It didn't take an "8 to 10 across the board savings" in shipping costs to convince Charles Stelmokas, vice president of logistics for Coors Brewing Co. in Golden, Colorado, to decide that intermodal rail was the way to go for long-haul shipments.
"We are a reefer-driven product, and the pool of refrigerated equipment providers and available reefer equipment is shrinking," he says. With so many trucking companies facing tighter margins and tougher competition, many are either getting out of the refrigerated business or going bankrupt. That's what happened to Consolidated Freightways (CF) last year when the one-time third largest less-than-truckload (LTL) carrier in the country hit skid row. "It costs more money to own and operate reefer equipment, and the reefer market is one-tenth the size of that for dry goods," Stelmokas says.
One way for a heavy reefer user such as Coors to combat the problem is to turn to the railroads, a transportation progressively seeking and accommodating shippers like Coors. After all, Coors fits the perfect profile for intermodal shipments. "One of the biggest advantages to utilizing intermodal is it helps me convert long-haul drivers to short-haul drayage drivers," he says. "This helps us elevate driver shortage issues. Plus, the cost of intermodal rail is much more competitive."
Coors, which works with all railroads, but primarily Burlington Northern Santa Fe (BNSF), de-ramps its Chicago-bound shipments in Chicago and delivers the pallets of bottles, cans and kegs of beer via truck to the warehouse. "The truckers only need to operate within 150 miles of the ramp for delivery," he says. "We do the same in Southern California."
Obviously rail service is not as flexible as trucking, since trucks operate on the shipper's schedule rather than their own. But Stelmokas finds no problem in working with the railroads' set-schedule. "Service is very regular with daily departures from Denver to Chicago and three-times weekly from Denver to Los Angeles," he says.
Coors' shipments move by rail from its plant outside of Denver to Southern California as well as Chicagoland. Today, Coors makes some 150 moves per week on the rails compared to its 1,500 to 1,800 truckloads per week. "I would like to eventually increase that to 500 moves per week, which would represent 30 percent of our transport," Stelmokas says.
Intermodal makes the grade...
Many shippers are realizing the benefits. According to the Association of American Railroads, intermodal traffic led the rail industry with the highest rate of growth in 2002. Two factors have given rise to this growth: the introduction of information technology that facilitates the tracking and tracing of cargo between shipper and intermodal service provider; and improvements to rail service itself to capture long-haul, containerized traffic.
Still, some shippers must be sold on the concept. "The biggest problem shippers still have with the railroads is the misperception that intermodal is not reliable," says Dave Stropes, Burlington Northern Santa Fe (BNSF) assistant vice president, consumer accounts. "But we have statistics to prove them wrong and insurance to back up our guarantees."
For a 15 percent premium, shippers can purchase a 100 percent on-time guarantee for certain service lanes for BNSF Premium (550 miles per day) and Expedited (750 miles per day) products, although shipper Stelmokas of Coors sees no need for it. "At this point, BNSF's regular service is so on-time and consistent that it is not necessary," he says.
Among BNSF's primary intermodal lanes are Chicago to Los Angeles, Chicago to Northern California, and the Pacific Northwest to Chicago, as well as service to high-volume Southeast points like Memphis, Birmingham, and Dallas/Ft. Worth. In all, BNSF operates 33,000 miles of track and 35 intermodal hubs throughout the United States.
Intermodal is a major part of Burlington Northern Santa Fe's (BNSF) business. With approximately 3.5 shipments per year, intermodal represents one-third of the $9 billion company's revenues. "We are the largest intermodal carrier in the United States and the world," comments Stropes.
BNSF moves shipments for UPS, FedEx, and Wal-Mart, which just named BNSF Carrier of the Year for the fifth consecutive years. Nine carriers were recognized by this retailer, which currently has 2,870 stores nationwide. UPS is also one of BNSF's largest shipper/customers. "Companies like UPS, look for reliability and high speed," says Stropes. "Since 1995, we have been 99.5 percent failure free with UPS."
Key to the intermodal service is the development of web-based information systems capable of tracking and tracing shipments. "We are able to trace shipments within a few miles and estimate time of arrivals," Stropes says. "We can also track the contents inside the containers."
Like BNSF, Norfolk Southern (NS) and Union Pacific (UP) offer premium intermodal services and find most of their business coming from intermodal marketing companies (IMCs).
Schneider National, J.B. Hunt, Yellow Freight, Roadway (soon to be a part of Yellow Freight), ABF, and UPS sell clients on premium truckload and intermodal transportation solutions. J.B. Hunt's intermodal program has grown from 20 loads a month in late 1989 to become the largest provider of intermodal services in the truckload transportation logistics market. Today, J.B. Hunt owns more than 20,000 containers.
J.B. Hunt established its first intermodal partnership with the Santa Fe Railway in 1989, and now has partnerships with eight North American organizations: BNSF, Norfolk Southern, CSX, Kansas City Southern, Union Pacific, CNIC, Tex-Mex and Florida East Coast railroads.
Schneider operates with 45,000 trailers, all capable of being lifted onto rail cars, plus container service. "New technology, new facilities and some process changes have given us a better product for our customers," says Brian Bowers of Schneider. "New NS products such as Blue Streak coast-to-coast rail services, NS's newest intermodal facility in Austell, Georgia, and the elimination of cross-town draying in Chicago help us provide superior service to Schneider customers."
Both UP and NS offer the Blue Streak service, which the railroads are expanding. The service, known for its near 100 percent on-time performance, offers truck-competitive service between several major markets in the western and northeastern United States.
Norfolk Southern's intermodal facility at Austell, near Atlanta, contributed more than 61,000 truck-to-rail conversions. This is good news, since the company also does a considerable business with companies such as Wal-Mart, Kellogg's, Target and the U.S. Postal Service. "We handle their rail service, and the IMC sells the service and arranges the drayage," says Ryan D. Houfek, NS Group Manger Market Planning in Norfolk, Virginia. Houfek sees unlimited potential for this business, a real switch from the days when the truck-rail relationship was adversarial.
...and offers relief along the way
Another plus are the number of new intermodal facilities coming on-line. A notable development for UP was the recent opening of its $181 million Chicago region intermodal facility in Rochelle, Illinois. "This facility will help us increase the ability to handle efficiently the growing rail-truck freight market in Chicago and the upper Midwest," comments Ike Evans, UP president and COO. Studies had indicated a need to expand capacity to handle increasing rail-truck traffic in the Chicagoland area.
Dubbed Global III, the facility features four tracks to accommodate 94 intermodal "double-stack" railcars for loading, 13 yard tracks and six support tracks to improve service reliability, 4,000 "staging" or parking places for trailers and containers, a 10-lane gate entrance that uses the latest computer technology, and a state-of-the-art security system.
Southern California is finally getting some much needed relief from its mounting truck traffic. The Alameda Corridor, which was funded by private and public monies and opened in April 2002, handles some 35 train movements per day. The traffic is the result of intermodal transfer of containers from the Port of Los Angles and Port of Long Beach. "We expect to see 100 train movements by 2020 or 30 to 36 million TEUs," says Phil Hampton, Corridor spokesman. "The Alameda Corridor was built to accommodate 150 movements per day."
The $2.4 billion project consolidated 90 miles of railroad into a high-speed express lane. "It helps shippers by reducing the amount of time cargo takes from the port to the rail yards," Hampton says. "It increases the efficiency of rail movement."
