While fuel prices are now on the wane, the stings of exceedingly high gasoline costs, and now the global recession, are factors weighing heavily on shippers as they consider transportation options. Most contend lower fuel prices will be short lived, and no one can predict how long the economy will remain in the doldrums. But one fact is certain: Business is off, meaning shipment volumes are down, and all efforts must be made to hold onto a respectable profit margin.

Add to this the growing trend to “think and act green”—a practice that, for many companies, can add expense because it means introducing new processes.

Thankfully for many, where transportation is concerned there are economical options. So, as a way to combat all the above mentioned ‘negatives’ out there, many shippers are now considering intermodal.

“Today, customers are increasingly more apt to fit into the intermodal mix,” comments Jeffrey R. Brashares, president of Logistics Services Group, Pacer Logistics Inc. But so far, he says it’s the large companies, particularly retailers and importers of electronics, which are using the mode.

The Bon-Ton Stores, Inc., one of the country’s largest regional departments store chains, for example, is using intermodal as a logistics mode for the first time. “With the cost of fuel on the rise, we had to rethink our supply chain,” says Robert Hook, divisional vice president, transportation. “After a successful trial run, we implemented Schneider Intermodal into our day-to-day transportation plan and have shifted a significant amount of freight to rail.”

Like Bon-Ton’s Hook, Steve Van Kirk, vice president, intermodal commercial management at Schneider National, believes more shippers should look at the opportunities for intermodal solutions to support their supply chain management strategy. Why? In trying economic times, intermodal can deliver cost savings, strong service results, and reliable access to capacity for shippers. 

“The regional expansion of intermodal capabilities has made this mode a viable solution in lanes that many customers have not considered as traditional intermodal service lanes,” Van Kirk explains.

A prime example of this is the CSX Intermodal network in the east, which has created a strong intermodal solution from both the Midwest and Northeast into Florida. This provides an attractive price point for shippers to service a high population state that typically has limited outbound transportation flows. This kind of solution presents a strong business cases for cost-conscious shippers. 

“We are also seeing progress in relieving the delays of moving cargo from West Coast ports to inland destinations,” adds Van Kirk. “Recently, increased use of double and triple tracks has been improving fluidity and reliability of intermodal rail movements from the West Coast.  As an example, the BNSF just recently opened a third set of tracks through the pass leading west from San Bernardino, California.”

While intermodal requires some additional lead time over truck, that lag appears to be decreasing. “We are now seeing service in some corridors, such as California to the Southeast and back, that is becoming truck competitive on transit,” observes David Marsh, Hub Group chief marketing officer. “We are also seeing resurgence in interest in intermodal service between the Midwest and East/Southeast and between the Northeast and the Southeast. All of these lanes offer customers reliable service and a cost advantage over truck.”

Multiple advantages

Regarding fuel costs, the experts point out that intermodal is three times more fuel efficient than trucking and can routinely generate 10 to 15 percent savings over truck moves thanks to reduced line haul and fuel costs. When fuel prices are high, the savings can be around 20 to 25 percent or more, depending on proximity to rail ramps and length of haul.

Intermodal fuel surcharges are typically half of what an over-the-road truckload fuel surcharge would be, which can result in savings of approximately $500 per load compared to truckload.

Where the environment is concerned, freight shipped on one intermodal train would take upwards of 200 to 280 trucks to haul. Plus intermodal emits less greenhouse gas emissions into the environment.  

This is a growing concern for businesses that have adopted environmental-friendly policies. In fact, an increasing number of companies like Frito-Lay, Inc. have joined SmartWay™, a voluntary partnership between the Environmental Protection Agency (EPA) and the freight industry, to reduce fuel consumption as well as greenhouse gases and other air emissions.

“The goal is to improve the fuel efficiency of your truckers,” Pacer’s Brashares states. “Companies are always looking at ways to reduce cost and do multi-stops over the Highway. An example is a two stop load going 70 miles. If three quarters of the load came off at the first stop in 10 miles and then the trailer moved three quarters empty to the final stop 60 miles down the road, you haven’t saved much in fuel. Customers are really looking at their distribution patterns and are increasingly interested in doing the right things from a fuel efficiency standpoint.”

Marked improvements

For years, shippers resisted using intermodal freight because they regarded it slow and unreliable. Consequently, it was often a logistics after-thought, considered a weak alternative to trucking. But times have changed and so has the intermodal industry.

The most remarkable advancement is the new, cooperative relationship between trucking firms and railroads in creating systems to make intermodal work.

Historically, railroads and truckers have been adversarial. Trucking firms didn’t cooperate with the lower-cost option of the rails because they could take business away. And, the railroads couldn’t serve companies needing to move container loads of goods without truckers providing the final leg of the journey since very few warehouses have the luxury of a rail spur to their doors.

But tough economic times make for strange bedfellows. With fuel prices high, intermodal is the most cost efficient means of shipping product over land, particularly for shipments exceeding 500 miles. “Traditionally, the rule of thumb was to focus on lanes 1,000 to 1,200 miles or greater for intermodal conversion opportunities,” says Marsh. “This is no longer the case. We are now finding lanes that fall between 500 and 750 miles that are perfect intermodal conversion opportunities.”

