There's something nostalgic about railroads. The steel tracks that rim the American landscape. The familiar ding-ding-ding as the crossing arm descends and the freight train passes. The lyrics to "I've Been Working on the Railroad," learned from childhood. The $200 properties on a Monopoly board.

To the layperson, little has changed over the years. Those rust-colored tracks lie fixed in their familiar locations. Drivers sit at a railroad crossing, either cursing their luck or counting cars for fun, the way they always have. Kids still learn the old folk song. And the B&O is a downright bargain for today's Monopoly players.

Even executives in the railroad industry recognize that, in some fundamental ways, freight railroads are untouched by time. "It's still steel wheel on steel rail," says Deb Butler, CIO and executive vice president of planning for Norfolk Southern, a company that's 177 years old.

But a funny thing has happened. As the price of diesel fuel soared and highway congestion increased, new interest sprang up in the old form of transportation. "Shippers had been dubious about rail because it has historically been about moving very large finished goods or commodities in bulk," says David Rutchik, partner with sourcing and supply chain consultancy Pace Harmon.

As big retailers, manufacturers and even trucking companies themselves started scrutinizing their skyrocketing shipping costs, however, railroads began to look more attractive. "It's all about the economic pressure," says Rutchik. Sustainability, too. That old iron horse, chugging along at 49 miles an hour, has suddenly become a "green" option, given its ability to move a ton of freight 423 miles on one gallon of gas.

While it's still only carload materials like coal that make a full cross-country trip by locomotive, more and smaller goods are spending the bulk of their journeys on a freight train. In 2004, intermodal business—the transport of truck trailers or ship containers on a railroad's flat cars—surpassed coal as the largest source of revenue for Class 1 railroads (as categorized by revenue) in the United States, according to the Association of American Railroads (AAR). "It has been our engine of growth," says Tom White, director of editorial services for AAR, thanks to big customers like UPS, truckload carriers like Schneider National and J.B. Hunt, and—to a lesser degree—the less-than-truckload transportation providers, all eager to use their trucks and drivers for short trips and let the railroads handle the rest.

The increased demand has been good news for railroads in the short term. But long-term, experts say, demand for rail service could outstrip supply to such an extent that rail capacity becomes severely strained and rail shippers profoundly dissatisfied. The key to future growth and customer satisfaction—in addition to laying billions of dollars' worth of new track—will be new IT systems and technology-enabled business processes, which ensure that the railroads operate more efficiently and predictably.