Identifying Customer Value in Rail Freight

In the context of pure rail freight, identifying what constitutes value for the customer is problematic but strategically critical because value reveals those areas of the business that attract profit and should therefore be resource-enriched.
In intramodally rich transport markets – where there are multiple rail freight companies capable of moving goods with comparable efficiency – differentiating value will likely be gleaned from reliability and the provision of capabilities that the customer requires beyond basic conveyance, such as freedom from the costs of procuring, maintaining, and crewing rolling stock, the ability to monitor freight progress, and ensured safe handling of loads. More will be said about the core profit-driving activities that generate value from the customer’s perspective in a later document. Price factors will be determinative in competitive markets characterised by capability equivalence between competitors. For buyers, price-based selection is more likely if the transaction is unusual (obviating need for long-term contracts), if the freight is time and handling insensitive, and if functionality beyond basic point-to-point conveyance is unrequired.

In multimodally rich transport markets, where the physical characteristics of the commodity do not constrain modality possibility, rail freight is seldom the superior choice. The rigidity of rail necessitates extra handling that incurs time/cost. However, in instances where the customer seeks movement of robust goods to a specified location at a specified time, multimodal systems can be used. Multimodal is in most cases rail freight in combination with road. If routine rail freight links retain capacity for loads ad hoc and strategic rail hubs are easily accessible by road, competitive pricing can be offered. The details of the modality are unlikely to interest customers, provided collection and delivery are according to specification. Hence, transport by rail freight will seldom represent a saleable proposition per se, unless the characteristics of the load make its conveyance by any other modality penalizing.