When trucking companies implemented fuel surcharges beginning last spring, intermodal providers began creating more intermodal opportunities for shippers to move freight in traditional truckload/intermediate length of haul corridors. 

Whether it’s rising fuel prices or a weak economy, moving shipments via intermodal gives shippers options to more effectively control fuel costs and benefit from less expensive rail transport—especially when a slowing economy places less demand on moving shipments quite as quickly as when demand is high.

“Shippers want to go as far as they can on the first leg of transportation,” Brashares stresses. “With the downturn in the economy, shippers are looking at every way to cut costs and improve efficiency of operations. That includes shorter distribution patterns.”

In fact, today, intermodal service can be available for expedited as well as regular service. Intermodal also offers shippers various strategies for maximizing freight loads. These include using same-size boxes when loading boxcars, minimizing dead-head or empty miles, planning appointments of delivery, and minimizing the dwell and idling of assets.  This is, in part, due to advancements in service reliability—the result of railroad providers investing in improved infrastructure.

“In addition, intermodal transportation has become even more important to rail providers such as the CSX and BNSF,” comments Van Kirk. “Because the railroads are running disciplined networks that create density of volume, their sharpened focus has resulted in better reliability by the railroads.”

For all these benefits, however, there remain trade-offs for shippers when choosing intermodal.  “Their transit times are a bit longer than truckload, and the loads need to be braced to prevent shifting,” concedes Van Kirk. While the service level associated with intermodal moves has improved over the years and is now considerably more competitive, shippers still typically report getting better service from truckload.

Correspondingly, one of the biggest changes to come to intermodal in recent years is improved perception as to what it can provide for shippers. “What was once only thought to be favorable mode for interplant movements has evolved to be a very viable option for freight destined for end customers,” Van Kirk says.

With respect to scheduling, shipment security and fragile freight, intermodal offers good and reassuring news. “When it comes to scheduling, the railroads are running in a very reliable fashion today,” he explains. “That means a high-quality intermodal provider can help you understand the timing cut-offs for the ramps to ensure you are meeting the transit requirements of your customers.”

In regards to security, the railroads’ increased use of double-stacked containers is helping reduce risk of theft.  “The practice of dropping a container into the well of an intermodal car with another container on top makes it virtually impossible for a break-in to occur in transit,” he says. “As for fragile freight, both rails and intermodal providers are willing to work with shippers to identify effective bracing solutions to allow shippers to ship intermodal.”

Team effort

Today, intermodal providers benefit by addressing a wide host of shipper needs. The success that intermodal is now realizing is largely due to a team effort between trucking firms and the railroads to bring intermodal options to shippers. Another part of the equation are third-party operators, known as intermodal marketing companies (IMCs), which continue to create intermodal solutions for customers often utilizing a non-asset, rail-owned equipment.

“Key to developing a successful intermodal program is understanding the opportunities that can be converted and then developing a strategy to begin the implementation,” explains Marsh. For example, a large number of shippers are taking high density lanes and converting a portion to intermodal while leaving some of the shipments on the highway. They are able to do this because intermodal provides consistent and predictable service that allows them to be versatile in their transportation selection while not sacrificing the needs throughout their supply chain.

“Customers are becoming more interested and educated about the intermodal product and that has allowed for more collaborative discussions about long-term sourcing needs,” Marsh says. 

Outlook and advice

Going forward, intermodal should offer even wider benefits given the probable impact economic difficulties will have on many logistics providers. Brashares warns that the credit crisis will be hard on a number of small trucking companies, particularly those involved in specialty haul. “Capacity is probably going to go out of the marketplace,” he says.

One factor that has plagued trucking companies of late, but been a boon to intermodal, has been the difficulty in hiring long-distance drivers. “This has been a huge issue,” Marsh concurs. “Intermodal helps the driver shortage because drivers have a much shorter haul. They can be home at night.”

Also hurting trucking firms is the fact trailers are more expensive, plus road networks in the United States are in disarray and need to be rebuilt. To some degree, this builds another argument in favor of intermodal since the mode does not employ trucking until the last segment.

Therefore, Marsh suggests that shippers be pro-active and analyze their supply chain and distribution network. “Each shipper should understand the opportunities for intermodal conversion and have realistic targets to help achieve those objectives,” he says. “One of the keys to success with our customers is developing a collaborative business model in which we share information and strategies that can help us achieve common goals.”

At the end of the day, despite the economic headwinds, intermodal will remain the most attractive position in the domestic transportation marketplace. “That’s because it represents good value for shippers,” Van Kirk concludes. “The ability to save money, obtain reliable transits and service, mitigate the impact of fuel price volatility, and make a positive impact upon environmental sustainability will contribute to its strength.” wt



Washington, D.C.-based writer Karen Thuermer regularly writes about transportation topics.