Anytime the commodities market takes a downturn on Wall Street it affects the railroad industry. Since its development in the 1820s, rail has been a primary source of commodity transport across the United States. The cars handle the weight of the goods better than air or road carriers, so more commodities are moved from Point A to Point via rail than any other logistical option within in the supply chain.
What Are Commodities?
Investopedia defines a commodity as a “basic good used in commerce.” These goods are used to manufacture other goods, whether as a supply needed for the item or the fuel needed for the production process. Commodities trade on the stock market and boost the economy as more people add them to their portfolio. There are two types of commodities: soft and hard.
Soft commodities come from the agriculture industry, and items such as cocoa, coffee, sugar, and wheat are traded regularly on the global markets. The mining industry produces hard commodities, such as coal, gold, and oil, and the two fossil fuels are being hit hard on the 50 major commodity markets worldwide as alternative energy continues to rise in popularity. This downturn effects rail.
Experts Weigh In
The Wall Street Journal reports that the railroad industry is experiencing a current slump because there is less need for cars to transport coal. Power companies must meet customer demands and find ways to power their generators in a more eco-friendly manner. Many have turned to natural gas, which is delivered via pipeline. Consequently, railcar companies are experiencing a lull in production.
While some might sing the demise of the rail industry altogether, it’s too soon for the fat lady just yet. The railroad industry remains an important part of the U.S. supply chain, and supply chain managers continue to rely upon this crucial asset for their transportation needs. As with any other industry in the world, railroads must find a way to adapt to changing times, and Washington State University offers an insightful suggestion on how railway administrators can boost rail to its former glory.
21st Century Rail
While little can be done about how commodities sell on the financial markets, there are ways that the railroad industry can improve upon its performance, thereby keeping it in its rightful place as a major transportation provider in commercial and industrial supply chains. Rail transport isn’t just important in the States; it’s an overseas force into which U.S. rail companies can earn a stronger presence.
Supply Chain Management MBA holders are being called upon to globalize intermodal transportation with advanced technology. A new wave of administrator positions that, according to Washington State earn top dollar from the U.S. Department of Transportation, are developing advanced training systems, policies, and procedures, and managing audits and programs. Learn more about a Supply Chain Management MBA to enter into this lucrative fold.
No matter what the commodity markets do, the world still needs rail to transport the goods traded. The downturns aren’t in supply and demand solely; they also occur because the U.S. rail industry must modernize its presence within global markets. Railroad administrators are being hired to help, which will take a bear market and turn it into a bull market for commodity traders.
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