In its first years of operation the McCloud River Lumber Company produced green lumber in McCloud, which the railroad would haul to the finishing factories in Upton. The lumber company shortly started building drying kilns, planing mills, box and sash/door factories, and other facilities in McCloud. Higher graded lumber would be kiln dried and stored in various drying sheds, while the lower shop and similar grade lumber tended to be air dried in massive drying yards that once surrounded the sawmill buildings. Like many other similar operations the lumber company turned to a narrow gauge railroad to move lumber around the increasingly sprawling complex.

The first recorded documentation relating to this operation is a contract for 500 tram cars that Scott & Van Arsdale signed on 22 September 1902 with the Allis-Chalmers Company of Milwaukee, Wisconsin. The contract called for the cars to be built to the following specifications: "28-1/2" gauge track, trucks 5'6" center, each car detailed as follows: 2 trucks to each car, one wheel pressed on and riveted, the other to run loose; wheels to be 20" diameter with chilled thread 3" face axles 2-1/4" rough in center, 2-3/16"turned in boxes, 2-1/16' bore in wheels; 4 boxes 5' x 2-3/16" babbitted with oil cellars, loose wheel to have one #1 compression grease cup and be held on by 1/2" washer and 1/2" pin through axle; 2 hook and staple bolts to each car to pull same- 3/4" iron; 4-3/4" x 14" bolts, 2 wrought washers for bunks; 3 rods 1/2" x 28" nuts and cast washer on each end; 8 bolts 5/8" x 10" for truck boxes.." The lumber company paid $10,500 for the cars, plus an additional $184 for sixteen "24 inch chilled wheels with 2-7/16" shafts and over hung boxes for four transfer cars suitable for about 5" or 6" width of timber." Allis-Chalmers was to ship the first 300 cars as soon as possible and the remaining 200 about February 1903. In subsequent correspondence dated October 1903, Allis-Chalmers admitted to Scott & Van Arsdale that the company "lost a considerable amount of money in filling the order for these five hundred lumber cars and could not furnish you with any more at the same price, or any of the material at the prices we quoted on the parts for cars furnished."

The railroad used horses, humans, and gravity as motive power through the first years. Small gas mechanical locomotives started showing up around 1912, which subsequently gave way to battery electric locomotives in the early to middle 1920s. These in turn were replaced with diesel mechanical power in the later 1930s, consisting of one Plymouth, two Vulcans, and one of the old General Electric battery electrics rebuilt with a Buda diesel engine. Rolling stock consisted almost entirely of small 4-wheel wood and steel carts. The company did number them, but no rosters seem to have survived. Work equipment consisted largely of a small steel wedge plow amd a succession of rotary snowplows used to remove snow during the winter months.

The role the railroad played changed through the years. In the early years the tram would handle almost all lumber throughout the complex. Rubber tired lumber carriers, forklifts, and the closure of most of the factories eventually reduced the operation to mostly moving green lumber from the sawmill to the planing mill. The railroad finally closed in 1970. The company quickly scrapped out all of the rail lines threading throughout the complex and burned the wooden carts to recover the metal pieces, but a few ended up on display in yards or other places through town. The company sold one of the small diesel mechanical locomotives and a few steel tram cars to a tourist railroad in Oregon but stored the other three in a shed in the mill until the early 1980s.