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NS’ BMW solution: good for business and environment

Summer 2014

BMW-NStrain

The next time you see a BMW sport activity vehicle cruising down the road, think Norfolk Southern. Since last fall, NS double-stack intermodal container trains have been moving the parts and components that go into every SAV manufactured at the automaker’s Greer, S.C., assembly plant.

NS provides overnight service to BMW, moving import and export containers over a 235-mile route between the South Carolina Inland Port in Greer and the Port of Charleston. Parts needed to build BMW’s X-series sport activity vehicles are shipped on ocean carriers from Europe to Charleston, while NS moves containerized components from Greer to Charleston for export to markets such as Russia and India, where final assembly is done. NS subsidiary Thoroughbred Direct Intermodal Services manages the inland supply chain for these containers, including just-in-time delivery to the BMW plant.

As the exclusive rail provider at the new inland port, NS kept a lid on costs by adding the BMW traffic to existing trains making daily runs between Charleston and Atlanta through Greer.

The result: good business for NS and long-term economic and environmental benefits for BMW, said Chris Luebbers, group manager intermodal marketing.

“Even though it’s a very short haul, we were able to come in with a service that is competitive with truck,” Luebbers said. “BMW will not only benefit because of the future prospect of ever increasing over-the-road costs, but they’re also getting other operational and environmental benefits from using rail instead of truck.”

Before the inland port opened, giving NS a way to provide intermodal rail service from Greer, BMW had used tractor-trailer trucks to ship the auto parts and components between its plant and the Charleston seaport. BMW estimates that making the switch to Norfolk Southern will remove 20,000 to 25,000 trucks annually off of Interstate 26.

As part of its corporate sustainability efforts, BMW closely monitors its supply-chain carbon footprint and has goals in place to reduce the environmental impacts from business operations. Switching to rail at Greer made economic and environmental sense, said Alfred Haas, BMW’s department manager for material control and transportation control at the automaker’s Greer facility.

“Our goal is to reduce emissions and support our sustainability targets, and rail is one way to do that if there’s a business case,” said Haas. “This was a business case, and it supported our sustainability targets with reduced emissions that rail service provides in comparison with trucking.”

Trucks off the highway

A Norfolk Southern analysis – using Federal Railroad Administration data that compares average emissions between double-stack intermodal rail and dry van trucks – shows that NS will help the BMW plant reduce its supply-chain CO2 emissions by around 64 percent. The analysis shows that moving 20,000 containers by rail between Greer and Charleston generates about 3,194 metric tons of CO2 emissions annually. That’s nearly two-thirds less than the 8,894 metric tons by truck.

In addition to reducing greenhouse gas emissions, the shift to rail is expected to ease truck traffic congestion on I-26 and make the commute safer for passenger vehicles.

Opened in 1994, the Greer BMW plant now employs about 8,000 and produces around 300,000 SAV X models annually. The plant, the automaker’s first full auto factory outside Germany, is the only one in the world today making the X3, X4, X5, and X6 models. In the early 1990s, when BMW was searching for a U.S. site, Norfolk Southern’s industrial development group joined with South Carolina economic development officials to promote Greer as an ideal location. A Norfolk Southern rail spur at the site was a key factor in BMW’s decision to settle there, BMW officials said.

Since the plant began operations, NS has transported finished vehicles in multilevel railcars to the Port of Charleston for export to global markets. The introduction of intermodal service developed after BMW approached NS about the possibilities, Luebbers said. That proved to be a catalyst that ultimately led to construction of the inland port, which is owned and operated by the South Carolina Ports Authority. NS provided rail, signal, and other track infrastructure to support the nearly $50 million port project.

“In finding a solution, we partnered with the ports authority, which had a piece of property in a strategic location on our main line,” Luebbers said. “The market demand was right for this project to take off.”

More business opportunities

In the bigger economic development picture, upstate South Carolina is growing in population and manufacturing and holds plenty of potential for future business growth, said Brian Gwin, NS’ industrial development manager, based in Columbia, S.C. Norfolk Southern’s Crescent Corridor parallels Interstate 85 near Greer.

“The vision is that we’ll create a warehouse and distribution cluster directly tied to the port,” Gwin said. “Our intermodal traffic there will continue to grow.”

Since the inland port opened in October, NS has expanded business beyond BMW to include moving containers for a chemical company, a tire manufacturer, and an athletic apparel manufacturer. “Even before the port terminal opened,” Luebbers said, “we had received a very positive reception from the Upstate business community.”

The BMW business is a prime example of how NS has been making strategic inroads into short-haul markets. Typically, trains have had a tough time competing with trucks on cost for moves of less than 500 miles. However, that balance is changing, Luebbers said, as higher fuel and insurance costs, a tight driver market, and new government regulations on truck drivers’ hours of service and safety performance are pushing up trucking costs. Tighter truck capacity due to increased cargo volume at
East Coast ports and a shift to rail by environmentally conscious shippers are adding to rail’s competitiveness.

As NS has improved operating efficiencies and service times, the railroad’s intermodal marketing groups have crafted innovative business partnerships to win short-haul container business in several key consumer markets. They include: Charleston, S.C., and Savannah, Ga., to and from Atlanta; Charleston and Savannah to and from Charlotte, N.C.; Norfolk to and from Greensboro, N.C.; and the Port of New York/New Jersey to and from Pittsburgh, Pa.

In those lanes, Luebbers said NS used existing terminal and train capacity to add new business, reducing the railroad’s cost structure while increasing revenue.

“We’ve made headway in that arena by finding ways to build volume density,” Luebbers said, “which helps offset the shorter miles.”