Rail Cargo Transportation Services Procurement Category Market Research Report from IBISWorld Has Been Updated

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Despite relative stability in carriers' two largest costs, wages and fuel, high market share concentration and growing demand have enabled rail cargo transportation service carriers to increase prices moderately during the three years to 2014. For these reasons and to help procurement professionals make better buying decisions faster, business intelligence firm IBISWorld has updated a report on the procurement of Rail Cargo Transportation Services in its growing collection of procurement category market research reports.

IBISWorld procurement market research
Price growth will occur at a slower rate than it has during the past three years due to a forecast decline in diesel prices and the increasing availability of pipelines

Rail cargo transportation services have a buyer power score of 3.0 out of 5. Buyer power is reduced by the market's concentrated structure. Only seven Class 1 railroads operate in the United States. Also, a few large railroad holding companies dominate among regional and short-line railroads, the largest of which purchased the second largest in 2012. As such, shippers' choices are limited by low and declining competition between railroads. IBISWorld market research analyst, Hayden Shipp, says, “Choice is also constrained by location, as shippers only have access to railroads that serve the routes they ship over.” Generally, only two carriers serve a given route, creating a duopoly. In many cases, only one carrier serves a route, creating "captive" rail shippers. Captive shippers account for about 20.0% of rail traffic, and they have lower buyer power than average. Major vendors in the market include Berkshire Hathaway’s BNSF, Union Pacific, CSX and Norfolk Southern.

High market share concentration and growing demand have enabled carriers to increase prices moderately during the three years to 2014. Price growth has occurred despite relative stability in carriers' two largest costs, wages and fuel. “Price growth is expected to proceed at a moderate, though slightly decelerated, rate during the next three years,” says Shipp. Increased pipeline availability will help limit growth in demand for crude-by-rail shipping, and carriers' diesel costs are forecast to decline. The prices that individual shippers will pay for rail cargo transportation services will continue to vary widely due to carriers' differential (i.e. customer-specific) pricing model.

Shippers whose facilities offer competitive access to multiple railroads and whose goods can also be transported by truck have higher buyer power than the market average. If such shippers create leverage through freight volume, bundling their routes or convincing a railroad that their business suits its operational goals, they receive substantial discounts. These discounts often amount to half the price that captive shippers pay. Some shippers can gain a competitive advantage by using Class 2 and 3 railroads to access multiple Class 1 lines. This arrangement allows for long-term competitive pricing and helps manage the risks of service interruptions on one carrier. For more information, visit IBISWorld’s Rail Cargo Transportation Services procurement category market research report page.

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IBISWorld Procurement Report Key Topics

This report is intended to help buyers of rail cargo transportation services, which are provided by Class 1, 2 and 3 railroads. Respectively, these railroads offer long-haul intercity, regional and shortline (i.e. local) service. Railroads are also called rail carriers in this report and buyers are referred to as shippers. This report does not include passenger rail transportation.

Executive Summary
Pricing Environment
Price Fundamentals
Benchmark Price
Pricing Model
Price Drivers
Recent Price Trend
Price Forecast
Product Characteristics
Product Life Cycle
Total Cost of Ownership
Product Specialization
Substitute Goods
Quality Control
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Competitive Environment
Market Share Concentration
Market Profitability
Switching Costs
Purchasing Process
Buying Basics
Buying Lead Time
Selection Process
Key RFP Elements
Negotiation Questions
Buyer Power Factors
Key Statistics

About IBISWorld Inc.
IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.

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Gavin Smith
IBISWorld Inc.
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