It’s clear that pressure on shipping capacity and rates from the ELD mandate, the ongoing driver shortage and a robust economy won’t be going away any time soon. To overcome those issues, some shippers are finding — or rediscovering — intermodal shipping service. By moving trailers and containers via rail versus over-the-road trucking, shippers can bypass capacity issues and find lower costs.
The trend has been evident as intermodal traffic volumes have been strong over the past several months. Through the first 36 weeks of 2018, intermodal rail traffic is up 6 percent over the same time last year, according to the Association of American Railroads.
Converting traffic to intermodal shipping services makes sense for many shippers. Here’s a look at some important aspects of intermodal shipping you should consider.
Converting traffic to intermodal works best for shippers who are able to trade longer transit times for lower rates. It’s especially efficient when moving from a major market near an intermodal terminal to another major market with facilities, cutting down on drayage time and costs on either end of the shipment.
Suits more traffic
A few years ago, intermodal traffic was most efficient for moves of 700 miles or more. That was the upper limit of a one-day truck move, so it made sense to make longer hauls by rail. However, now with the ELD mandate, drivers may not be able to make the same moves in one day. What used to be a one-day truck move is now a two-day move. Now, if shifting to intermodal adds only one additional day, then the lower cost might be an attractive tradeoff. We’re finding that intermodal is attractive for shipments in the 500-600 mile range now, such as between major markets on the East Coast.
Railroads are investing billions in improving intermodal infrastructure and services. New and expanded terminals, improvement of overall network velocity and removing inefficiencies that delay transit times are top priorities for railroads to ensure they retain traffic they’ve recently gained from over-the-road trucks.
If shippers adapt their supply chains to the pace of intermodal, they may be able to shift some of their products to ship earlier in the year to avoid peak congestion and build longer transit times into their strategies. Converting at least a portion of traffic to intermodal can pay off in long-term savings as OTR rates rise.
Intermodal drayage is not immune to capacity issues. Drayage, the truck movement on either end of the rail shipment from the terminal to origin or destination, still relies on drivers who can have their choice of freight right now. If a shipment requires multiple stops, or a 200-mile drive to pick up or drop off, the driver may be less willing to sign on for the move.
Intermodal shipping works best when there’s some flexibility in transit time. If shippers can forecast freight needs a few days further out, they can build in time for intermodal service. With some additional planning, shippers can reduce costs with intermodal.
Ultimately, it’s up to the shipper to choose the best mode to serve their supply chain. Some freight is very time sensitive and should stay with an over-the-road option. If you’d like to explore intermodal possibilities, we can help you weigh the advantages of converting traffic to intermodal and provide you custom logistics solutions that meet your supply chain goals.