A supply chain and logistics provider serving major U.S. fast food and sit-down chain restaurants said its customers could double the share of surface freight shipped via railroads to as much as 9 percent in the coming years.
Armada Supply Chain Solutions said the roughly 15 restaurant chains it serves use railroads to haul between 4 and 5 percent of their goods annually, a rise from zero intermodal transport about four years ago. When Armada first began sending customers’ loads via the rails, the company “only did a handful a week,” said Mike Vannatta, senior director of procurement at the Pittsburgh, Pa.-based company. Now, Armada manages 13 dry loads and 138 temperature-controlled loads monthly for its restaurant customers.
Armada had to convince shippers that “intermodal service was just as good if not better the over-the-road service,” Vannatta said. There was initially pushback from some shippers and suppliers because “they didn’t know how to properly load for the rails or had bad experience with intermodal in the past.”
Employees from Marten Transport, a temperature-controlled trucking company, and BNSF Railway taught Armada’s customers how to change their loading and receiving operations to handle intermodal freight. Improved intermodal service reliability, a result of the hundreds of millions of dollars the railroads have spent on their container and trailer rail networks, also helped build customer confidence. Through Armada’s relationship with Marten, and the truck company’s partnership with BNSF, its customers shrank their environmental footprints and trimmed transportation costs.
Marten is working with Armada to increase customers’ intermodal volume by targeting shipments on the rails under 1,000 miles. Marten is well positioned to make these shorter moves work because of its intermodal capability and the regional focus of its trucking operations, said Tim Nash, executive vice president of sales and marketing at the Mondovi, Wis.-based carrier.
Under the older intermodal model, goods were only typicall shipped via rail when the origin and destination was 50 miles to 100 miles from the railhead. Marten hauls shippers’ freight as far as 300 miles to intermodal terminals, giving customers far more rail options.
“Seventy-five percent of our trucks are assigned to one of 13 operating centers, so we are very short haul focused,” he said. “That allows us to execute close to 100 percent of our own dray moves.”
Armada’s restaurant customers are more open to intermodal than wholesale grocers because their turnaround time for loading and unloading is far faster. The average equipment dwell time for Armada customers is 54 minutes for unloading and 53 minutes for loading, Vannatta said. The company is working with customers to reduce every dwell time for loading and unloading to no more than an hour.
Wholesale grocers generally take between two to seven hours to turn around equipment, but they will likely reduce loading and unloading times if truck capacity shrinks and rates rise as a result, Nash said. Rates could rise in the second half when federal regulation reduces driving times and makes it harder for carriers to find drivers. This shift in pricing could spur wholesale grocers to speed up their equipment turnaround times so they can take advantage of the cheaper intermodal option.
The grocers’ willingness to use intermodal would further strengthen the growth Marten has experienced in the market. Since 2006, Marten has increased its intermodal volume on an average annual basis at a double-digit clip, and the carrier runs about 600 loads weekly, company President Tim Kohl said. Marten shipped 27,000 intermodal trailer loads in 2012 and expects to haul more than 32,000 loads this year.
Aside from shippers looking to cut down on transport costs and secure capacity, the business has also grown because of improvement to the trailer fleet. Marten has expanded the fuel tanks for each trailer from 50 gallons to 75 gallons, allowing temperature-sensitive goods to be shipped on the rails up to three days. The additional energy capacity also better ensures goods will stay cool when temperatures rise. A recently imposed California rule requiring reefer engines to be no older than seven years, along with increased insulation in Marten’s trailers, has cut fuel consumption by 10 percent.
Kohl said the company has invested in trailers instead of 53-foot containers because the former can handle about 3,000 more pounds than the latter. The carrier’s fleet of temperature-controlled trailers has grown from zero to 4,400 units since 2006. Other companies, including C.R England and NFI Industries, are also expanding their reefer equipments fleets to meet rising demand.
BNSF’s “why not approach?” of analyzing shippers’ supply chains to see if there is an intermodal solution has also driven freight from the road to the rails, Marten Senior Director of Operations Chad Thompson said. BNSF’s expedited service is also a major draw, as reefer loads can be shipped to Chicago from Southern California and the Pacific Northwest in three days, said Gregg Zody, sales director of consumer products at the western railroad.
Not only is intermodal service faster, but the BNSF’s terminal investments cut down the time truck drivers spend picking up and dropping off loads. New wide-span cranes and automated gate systems, for example, at the railroad’s Memphis terminal have cut down the average driver turnaround time from an hour and a half to 27 minutes, Zody said.
BNSF more than doubled its reefer intermodal volume between 2002 and 2012, and shipped 151,000 units last year, Zody said. He expects the rate of annual double-digit growth to continue through 2013.