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Innovation Train: How Cargill Moved 400,000 Bu of corn 1,300 Miles

13 July 2012

Cargill

One of the most well-known examples of Cargill innovation is the unit train — that seemingly endless string of grain hopper cars that people curse as they sit in their cars at railroad crossings.

Bulk shipment of grain may appear to be an obvious way to increase efficiency and an easy idea to implement. It wasn’t.

The actual story of the unit train is more complex — and therefore more instructive about the sometimes messy, elusive and difficult nature of bringing an idea to life as a true innovation.

This innovation became reality in Gibson City, Illinois, U.S. late in 1967. It was a momentous enough occasion to attract the presidents of Cargill and the Illinois Central Railroad. That first grain unit train consisted of 115 jumbo hopper cars carrying 400,000 bushels of Illinois corn to Cargill’s export terminal at Baton Rouge, Louisana.

The long journey did not go exactly as planned. A bridge on a short branch line failed under the weight of the fully loaded train. Fourteen cars derailed, and one local farmer wanted to talk to somebody about buying the spilled corn for his hogs.

But the era of the unit train had been launched, and the next year 56 unit-train shipments delivered more than 22 million bushels of corn to Baton Rouge. The unit train was quickly embraced by the entire grain industry.

An idea borrowed

The idea for the innovation actually wasn’t new. Cargill’s true innovation was adapting an existing idea to a new industry. Unit trains had begun a few years earlier when the coal industry began saving freight costs by moving huge, dedicated trains. Railroads offered significantly lower tariffs to unit-train shippers committed to a set number of runs over a year.

The concept was relatively easy for coal, a commodity that had consistent production and buyers. But grain exports, concentrated at harvest time, were considerably more complicated.

The Illinois Central Railroad was looking for a grain company that was willing to take a chance on the idea of renting an entire train. The railroad found it in Cargill, after explaining the “rent-a-train” idea to managers in Minneapolis. Cargill quickly realized the potential cost savings, particularly for crops not well served by water transportation. They also saw some major hurdles.

Logistics were daunting. Cargill had to obtain enough grain to load 100-plus cars within a time frame that had never been attempted in the industry. New facilities would need to be constructed to handle the massive increase in volume. Elevators and facilities sprang up across the Midwest to process the crops. In addition, Cargill sought the approval of a new railroad tariff by the Interstate Commerce Commission (ICC).

Half the cost

How successful was this innovation? There were immediate cost savings that made the grain of U.S. farmers more attractive for export. In some cases, unit train rates were half the cost of a single car rate.

Not only did the unit train become the standard for moving grain, it was adapted for other food commodities, including Cargill’s launch of bulk flour shipments in 1977. While Cargill was the sole beneficiary of these rates for only a short time (there was no way to protect this competitive advantage), it pioneered a change that benefited the whole agricultural industry.

The unit train still has lessons for the process of innovation. To be sure, Cargill leveraged an idea from another industry — but ideas alone are not innovations. True innovation was the company’s ability to apply its supply chain management expertise and focus its work teams on solving a classic logistics problem. None of it, however, could have happened without significant trust with key supplier the Illinois Central Railroad.

July 2012

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