Truck shipments of less than 700 miles still appear to be an enormous target
from an intermodal point of view, constituting perhaps 80 percent of the overall for-hire freight market. But rail-truck service appears to have few arrows in its quiver to hit that huge potential market.
Intermodal freight shipments have been growing in the 5 percent-to-7 percent annual range for several years, fueled by the advent of stack trains during the 1980s and supplemented by increased motor carrier and other domestic traffic.However, that growth has been largely confined to longer-haul routes, according to industry insiders.
Although comprehensive statistics have not been kept on deregulated industries, some trade groups have claimed intermodal's market share is pushing 80 percent on transcontinental shipments or those more than 2,000 miles.
"It looks like short-haul intermodal should be a major growth opportunity," said Dan Smith, senior associate for Mercer Management Consultants. "A huge portion of domestic freight travels less than 500 miles. The person who figures out how to do it (with intermodal technology) is going to get rich."
Conventional intermodal service with terminals, lift equipment, drayage and inspection has been far less attractive for the shorter hauls - less than 700 miles or so - in many cases, because of economics.
Industry officials say there is no magic formula to establish a break-even point under which intermodal shipments aren't profitable, in large part
because truck drayage costs vary from move to move.
"The most critical thing is understanding the dynamics of the individual market and figuring out how you can compete in that market, rather than being blinded by length of haul," Mr. Smith said.
Officials at Conrail see intermodal's growth potential in the 700-to-1,000 mile range, according to John Sammon, assistant vice president - intermodal.
Mr. Sammon said most intermodal service loses competitiveness below that distance, because of drayage expenses to and from terminals, and a fixed cost for gate, lift and inspection services that comprise a larger share of total costs for a shorter-haul movement than a longer one.
That doesn't mean, however, that there are no opportunities on shorter-haul routes, Mr. Sammon said.
"There are specialized niches in shorter-haul lanes where you can put effective packages together," he said.
As an example, he cited shipments for a major customer from North Bergen, N.J., to Syracuse, N.Y., which Conrail handles even though the distance between those cities is about 250 miles by highway and 290 by rail. Conrail also handles auto parts traffic through its Toledo terminal from southern Michigan that are destined for an automobile assembly plant at Newark, Del. Those shipments, which are made economical by a short-haul drayage move in Michigan, travel about 550 miles, using Conrail's Harrisburg terminal to transfer freight from rail to highway modes.
Another situation where short-haul intermodal is working is between Jacksonville and Miami, Fla., where the Florida East Coast Railway runs eight
trains a day over a 365-mile route.
The railroad has been operating with two-member crews for decades, giving it a cost advantage other railroads obtained on a one-by-one basis in the mid- 1980s for some intermodal services.
Gene Tonsager, senior vice president of marketing and sales for FEC, said ''our success is based on the consistency of service we provide. Our strategy is to continue with what works; to provide a consistency of service where we can make a dollar; and steamship lines, motor carriers and others find our schedules attractive."
FEC gains more than half of its business from intermodal, relying on motor carrier traffic, as well as international and domestic container shipments for that volume. Truckers like FEC's southbound moves of their loads because that arrangement eliminates the need for paying a driver to move a box to Miami and return it empty. Equipment utilization also can be improved with that approach, truckers say.
Some short-haul technologies have reached commercial viability, including Triple Crown Services Co., of Ft. Wayne, Ind. Norfolk Southern began that service in 1986, using bimodal vehicles known as RoadRailers that can travel on rail or highway. The cost of RoadRailers is reduced because they don't have to be lifted onto railroad cars and require less terminal space.
Conrail bought a 50 percent share in Triple Crown earlier this year.
Triple Crown operates a 13-terminal hub-and-spoke network with Ft. Wayne as a hub terminal for shipments between Midwest gateways such as Chicago and Kansas City, the Northeast and eastern Canada, and the Southeast.
Not everyone has had that kind of success in short-haul lanes. Most other rail carriers have attempted to run short-haul services in recent years, but discontinued them because of economics, equipment shortages or operating difficulties. Even the RoadRailer, which now is generating about a 10 percent profit margin when you discount a 1993 write-off for obsolete equipment, had a short-haul service that didn't work out commercially during the mid-1980s before it was operated by NS.
Some other new technologies are on the drawing board or test bed, such as
CSX Intermodal's Iron Highway.
That technology uses platforms that can accommodate all lengths of trailers, with power units at each end and a folding ramp in the center of the platforms that is used to load and unload freight-hauling equipment.
The technology is in the final phase of testing at the Association of American Railroads' Transportation Test Center in Pueblo, Colo. Testing began there this summer, but was halted while the wheel and axle set, known as trucks, were redesigned to improve ride quality and crew comfort, according to
The company says it is still negotiating marketing, operating and commercial issues relating to Iron Highway, and will not discuss details of those talks.
The company does say, however, that Iron Highway is designed to increase market share for short-haul services.
CSX could choose to market and operate the service over its own network, or work out some sort of franchise agreement with other carriers or sign some other type of arrangement with rail and truck lines.