The leaders of the North American intermodal industry
convened in late September in sunny, steamy South Florida
to discuss what their industry can be, and what it can’t.
It can be an alternative to over-the-road dry-van trucking, judging by data from consultancy FTR Associates,
which estimates that 0.1 percent of all dry-van traffic is
converted to intermodal each calendar quarter, a reflection
of rail’s reputation as a cleaner and more fuel-efficient
transport mode as well as shipper concerns over truck driver shortages and never-ending road congestion.
But it is unlikely intermodal will ever supplant trucking
in the budgets of shippers. Intermodal gets elevated in the
conversation when oil prices rise and regulators appear
to be clamping down on truck safety. However, the talk
dies down when the opposite occurs. Today, diesel prices
nationwide hover around $2.48 a gallon, the lowest level
since June 2009. In addition, Congress’s 2014 decision
to table a controversial provision in the Department of
Transportation’s rule governing the hours a driver must be
off duty before returning to the road has freed up capacity
that would have otherwise been lost.
Larry Gross, senior consultant at F TR, told the Intermodal
Association of North America’s (IANA) annual meeting in
Fort Lauderdale that Congress’s actions effectively led to
a 4- to 5-percent increase in truck capacity by allowing
drivers and rigs more time on the road. That may explain
why FTR expects domestic intermodal traffic to grow just
1. 6 percent in 2015, while international traffic, which has
lagged recently, rises by 6. 3 percent.
For now, truck capacity is no longer in what Noël Perry,
another FTR analyst, called “crisis mode.” Like many
observers, Perry sees the capacity crunch raging anew two
or three years out, as the cost of increased government
safety regulations puts many smaller fleets—the backbone
of the U.S. truck fleet—out of business, and companies
continue to struggle to find applicants for truck driver jobs.
What this means for intermodal is that while it makes
great sense for resolving shipper-specific challenges, it is
not a panacea for the still-looming mother of all truck-ca-pacity crunches. “We are a long way away for truck capacity
to be shifting to intermodal,” Gross said.
That hasn’t stopped the railroads from trying. William
Clement, vice president, intermodal, for CSX Transportation,
a unit of Jacksonville, Fla.-based CSX Corp., said on a sep-
arate panel that CSX still “sees great opportunity for con-
version from over-the-road (trucking), especially on the
East Coast.” Clement said intermodal accounts for up to
half of CSX’s overall growth. Tim Roulston, director, sales
and wholesale intermodal for Canadian National Inc. (CN),
the giant rail, said on the panel that CN would also move
relentlessly toward converting truck users.
SERVICE CONCERNS LINGER
Shippers appearing on a panel with executives from CN,
CSX, and Union Pacific Corp. said the intermodal supply
chain, which includes dray drivers trucking goods to and
from intermodal ramps, must focus on service consistency
above all else. Denis Marion, director of U.S. transportation
for the U.S. arm of Korean electronics giant LG Electronics,
said it doesn’t help if a box containing hundreds of thousands of dollars’ worth of high-value goods arrives at the
destination ramp two days earlier than scheduled and must
be moved to a yard because LG’s customer isn’t ready to
take delivery. Marion, whose unit moves about a quarter
of its goods via intermodal, said consistently hitting tran-sit-time metrics is essential in satisfying end customers,
who expect flawless delivery performance because they
don’t want to hold inventory.
“Don’t make me micromanage every single box,” Marion
said.
Ben Ball, director, transportation services/corporate
freight, for Dalton, Ga.-based Shaw Industries Group Inc.,
the world’s largest carpet manufacturer and a big flooring
producer, said Shaw would like to devote more budget to
intermodal if the service were to improve. Currently, about
18 percent of Shaw’s loads move via rail.
Paul Boothe, director of global transportation provider
development for Miami-based Ryder System Inc., said
intermodal in 2014 accounted for $85 million of Ryder’s
$5.1 billion in transport spend. Boothe said Ryder will likely boost its intermodal spend to $100 million by the end of
2015. However, he said that with a current on-time delivery
rate of 83 percent, intermodal’s delivery performance needs
to improve before more truck users will switch.
Virtually everyone at the meeting acknowledged that after
a one- or two-year breathing spell, the trucking industry
could face a capacity crisis that could bring providers to
their knees. This could mean a great opportunity for the
intermodal segment, as long as its executives recognize that
their business, too, cannot survive without drivers and rigs.
newsworthy
Intermodal folks take stock of
their vision—and the realities
standing in their way
go figure …
95,000/85,000
At left is the number of seasonal employees UPS Inc.
plans to hire this holiday. At right is the number of
seasonal in-store employees that retailer Macy’s plans
to hire.
SOURCE: COMPANY DATA
