Analysis: Trailer on rail resurgence holds driver shortage warning

Analysis: Trailer on rail resurgence holds driver shortage warning

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One of the so-called truths of the intermodal era is the inevitability of the transition to container, fueled by the “2 for 1” economics of double-stack.

Trailer on flatcar (TOFC) was a dwindling segment, only kept alive through the forbearance of the railroads and a few remaining stubborn adherents to an obsolete technology. So far in 2017, reality is refusing to adhere to the common wisdom.

Domestic container volume over the past six months through August was up 3.6 percent over the prior year, according to the Intermodal Assocication of North America's Equipment, Type, Size and Ownership database. Volume is up 5.4 percent over the same timeframe for those obsolete TOFCs. What’s going on? The answers to that question could possibly shed some light on a couple of important current issues on the intermodal table: e-commerce and the driver shortage.

First, 28-foot trailer volumes moving via intermodal have jumped 7.3 percent this year over the past six months, twice the percentage increase seen by domestic containers (although on a far smaller base). The gains occurred despite the fact that 28-foot trailers offer vastly inferior intermodal economics versus domestic containers.

The lift costs are about the same as a domestic container that offers nearly twice the cubic capacity, and the line-haul costs per unit of cube are higher because you cannot double-stack a 28-foot trailer. Yet 28-foot pups offer a very important advantage to parcel and less-than-truckload (LTL) carriers that often offsets the intermodal economics, which gives the ability to build direct loads to enable them to skip intermediate handling of the freight.

For example, such a carrier might have the volume to build a direct 28-foot load every day from Chicago to San Diego. However, that is not enough volume to fill a 53-foot box, so if that intermodal technology is utilized then the load must be broken and rehandled in Los Angeles, which adds additional cost and time to the process.

None of the foregoing is new, but what has changed is e-commerce. The parcel carriers form the front line of the e-commerce revolution and what used to be moved in bulk is now moving as individual parcels. In addition to 28-foot pups, these intermodal customers also are the ones that continue to utilize the remains of the once-ubiquitous fleets of 40-foot, 45-foot, and 48-foot TOFCs. Adding these into the mix bumps the year-over-year growth up to 8.2 percent over the last six months. The growth in the movements of shorter trailers via intermodal can be regarded as a barometer of the increasing importance of e-commerce.

Second, look at 53-foot trailers. Through the early part of this year, 53-foot trailer volume was below that of 2016, but that changed with a vengeance in May. During the four months from May through August, 53-foot trailer volume has notched a 7.8 percent increase versus 2016, while domestic container has grown 5.4 percent (but from a much larger base). Moreover, the gap is widening. In August, 53-foot container volume was up less than 6.8 percent year over year, while 53-foot trailer activity shot up a whopping 14.2 percent.

The 53-foot trailer boom could be a harbinger of the looming trucking capacity shortfall. A substantial portion of the 53-foot TOFC volume tends to be opportunistic, with truckers choosing to put the trailer up on a flatcar when they do not have the tractors and drivers available to move it over the road. The ability of the domestic container intermodal carriers to flex upward is a function of the excess capacity that remains in their fleets of containers and chassis, but the TOFC users have no such limitation. They have all the trailers they need, but lack the necessary tractors and drivers.

Enter the flatcar and TOFC. All intermodal carriers are benefiting as trucking capacity tightens, but the 53-foot trailer segment is seeing the most response. Are we seeing “the canary in the coal mine” when it comes to the upcoming trucking shortage?  

Lawrence J. Gross is president of Gross Transportation Consulting in Mahwah, New Jersey, and a partner at FTR Transportation Intelligence. A veteran with 34 years in the transportation business, he covers freight transportation, concentrating on the intermodal and trucking sectors from a transportation and equipment perspective. Contact him at ljgross@optonline.net and follow him on Twitter: @intermodalist.