The term intermodal refers to moving a container or trailer by more than one mode of transportation—generally truck plus rail, ocean plus rail, ocean plus truck, or all three modes. Some recent freight industry trends—such as long-haul trucking capacity shortages, higher fuel costs, and a drive to reduce environmental impact—have sparked new interest in intermodal, especially pairing truck and rail as an alternative to over-the-road (OTR) trucking for domestic moves. For many years, shippers were reluctant to use Intermodal service. Memories of poor service, of containers or trailers stuck in a rail yard, coupled with the speed and flexibility of using over the road service on shorter distances, inhibited intermodal growth. That seems to be changing.
The American Association of Railroads is reporting record intermodal volumes in some months. Truck capacity and driver shortages, the investments made by the major railways on many key business corridors, the increasing use of Intermodal long haul service by truckers, along with improved technology are fueling a so-called “rail renaissance.” “Domestic intermodal is growing much faster than almost any other area of the U.S. economy or industry,” says Scott Webb, senior vice president at NFI Intermodal, a carrier based in Cherry Hill, N.J.
What are some Best Practices that shippers and Logistics Service Providers can follow to take advantage of Intermodal service? Here are a few tips.
1. Educate yourself on how Intermodal service can benefit your company
Identify the railroads, drayage companies and IMCs (Intermodal Marketing Companies) that service your lanes of traffic. Learn about chassis, trailers and containers and the size and number of the containers (e.g. 20 foot, 40 foot and/or 53 foot) available in your area. Educate yourself on the head haul and back haul requirements of the intermodal providers serving your traffic corridors. Compare the transit times and costs against the over the road options across all lanes. Find out about their closest rail terminal and its hours of operation. Examine the length of haul on your major lanes and the hours of service it will take a driver to move your loads. Will an OTR driver hit the maximum hours of service in a day on some key corridors and then have to take a ”time out?” Would you be able to obtain essentially the same transit time by switching to intermodal service that can be competitive on lanes as short as 450 miles?
If you are an import/export shipper, learn more about the locations of ports that serve your major locations. Meet with representatives of these companies, take some terminal tours and review your operational requirements with them. Find out what they can do for you.
2. Study the service levels and transit times on different days of the week
A shipment that departs by truck on a Monday may arrive at destination on Wednesday or Thursday. That same shipment that leaves on a Wednesday or Thursday may arrive at destination on the weekend. If the shipment goes via rail, it may arrive on Monday. In other words, it will be delivered on the same day as the over the road shipment and at a lower cost.
3. Look for consolidation/deconsolidation opportunities
If you are moving multiple LTL shipments each week on various days of the week, look at opportunities to consolidate these shipments and take advantage of the rail option. Your shipments, if consolidated and shipped via Intermodal service may arrive on the same day as truck service and save you money. If you are importing containers from Asia, there may be a possibility of trans-loading the freight from 40 foot containers at a port into 53 foot domestic containers.
4. Ask about Expedited Intermodal Service
On some heavy volume corridors (e.g. Chicago – Los Angeles), the rail service is very comparable with truck service. In fact, some truckers use the rails to provide their line haul service on this and other corridors. Expedited rail service can be the same or one day longer than over the road truck service. Examine the possibility of taking advantage of standard or expedited intermodal service, where it is available.
5. Consider Moving Factories and DCs closer to Rail Terminals
The six Class I railroads—BNSF, UP, CSX Corp., Norfolk Southern Corp., and the U.S. operations of Canadian National Inc. and Canadian Pacific Corp.—operate 164 intermodal facilities in the U.S. and 19 in Canada. Locating close to a rail facility can reduce drayage miles, drayage time and drayage costs. Transportation accounts for 40 to 50 percent of a company’s supply chain costs. By contrast, real estate represents between 4 and 5 percent. The cost of a dray can run as high as $1.75 a mile. A user who negotiated a good deal on the land will find those savings eaten up quickly with each mile they are away from the yard. As you design your supply chain, do your due diligence on real estate and transportation costs.
6. Don’t forget about the NAFTA Corridors
Intermodal service is available between the three NAFTA countries. The major railroads serving Canada and Mexico have invested heavily in moving freight from offshore (e.g. Prince Rupert, Lazaro Cardenas) and cross-border. Check out the services and transit times that are available on your cross-border movements.
7. Put your toe in the water
The best way to learn about a service is to try it. Move some trial shipments via Intermodal service to test the claims of the IMCs and railroads. Speak with your vendors and clients to obtain their input and feedback. Track the on-time service reports that these companies can supply to you. As you gain confidence in the service and start benefitting from the cost savings, look for more conversion opportunities.
There are millions of loads that move over the road in North America that are potential conversion opportunities for Intermodal service. The rails have invested heavily in expanding double stack corridors and are open for business. If you haven’t tried Intermodal service, now is the time.
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Dan Goodwill, President, Dan Goodwill & Associates Inc. has over 30 years of experience in the logistics and transportation industries in both Canada and the United States. Dan has held executive level positions in the industry including President of Yellow Transportation’s Canada division, President of Clarke Logistics (Canada’s largest Intermodal Marketing Company), General Manager of the Railfast division of TNT and Vice President, Sales & Marketing, TNT Overland Express.
Goodwill is currently a consultant to manufacturers and distributors, helping them improve their transportation processes and save millions of dollars in freight spend. Mr. Goodwill also provides consulting services to investors, vendors to the trucking industry, transportation and logistics organizations. All posts by Dan Goodwill