The railroads believe U.S. businesses may be ready for a
change, especially as trucking costs escalate, road congestion intensifies, and fears of a driver shortage persist. The
rails maintain that the speed and reliability of their domestic intermodal service has now improved to the point where
they can offer a compelling price-service solution on short-er stage lengths.
A WIDE-OPEN OPPORTUNITY
If rail industry estimates are accurate, there is plenty of
incentive to focus on the domestic business. Omaha, Neb.-based Union Pacific Railroad Co. (UP) says 11 million
truckloads are up for grabs in its service territory, while
Fort Worth, Texas-based BNSF puts its potential market at
7 million. In 2010, BNSF handled between 2. 25 million and
2. 5 million domestic intermodal loads, while UP handles,
on average, about 2 million a year.
Jacksonville, Fla.-based CSX told analysts recently that of
the 14 million truckloads that normally move in the Eastern
United States each year, about 5. 1 million have already been
converted to intermodal, leaving a potential market of somewhere around 9 million. CSX said it handles about 40 percent
of the 5. 1 million loads that have already been converted.
Senior rail executives recognize the potential bonanza that
awaits them should they convince shippers that they can deliver on their intermodal service commitments and continue to
do so at lower rates than truckload. “We have a unique opportunity, and the opportunity is huge,” says Steve Branscum,
BNSF’s group vice president, consumer products marketing.
To capitalize on this opportunity, the rails are building
out their intermodal networks. Norfolk Southern’s
“Crescent Corridor,” a 2,500-mile joint public-private proj-
ect linking New Jersey with Louisiana, is expected to divert
1 million trucks per year from 10 interstate highways when
the work is completed in 2013. Executives for the Norfolk,
Va.-based railroad were unavailable for comment.
The Container Store’s intermodal leap of faith
The Container Store took a leap of faith last year when it
switched some of its outbound distribution from over-the-road truck to intermodal. It’s still early, but, so far, its faith
seems to have been rewarded.
In 2009, the Coppell, Texas-based retailer of storage and
organization products began using Burlington Northern
Santa Fe Railway and its intermodal partner, J.B. Hunt
Transport Services Inc., for inbound movements from West
Coast ports to its lone DC, an 825,000-square-foot facility
also located in Coppell. In 2010, Container Store decided to
expand the relationship to some of its outbound movements
as part of a “continuous moves” operation aimed at grouping multiple one-way hauls into round trips. It started with a
pilot program covering two stores in Northern California.
Today, the operation serves 13 of Container Store’s 49
stores, and the network is set to expand as the retailer adds
stores in cities like Indianapolis later in the year. (An additional three stores are served through an intermodal relationship with Union Pacific Railroad Co. and trucker NFI Inc.)
Container Store’s typical intermodal length of haul is
about 1,330 miles, though Indianapolis will be served at an
875-mile stage length, while Chicago, an existing market, is
served at 900 miles.
Container Store expects to save $300,000 in transportation costs this year through the switch to intermodal, said
Tom Sangalli, the company’s logistics and transportation
director. That number may fluctuate depending on network expansion and volume growth, he added.
INITIAL HICCUPS
The program was not without its risks. At a window of plus
or minus 15 minutes, Container Store’s store delivery schedules are among the strictest in retailing. “I’ve worked in
retail for 20 years, and these are the tightest windows I’ve
ever seen,” said Sangalli.
Because the delivery schedules could not be changed,
Sangalli’s biggest concern when making the switch became
the reliability of J.B. Hunt’s draymen, the truckers responsi-
