intermodal,” he added.
Executives take pains to educate potential users in situations where intermodal might not work. The cost of truck
dray services to and from intermodal ramps is a crucial
element. The longer the dray distance, the higher the total
expense. Service to and from high-density markets like
Chicago and the Ohio Valley make dray service economical.
However, the returns begin diminishing when the service
hits lower-density markets.
A ratio of dray miles to over-the-road linehaul miles
above 30 percent would likely put intermodal at a cost disadvantage to truck, according to Sam Niness, assistant vice
president and general manager of “Thoroughbred Direct,”
the intermodal unit of Norfolk, Va.-based rail Norfolk
Southern Corp. (NS). For example, if the truck mileage is
800 miles and a shipper and consignee are each 100 miles
from their respective ramps, a 50-percent ratio (truck
mileage divided by the total round-trip dray miles on both
ends) would pose a conversion challenge, based on Niness’s
formula. However, change that truck haul to 2,000 miles,
and intermodal becomes an attractive option. In an effort
to reduce dray costs, a growing number of NS’s customers
are working with the railroad to position new distribution
centers close to its ramps, Niness said.
Executives are also careful to explain what must be done
to secure customers’ goods while on the rails. A trailer or
container that is fitted for truck transport may require
“blocking and bracing”—intermodal lingo for steps taken
to minimize damage to contents—before it is moved by
train. Arthur L. Adams Jr., director of commercial sales for
eastern rail CSX Transportation, a unit of CSX Corp., said
officials from the unit’s load engineering and design ser-
vices operation are brought in for complimentary consul-
tations with carriers and shippers on such measures before
equipment ever gets loaded.
OPENING THE DOORS
The past 10 years have seen dramatic changes in how intermodal is marketed. In a move to attract freight brokers,
railroads have made more intermodal services available on
the spot market, the world brokers live in. Rails also offer
brokers door-to-door services by bolting drayage operations onto the traditional ramp-to-ramp business. While
this has benefited all brokers, it has been a particular boon
to smaller players, which had to find their own dray services
but often lacked the scale or dray network contacts to do it
economically.
In 2007, Union Pacific Railroad Co. created a unit called
“Streamline” catering to smaller users that previously could
only secure ramp-to-ramp service from their rail partners.
By leveraging its enormous resources, Omaha, Neb.-based
Streamline gave users the opportunity to offer end-to-end
intermodal solutions to their customers, according to Kari
A. Kirchhoefer, Streamline’s president.
Rail intermodal folk contend that the ability to sell a
door-to-door product has demystified intermodal service
Beers of Transplace added that abundant container
capacity frees intermodal users from concerns over truck
shortages. Security issues aren’t a problem because a
wellcar holding two stacked containers is virtually impossible to break into due to the height of the top box and
the deep location of the bottom box.
Then there is the cost: According to Beers, intermodal
shipping rates are 15 to 20 percent lower than truck. In
addition, rail fuel surcharges are 40 to 50 percent less
than truck because rail service is inherently more fuel
efficient, he said.
Of course, working in the U.S.-Mexican market is not
the same as playing on the domestic field. Different
rules apply. Goods need to clear customs at origin and
destination. Shippers will confront two sets of linehaul
rates because the U.S. portion will contain fuel surcharg-
es, while the Mexican portion won’t. Insurance that is in
force in the U.S. is not applicable in Mexico. Different
policies and procedures at Mexican customs sometimes
cause bottlenecks in the country even before the goods
reach the border. Phil Shook, director of intermodal for
third-party service provider C.H. Robinson Worldwide
Inc., said Mexico suffers from a lack of intermodal ramp
density that could temper growth prospects.
As in the U.S., the length of the rail move dictates the
cost-effectiveness of cross-border intermodal service. A
trip from Chicago to the border will offset the cost of
the dray on either end. A trip from Dallas, on the other
hand, will not pay its way. Users will also have to balance
the cost-savings with the knowledge that a shipment
moving by rail may arrive one to two days later than
truck, even with the border congestion.
Another common denominator in both markets is the
need to educate the marketplace on intermodal’s pros
and cons. Rail has only a 14-percent share of the value
of the U.S.-Mexican market, according to the latest
available U.S. government figures. Many shippers don’t
know any other form of transport besides truck, and
they are unclear about intermodal’s capabilities. Beers
of Transplace said the conversion rate would be higher if
shippers understood the benefits of intermodal and the
trade-offs with over-the-road transport.
