North American intermodal rail may not have tech start-ups seeking to transform the industry or experience rapid consolidation like the ocean shipping industry, but there is plenty of innovation and potential pitfalls coming down the tracks.
CSX Transportation’s overhaul, involving the slashing of some of its domestic intermodal services and move away from its hub-and-spoke model, is just the tip. North American intermodal traffic, which hit its fastest pace of growth in the third quarter in more than three years, according to the Intermodal Association of North America, does not capture the enormity of changes rippling through the industry either. While by no means a complete list, here are some of the developments to watch:
- US East Coast port efforts to lower dwell times and build density needed for unit trains will be pivotal in their ability not only to protect cargo and grab from their counterparts, but also to attract shipments from the West Coast. Savannah, for example, expects its $128 million rail project will allow shippers to get their goods to destinations such as Memphis and Chicago two days faster.
- Do not be surprised to see other Class I railroads follow the lead of Canadian National Railway and Norfolk Southern in creating deeper partnerships to better interchange trains, as that is often the cause of transit delays. CN and NS said the deal involving bypassing the traditional Chicago switch will cut two days from transits.
- Railroads also are working to make their intermodal terminals more efficient and speed up the delivery and drop-off of cargo. Canadian Pacific Railway is rolling out technology at its terminal truck gates that promises to make it easier for drivers to pick up and drop off loads, and cut inbound processing by up to half. It is part of a larger effort by the railroad to position itself as an intermodal supply chain partner, much like its archrival CN.
- Mexican shippers often turn to intermodal rail because it is generally more affordable than over-the-road trucking, but more often because it is safer from theft. There are signs that value proposition is crumbling for some shippers. Ferromex said a spike in the number of attacks on freight trains in southern Mexico and near the port of Veracruz is driving some customers away. In addition to hiring a new security company, Ferromex has invested in drones, light posts, and security technology, and is working with federal authorities to improve security in Puebla.
- Last, and, perhaps most important, Class I railroads are heading into a rare opportunity to accelerate their domestic intermodal growth. The scale of intermodal growth that the electronic logging mandate for trucks will drive is unclear, but railroads and analysts expect shippers to convert more cargo to rails from the highway when truck capacity tightens and rates rise as a result. Large shippers tend to be aware of how the trucking regulation could tighten capacity, but smaller shippers are just waking up to the challenge as they go through the request for proposals process with motor carriers, said Rick LaGore, CEO of InTek Freight and Logistics. The ELD rule takes effect on Dec. 18, but an association representing state law enforcement agencies said it would postpone until April 1 putting drivers out of service for not complying with the mandate.