The Lure of Inland Ports

Last week, we launched a new Journal of Commerce event in Chicago, the Inland Port Logistics Conference. The name might suggest it’s a maritime conference, and it is, but only partly.

An inland port as defined here — and not just by us; the term is gaining currency in the industry — is not a port on a river or body of water such as Lake Michigan. It’s rather a rail intermodal center and an adjoining cluster of distribution centers to which containerized goods, after arriving at a North American seaport, are hauled by rail and only then sent into the logistics and distribution process.

The seaport in this concept is a waystation in the cargo’s route to the import distribution center (the first DC that imports typically hit in North America). The concept has a rail intermodal center surrounded by an industrial park. It’s near a major inland population center, has direct rail connections to a seaport, has access to the national highway system for onward distribution of goods and can attract enough cargo to achieve the traffic density railroads need for regular services and profits.

Much-improved rail service reliability for intermodal cargo and, more specifically, the close proximity of distribution centers to the inland railhead make the concept attractive to importers, cutting to a minimum the cost of the local truck move from the rail intermodal to the DC. Goods arrive at inland ports either intact in containers originally loaded in Asia — IPI, or inland point intermodal moves — or they move from the seaport in domestic intermodal equipment after imports are transloaded from the original 40-foot container near the seaport.

Inland ports are expanding and multiplying, hence the reason to host a conference on this topic. It’s an aspect of the overall intermodal story in North America in which millions of truck moves are being converted to rail shipments to take advantage of lower cost without sacrificing service reliability; domestic intermodal volume is fully recovered from the recession and is now in record territory, said Larry Gross, senior consultant with FTR Associates.

“They (railroads) have gotten the quality, consistency and reliability up to the minimum threshold so that intermodal is a real core option as opposed to a mode of last resort,” Gross said.

CenterPoint Properties, host sponsor of the Inland Port Logistics Conference, opened its Intermodal Center-Elwood, Ill., outside Chicago in 2002 with the 770-acre BNSF Logistics Park Chicago as the centerpiece. Earlier this year, the adjoining Intermodal Center-Joliet opened with a Union Pacific rail facility as its centerpiece. The Elwood and Joliet facilities this year will handle roughly 2.5 million TEUs, putting the complex in the top five among U.S. ports if looked at that way. Fully built out, the site would have capability to handle about 6 million TEUs.

Major inland ports exist in Dallas, Kansas City, Memphis, Atlanta, Denver and several other locations. The Alliance Global Logistics Hub outside Dallas is anchored by the BNSF Alliance Intermodal Facility. Dozens of smaller cities where a rail mainline passes through have visions of building intermodal facilities for the jobs and taxes they generate. Not all of these, indeed possibly relatively few of these, will be built because they don’t meet a minimum threshold of potential rail density and quick access to a major population center.

Issues arise, and some of them were discussed at the conference. Ocean carriers, when handling cargo is booked under an IPI bill of lading, are responsible for the cargo through to the destination at the inland rail facility and thus any on-time commitments it makes to the shipper must cover the rail move.

Maersk Line, the world’s No. 1 carrier, which recently committed itself to 95 percent on-time arrival on a global basis, must depend on railroads and truckers to achieve that standard. Yet railroads and forward-thinking ocean carriers such as Maersk define on-time arrival in different ways, presenting challenges in trying to improve performance, the company said.

“What we find in talking to our rail vendors is they have set an industry standard where roughly 80 percent on time is something the railroads would be pretty satisfied with today,” said Gordon Dorsey, U.S. country operations manager for Maersk. “When we talk about 95 percent on time, we are talking end-to-end, but if we are going to talk about coming to that reliability, you will have to get to where everybody sets those standards.”

Other issues were raised as well. With states and municipalities still starved for cash, industrial developers and their customers must foot the bill for basic infrastructure, such as roads that cities would have paid for in the past to attract the investment and the jobs that come along with it.

Bottom line: Inland ports are a growing phenomenon, and we’re going to hear a lot more about them in the future.

Peter Tirschwell is senior vice president for strategy at UBM Global Trade. Contact him at ptirschwell@joc.com, and follow him at twitter.com/PeterTirschwell.

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