Getting on Track
Why intermodal should be a part of every shipper’s supply chain (and how to make that happen)
Most every shipper has experience with truckload freight and at least a basic understanding of railroads, yet many are unfamiliar with the marriage of these two modes. Dubbed intermodal transportation, it is an efficient method of shipping that should be an integral part of every supply chain. This document will outline what intermodal is, how it can benefit your network, and some of the key differences between truckload and intermodal shipping.
In the broader sense of the term, intermodal shipping is the movement of freight involving multiple modes of transportation, typically some combination of truck, railroad and/or ocean vessel. For purposes of this document, we’ll confine our definition to the containerized shipping of freight in North America via the combination of truck and railroad.
Why bother putting shipments on the rail when a truck can just as easily haul them? Why have multiple parties handle the same shipment? Why wait for longer transits? Let’s take a closer look at several key benefits.
Intermodal shipping can represent a huge cost-saving opportunity to shippers’ supply chains. Though savings vary by lane, seasonality, and the current truckload market, intermodal can save shippers hundreds, sometimes thousands, on a per-load basis. Even in competitive truckload lanes where per-load savings are nominal, shippers can drastically reduce their annual transportation spend. For example:
• Newark, NJ to Chicago, IL is a cheap backhaul lane for truckload carriers
• Intermodal cost-savings is typically between $50 and $150 per load, with one to two days additional transit
• Taken singularly, that’s not impressive; however, if that lane ships three times weekly…that’s an annual savings between $7,800 and $23,400 on just one lane!
On average, a fully-loaded semi-truck has a fuel economy of approximately 6.5 miles per gallon. Railroads can move one ton of freight 470 miles on single gallon of fuel. That incredible improvement in fuel efficiency translates to a 75% reduction of greenhouse gas emissions on a per-load basis, according to the American Association of Railroads. In addition to being the most fuel-efficient and environmentally-friendly mode of overland transportation, every fully-loaded intermodal train removes the equivalent of 280 truckloads off the road. With intermodal, shippers can decongest the air, their transportation budget, and North America’s highways.
It is essential for shippers to diversify their capacity pool. Every shipper will face supply chain disruptions, from minor, isolated incidents to macroeconomic trends. Shippers solely reliant on truckload shipping are ill-prepared to manage these capacity shortages. In addition to routinely occurring events (natural disasters, seasonal shortages), issues such as looming driver shortages and the impending ELD mandate could have a major impact on long-haul trucking capacity. Adding intermodal shipping to a supply chain can mitigate these risks.
The Class I North American railroads maintain shared equipment pools with over 80,000 domestic 53’ containers, and there are many asset carries with thousands of their own privately-held containers. This massive equipment pool is spread throughout the continent, and is accessible in nearly every metropolitan area. Shippers can work with brokers (called Intermodal Marketing Companies or IMC’s) that are contracted to lease rail equipment, asset-based carriers with their own equipment pool, or carriers like Coyote Logistics, who can offer the best of both worlds. In addition to being an IMC, Coyote has access to over 75,000 UPS assets, which further mitigates risks for shippers by drawing from two independent equipment pools.
Fast, Reliable Transportation:
Intermodal shipping is not slow. Many lanes run only one day longer compared to truckload transit; intermodal transit from Chicago to New Jersey can even be as quick as two days. Trains operate on set schedules, with daily departures in most lanes. Tracking is simple, with high visibility to freight movement. Every railroad has an easy-to-use website where shippers can get instantaneous tracking updates. Many carriers, Coyote included, receive multiple EDI location updates every hour directly from the rails while the freight is in transit. Coyote customers can view these tracking updates in real-time through our website (Coyote.com) or customer mobile app (CoyoteHOWL).
Safe and Secure
Your freight is safe when in transit on the rail. Containers on the train are typically double-stacked. The lower container is lifted by crane inside the well car, which prevents the container doors from opening. The upper container is locked on top of the lower container, high above the ground and out of reach of thieves. When the containers are offloaded at the gated intermodal facilities, they are under the watchful eye of 24/7 security personnel and surveillance; many intermodal facilities have their own internal police force.
Your freight is also secure from damage. As long as freight is properly blocked and braced, it is no more likely to be damaged in transit than in a truck. Hi-tech lift cranes are smooth and steady, as is rail transit itself.
It’s only getting better
Each of the Class I railroads have invested billions of dollars in building their infrastructure over the past decade. They are all committed to converting highway freight to the rail, and are making their intermodal product more attractive by: building new, state-of-the-art facilities; renovating existing locations; increasing connectivity and lane offerings and reducing transit times.
How do I find intermodal opportunities in my supply chain?
There is no hard and fast rule to determine which lanes are cheaper on the rail. Several factors come into play: door-to-door distance; origin and destination proximity to rail ramps; current truckload rates; headhaul or backhaul lanes and current rail service offerings. As a general rule, if the lane is longer than 500 miles and you can ship it in a 53’ dry van, it is worth looking into intermodal. Many lanes around 500 to 600 miles are cheaper over-the-road, but there are several that are candidates for conversion. For instance, Chicago, IL to Buffalo, NY is only 533 miles, and is typically several hundred dollars less expensive via intermodal.
The best, and easiest way for shippers to ensure they discover every opportunity in their networks is to utilize an experienced intermodal provider. A good provider will simplify the conversion process, making intermodal shipping a seamless, door-to-door process every bit as fluid as your truckload freight. At Coyote, we routinely conduct network optimization analysis for customers to find any and all opportunities. Our dedicated intermodal team combines the power of our proprietary, in-house technology and intimate industry knowledge to offer our ‘No Excuses’ service. Whether you are new to the mode, or have been shipping on the rails for years, we make it easy for shippers to run intermodal.
