New Thinking on Intermodal

By now it is a well-established trend in North American transportation that freight is moving from the roads to the rails. Driven by the opportunity to cut costs while maintaining reliability, a growing cohort of shippers is embracing a strategy that includes intermodal in the mix.

Even with cycle times shrinking and demand-driven supply chains dominating, a huge improvement in intermodal service reliability is allowing rail to play a larger role in time-sensitive supply chains. Long gone are the days when the railroads grudgingly accepted intermodal freight; today it’s an article of faith among railroads and their investors that intermodal is where the growth is, in the form of millions of over-the-road movements still with the potential to be converted to rail.

The trend was clearly visible in the numbers last year. Domestic intermodal moving in containers, increasingly the preferred choice of mode when moving between truck and rail, grew 9.6 percent, according to Intermodal Association of North America data. That far exceeded domestic trucking growth of 5.9 percent as tallied in the For-Hire Truck Tonnage Index published by the American Trucking Associations, and international U.S. container growth of 4.1 percent, according to PIERS data.

Largely in the past as well are the days of trucker-rail rivalry, at least on the commercial front, where traditional truckers such as J.B. Hunt, Swift Transportation and Schneider National see where the winds are blowing and are partnering up with the rails with increasing frequency in offering intermodal options to their customers.

But as large as the potential may be, an expanding share for intermodal isn’t a foregone conclusion. The business has to be won, often from skeptical shippers with long memories of the bad old days of sketchy intermodal service and an indifferent attitude from railroads. “A lot of shippers don’t believe intermodal will work for them, for one of two reasons — they tried it in the past and had a bad experience, or maybe they were given a proposal that didn’t meet their needs,” said Steve Branscum, group vice president for consumer products at BNSF Railway.

That reality has forced railroads to get creative. Knowing that shippers may have set ideas about intermodal, the idea is to present an intermodal solution in a different light. A case in point is the idea that intermodal doesn’t necessarily have to involve a lengthy rail transit in the middle of two short drayage moves at either end, Branscum said. “For decades, the mindset of both the shipper and the intermodal provider was, ‘If I am going to provide or use an intermodal solution, it needs to have the longest rail transit possible, and the shortest truck move possible. What that meant was you would use the ramp closest to the origin and ultimate destination, but often that would produce a bad transit, because the hub wouldn’t have frequent service, or would require an interchange move that complicates things,” he said.

But there are different ways of looking at that operation. “The beauty of intermodal is that it is very flexible. We have these core rail routes that cover the country that have very frequent services, very fast service, very reliable service, but where you get on or off that network is a huge factor in whether it will work,” he said. “With creativity, you can look at different hubs which are higher density hubs, higher frequency service hubs, and the result of that is you don’t go quite as far as on rail, perhaps 70-30 (rail vs. truck mileage) and not 90-10, but it makes the service work whereas before it didn’t.”

Flexibility on where freight enters and exits the rail system and leveraging the networks of major third-party logistics providers is behind what BNSF calls Next Generation Intermodal.

For such flexibility to work, the transportation partner is critical, because longer trucking moves require density of their own lest empty backhauls eat away at the economics, said Larry Gross, senior consultant with FTR Associates. “What is the prerequisite to making that work is you have to have an intermodal provider that is truly controlling the total aspects of the move door to door,” he said.

“You have to have more sophisticated control over the highway move; you have to have stuff going and coming or the empty miles will kill you,” Gross said.

Another critical point to integrating longer dray moves with intermodal is the direction: The idea gets complicated if the truck has to travel in the opposite direction of the ultimate destination just to get to a viable rail ramp. “One of the questions is how many out-of-route miles do you have to endure in order to get on the rails, so the terminal location becomes more critical,” Gross said. “It needs to be on the way.”

The numbers and the growing attention of shippers and truckers suggest more of that business is on the way.

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

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