Multiple Gateway RFP’s is: they have been very difficult to create and evaluate.

Fortunately, that has changed! Multiple Gateway RFP’s are being used by more shippers as improved technology now makes it easier to create and evaluate them.

In the past, to create a Multiple Gateway RFP you needed to know the following for each movement:

  • The railroads serving your origin
  • The railroads serving your destination
  • The major gateways where the origin and destination railroads interchange traffic to the destination area

The flow chart below is for the creation of a Multiple Gateway RFP for an NS move. This move is originating in Knoxville, TN and terminating on either the UP or BNSF railroads in Los Angeles, CA.

 

Multiple Gateway Railroad RFP

 

The flow chart shows that the shipper’s RFP’s for NS, UP and BNSF must include a request for nine (9) rates from the three railroads for this one movement:

  • NS RFP needs four (4) rates from Knoxville, TN to major gateways with UP and BNSF
  • BNSF RFP needs three (3) rates from the gateways on BNSF to the Los Angeles destination
  • UP RFP needs two (2) rates from the gateways on UP to the Los Angeles destination

If a shipper has hundreds of moves, in the past, the RFP could take months to assemble for all railroads.

The bid evaluation was also more complex. This slowed down the bid evaluation process at a time when contracts were ending and time was critical.

Significant cost reductions normally result from a Multiple Gateway RFP, but this process was always significantly more time consuming. This has changed!

The Rail Cost Control (RCC) program represents a significant improvement in technology that makes it easy to create and evaluate Multiple Gateway RFP’s. To do this, shipper’s moves are loaded into the program’s Database Management System. Then, the program’s Cost Optimizer automatically generates Multiple Gateway RFP’s for all movements on each railroad through commonly used gateways. The RCC creates the RFP so it automatically reads railroad responses to the RFP.

The Rail Cost Optimizer then automatically:

  • Evaluates all railroad’s responses and determines your least cost routing option and awards traffic to that option;
  • Creates win/win optimizing opportunities that decrease your cost, while increasing railroads profits; and,
  • Creates cost effective counter proposals for your railroads.

The Rail Cost Control program is an Escalation Consultants product that represents a significant improvement in technology. The RCC has a material impact on a shipper’s rail expenses.

 

Rail Cost Control (“RCC”) is a program developed by Escalation Consultants to help shippers reduce rail expenses by managing costs and empowering negotiations. For more information about RCC and other related articles, visit the RCC Blog.

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