Onshoring and Reshoring to Boost Freight Transportation Efficiency in North America

Manufacturing Shifts from Asia to the U.S. and Neighboring Countries

The movement of sourcing and manufacturing away from Asia and into North America is expected to drive significant improvements in freight transportation efficiency. This shift, commonly referred to as "onshoring" or "reshoring," involves relocating production closer to U.S. customers, enhancing control over logistics, and reducing transportation costs. According to a recent survey by the Boston Consulting Group, over 90% of respondents reported relocating production as a response to globalization backlash, spurred largely by supply chain disruptions during the COVID-19 pandemic.

The U.S. Department of Commerce highlights that Mexico has recently overtaken China as the leading trading partner for the United States, further emphasizing the growing importance of nearby regions in manufacturing and logistics.

Rail Freight and the Paradigm Shift in Logistics

Brian Gorton, President and Chief Operating Officer of Conrail Corporation, emphasized the impact of onshoring and reshoring on logistics, particularly for rail transportation. "The phenomenon of relocating manufacturing from Asia to North America will lead to a paradigm shift in logistics and in railroading, in particular," Gorton explained. "Managers will need to reexamine their transportation strategies and consider alternatives such as rail freight for its advantages."

As companies bring manufacturing closer to home, industries such as heavy equipment, food, chemicals, wood, and automobiles will benefit from railroads' proximity to the onshoring ecosystem. However, Gorton warns that the growth of the rail industry is not guaranteed and will require quick adaptation in several key areas.

Three Key Areas for Rail Industry Evolution

• Infrastructure: While the passage of the Infrastructure Bill is a positive step, Gorton believes new plans need to be implemented to support onshoring. Expanding rail access to new manufacturing hubs will require additional track, terminals, and back-office support.

• Service Quality: Railroads must improve their delivery speed and reliability to compete with other modes of transportation. This will involve new operational strategies to meet supply chain expectations.

• Technology: The rail industry needs to adopt advanced technology, such as AI and shipment monitoring systems, to meet the expectations of new customers who are accustomed to high-tech solutions in Asia.

A Growth Opportunity for the Rail Industry

Onshoring and reshoring represent a promising opportunity for the rail industry to modernize and grow. "As we start to appreciate the growth potential the onshoring/reshoring phenomenon can deliver, the industry will do well to invest in its evolution," Gorton said. With infrastructure improvements, enhanced service quality, and cutting-edge technology, the rail sector is poised to capture market share from other modes of freight transportation.

About Conrail Corporation

Founded in 1976, Conrail is a leading terminal and switching service provider, operating approximately 1,200 miles of track in shared asset areas for CSX Transportation and Norfolk Southern. Conrail provides safe and efficient rail services to freight customers in Detroit, New Jersey, and Philadelphia, connecting them to the national rail network. For more information, visit Conrail Corporation.