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U.S. President Joe Biden on Friday signed an executive order creating an emergency board to help settle disputes between major freight rail carriers and their unions. But thwarting a strike will not resolve an industry crisis: a severe labor shortage.

SAP’s Take

North America’s major freight railroads — BNSF, Canadian National Railway, Canadian Pacific Railway, CSX Transportation, Kansas City Southern Railway, Norfolk Southern Railway and Union Pacific Railroad — are suffering labor shortages equal to those of the air travel industry.

Bulk commodities, such as energy, agriculture, automobiles, and components, account for more than half of the freight moved by trains. Rail carriers transport 27.9% of U.S. freight, second to the 39.6% delivered by road, according to the U.S. Department of Transportation.

While retiring engineers and track workers account for a major part of the labor attrition, past layoffs and demanding schedules are also part of a very complicated problem.

“In the railroad industry, folks were let go,” said Timothy Motter, SAP solutions manager for the travel and transportation industries. “Now that those folks have been let go, they don’t necessarily want to come back. Railroad work is very difficult.”

Loop Capital, an investment bank that follows the railway industry, estimates that the industry is short about 4,100 workers, or about 9.4% of the needed workforce.

“Retention and hiring are not easy in the logistics industry in general, especially if you’re telling someone that they can’t go home, and that their schedule is up in the air every day,” Motter said.

Port delays have made scheduling for intermodal shipping — whereby shipping containers are loaded from one form of transportation to another — even more of a nightmare.

“Delays in getting containers through the port system and onto a train are really wrecking schedules,” Motter said. “If I can’t get a container on my train, I can’t fill up the train, but I still have to move the train on a scheduled basis.”

Like airlines, the railroad industry depends on tight schedules to keep operations staffed and profitable. But global supply chain and logistics problems have thrown that into havoc, making recruiting more difficult.

“It’s really difficult to bring someone back into the industry,” Motter said. “There’s a considerable amount of training that needs to occur to make sure workers are ready to handle themselves. To bring on a new employee is really difficult too. What happens to the new employee in a unionized industry? Well, they get the worst choices for work schedules, typically late or even in the middle of the night.”

The railroad industry’s chief competitor is trucking. To make railroads more competitive, the industry implemented a new way of shipping called Precision Scheduling Railroading (PSR) several years ago. Instead of allowing trains to sit still until fully loaded, PSR now focuses on loading individual cars. This enables the railroads to operate more meanly. But it also led to layoffs.

According to Motter, the shippers and unions say that “PSR cut headcounts too deep.”

Ilaina Jonas, Senior Director of Global Public Relations, SAP
+1 (646) 923-2834, ilaina.jonas@sap.com