Adjusting your expectations
While shippers can expect reliable, safe and cost-effective service on the rail, there are some differences between shipping truckload and intermodal to be aware of. Being a completely different mode of transportation, it’s crucial for shippers to understand the nuances of intermodal to avoid any future frustration.
When your container is on the train, it’s on the train
When moving freight in a truck, the shipper maintains a comparatively high degree of control over the product. If the product needs to be re-routed, all it takes is a call to the driver. If the driver breaks down, it is relatively easy to source another driver to repower and deliver. Aside from that, delays are typically limited to minor traffic jams.
When shipping intermodal, one conductor is moving one train with hundreds of loads. They are not able to prioritize individual containers. If the train is delayed in transit, the rails will work as quickly as possible to remedy the situation, but there is nothing the shipper or intermodal provider can do to expedite. If there is congestion at the destination facility, the rail will work as quickly as possible to pull containers off the train and mount them on a chassis, but there are thousands of containers and it may take a few additional hours.
No intermodal provider, whether asset-based or broker, can solve most rail delays, but Coyote will always keep wide open lines of communication, giving shippers up-to-the-minute updates on any delayed shipments. Better yet, Coyote’s intermodal experts use historical transit data to help shippers proactively plan transits, hedging their bets for delays.
Plan your transit
Intermodal shipping is not slow, but it does take longer than a truck. If shippers have time-sensitive deliveries, it is critical to understand how the freight will move on the rail and plan accordingly. Every day, Coyote accommodates shippers’ demanding delivery requirements, boasting KPI’s comparable to our truckload services.
Intermodal trains operate on predetermined transit schedules. At origin, daily “gate cuts” determine whether a container will be on that day’s train or have to wait until tomorrow. At destination, rail schedules offer estimated notification times (also called “grounding”, when the container is pulled off of the train and placed on a chassis for delivery). Typically, the rail will notify a container within six hours from the train’s arrival at the facility.
Let’s examine an example to illustrate:
Chicago, IL to Atlanta, GA
Blocking and Bracing
Rail shipping is a smooth and steady mode of transportation, with both the cranes lifting containers onto trains and the ride on the rails. That said, gentle vibrations over hundreds of miles of track can cause unsecured pallets to gradually shift, and potentially tip. At the least, this can lead to damaged product and/or overages on legal axle weights, resulting in costly and time-consuming re-works. At the most, tipped pallets can cause dangerous leaning containers that may fall off the train. Proper blocking and bracing is important for every mode of shipping, but it is especially important for shippers to do so when shipping intermodal.
Shipper Responsibility: in intermodal shipping, the shipper is responsible for securing their freight, not the origin driver, railroad or destination driver. This is an industry standard.
How: proper blocking and bracing often makes use of void fillers (such as air bags or honeycomb fillers) and plywood dividers. Load locks and load straps are not usually sufficient by themselves.
Resources: Every railroad has damage prevention specialists dedicated to helping shippers design loading plans and diagrams for intermodal shipping. Coyote can connect you to the necessary resources to prepare your freight for intermodal conversion.
Intermodal has some accessorials that are not typically associated with truckload shipping. It is important to remember that any increased accessorial expenditure is still less than potential cost-savings. A vast majority of intermodal loads do not incur any accessorials, and proper planning and best-practices by the shipper make them an even rarer occurrence.
• Detention: $50 to $75 per hour, billed in 15 minute increments. Drayage carriers tend to have higher detention rates than truckload carriers and strictly enforce those rates. Drayage carriers rely on efficiency and turning multiple loads per day with a single driver, necessitating an accurate schedule with less room for unplanned delays.
• Per Diem: also called demurrage, this is the daily leasing fee the railroad charges IMC’s to use their containers. The fee is typically $20 per day, and is assessed every day the container is on a chassis. Many asset carriers also charge per diem fees. Shippers most often face these charges in drop container scenarios.
• Ramp Storage: in an effort to reduce congestion and free up chassis, the railroad will assess storage fees on containers that are not removed from the rail ramp within the allotted “free time”. This “free time” will vary by railroad and facility, but shippers are typically given the day the container is placed on a chassis plus one to two additional days, after which fees ranging from $75 to $200 per day will accrue.
• Dry Run: in the event the drayage carrier arrives at the shipper or consignee and the facility cannot load or unload the product, respectively, a dry run may occur. A dry run is the intermodal equivalent of a TONU (truck-order-not-used). TONU’s are typically a flat fee. Dry runs are typically the full cost of the drayage run. This is primarily due to the fact that often times, the driver is going to the rail ramp to get an empty container specifically for a load, and is effectively deadheading all the way to the shipper.
Intermodal is efficient, cost-effective and sustainable. It augments shippers’ capacity while reducing their carbon footprint. Every Class 1 railroad views it as an important source of future growth; they are continually investing in infrastructure and service improvements. It is not the solution for every lane, and there are some obstacles to implementation, but a skilled and experienced intermodal provider like Coyote Logistics will facilitate the entire conversion process, letting shippers focus on their product while we save them money. Reach out to Coyote today and get on the right track.
List of References:
IANA, Intermodal Factsheet. http://www.intermodal.org/information/factsheet.php
CSX Rail, Intermodal 101. http://www.intermodal.com/index.cfm/resource-center/information-kits/intermodal-101-part-two-the-benefits-of-intermodal-rail-shipping/