Intermodal : Making the Connection
Intermodal transport requires all modes to work together seamlessly. It's all about connectivity.
Intermodal transportation has been a fundamental part of supply chain management for more than two decades, and indications point to continued industry growth. Intermodal volumes grew 4.5 percent in the second quarter of 2015 over the prior year, and international intermodal also surpassed expectations for the quarter, according to a recent Intermodal Association of North America (IANA) report.
"International volumes displayed one of the largest increases since IANA began keeping records," says Joni Casey, president and CEO of IANA. "While much of the strong performance in the second quarter was due to the recovery from the first quarter's port congestion issues, strengthening imports also played a role in pushing international volumes higher."
Intermodal marketing companies (IMCs) also posted strong year-over-year Q2 volume growth. Intermodal loads jumped 4.5 percent, and IMC highway volume soared 8.2 percent, which was three times the pace of overall highway trailer loads.
Not only is intermodal growing in overall volumes, it is becoming a dominant part of many railroads' business portfolios, IANA states. One example is CSX.
"Intermodal is the fastest-growing part of the CSX portfolio, handling more than 2.7 million units in 2014," says spokesperson Melanie Cost. "In the first six months of 2015, intermodal volume has increased three percent compared to 2014."
CSX and other railroads continue to work to divert freight from trucks to trains. CSX offers a proprietary Highway to Rail (H2R) Optimizer tool that shippers can access from the company's website. The tool helps shippers make decisions based on the economic and environmental benefits of rail, according to Cost.
Approximately 10 to 15 percent of landed freight moves by rail; the remainder moves by truck, says the American Trucking Associations (ATA). While recognizing that many trucking customers also use rail providers, the ATA states that intermodal transportation is not without its own challenges.
"Intermodal requires operational cooperation and dependence with ocean carriers, terminals, railroads, and other third parties, diminishing the control-dispatch independence that truckers otherwise had over their operations," says Dave Manning, president of TCW, a trucking company based in Nashville, Tenn., and member of the Board of Directors of the ATA's Intermodal Motor Carrier Conference. "Their problems, unfortunately, become our problems."
Shippers managing global supply chains recognize firsthand the impact that each mode and leg has on the overall transport of goods. While ocean, rail, and trucking providers all remain committed to improvement in their respective industry sectors, intermodal transportation requires the modes to work together seamlessly. For shippers, or beneficial cargo owners, intermodal transportation is all about connectivity.
Many railroads are addressing the needs of their intermodal customers by investing in equipment and technology. They are also investing in infrastructure that allows easy access to port locations and inland intermodal sites. Western U.S. ports are "investing in unprecedented infrastructure" that will connect with rail networks, according to Burlington Northern Santa Fe (BNSF) Railway.
West Coast Trends Up
West Coast ports continue to handle a majority share of Asian imports into the United States, a trend that the railroad predicts will continue, according to Katie Farmer, vice president of BNSF's consumer products group. The rail works closely with West Coast ports to provide direct access to key markets, including Dallas/Fort Worth, Kansas City, Chicago, and Memphis.
"We expect growth in both the Pacific Southwest and Pacific Northwest port gateways," says Farmer. "We have made record investments in our West Coast facilities and in all the routes leading from the West Coast to our inland hubs."
On the East Coast, CSX directly serves more than 50 intermodal terminals, and has access to all major ports on the Atlantic and Gulf coasts. It also connects with other railroads to serve West Coast ports.
A Benefit to Ports
New port development also plays a role in intermodal transportation. Both Canada's Prince Rupert in the far northwest Pacific, and Mexico's Lazaro Cardenas south of California, have helped create outlet ports that have benefitted their exclusive carriers, Canadian National and Kansas City Southern, respectively, according to a recent whitepaper published by Wall Street transportation analyst Tony Hatch.
Railroads, ocean carriers, and trucking companies realize the benefits of infrastructure improvements that eliminate congestion on highways or roads surrounding ports. Ports also realize gains as a result of increased rail connectivity.
Curtis Foltz, executive director of the Port of Savannah, sees outstanding rail connectivity as "hugely strategic and critical to future growth." With both Norfolk Southern and CSX terminals on port, Foltz indicates that approximately 20 percent of all products arriving by container into the Port of Savannah leaves the port via rail, with 80 percent moving by truck.
"We forecast that the percentage of cargo moving by rail will grow to about 26 percent," Foltz says. "Rail transportation is economical, environmentally friendly, and reduces the burden on our nation's highway system."
Supply chain management will never, however, be a "one size fits all" industry, says Foltz. "When making transportation routing decisions, shippers must consider issues of service reliability, the cost of carrying inventory, and the shelf life of goods," he explains.
Other East Coast ports are also experiencing benefits as a result of enhanced rail connectivity. PortMiami, for example, has on-dock rail, and Port Everglades offers near dock rail through their respective strategic alliances with Florida East Coast Railway (FECR).
In July 2015, FECR and Port Everglades celebrated the one-year anniversary of the completion of FECR's Intermodal Container Transfer Facility (ICTF), adjacent to Port Everglades.
"The ICTF ensures that Port Everglades is competitive with other U.S. East Coast gateways, and, most importantly, gives South Florida a cost and time-to-market advantage over many of these gateways," stated Steve Cernak, Port Everglades chief executive and port director in a joint press release between FECR and the port.
Investing in Equipment
While railroads are investing in infrastructure to better serve ports, trucking companies are also making investments in equipment to support port requirements. For the past several years, truckers have been upgrading and replacing older trucks with 2007 EPA emission compliant trucks to meet port-clean mandated requirements in various ports around the country, according to the ATA.
"In Southern California alone, motor carriers spent more than $1 billion," says Manning. "The New York/New Jersey port complex will impose the same type of 07 compliant engines in 2017."
Ocean carriers often select ports based on efficiency and cycle time, or the ability to discharge/stow cargo rapidly. This is critical to allow ocean carriers to meet the needs of their shipper customers and to maximize asset utilization. That's why shippers are starting to prefer ports of call that support efficient loading or unloading of containers to land distribution networks.
"Companies are running in real-time or just-in-time environments, and any interruption can have significant supply chain impacts," notes Robert Weist, vice president of North American transportation for Crowley Maritime, which serves port locations in Pennsauken, N.J.; Jacksonville, Port Everglades/Miami, Fla.; Gulfport, Miss.; and San Juan, Puerto Rico. From these ports, Crowley serves the eastern and western Caribbean and Central America.
Crowley uses electronic data interchange (EDI) and other types of technology to manage shipments and provide a seamless experience for the beneficial cargo owners (BCOs) the company serves, says Weist. This includes managing both Crowley events and standard rail EDI events. From the time a vessel is discharged, Crowley monitors at least four other events before the cargo reaches the in-gate railroad. The carrier also monitors at least 15 events during the rail portion of the shipment before the cargo is unloaded from the train and is in the process of being transported by drayage or truck to the customer location.
Railroads are also developing systems to provide shipping information and visibility to intermodal shippers. "CSX allows shippers to trace their freight from rail origin to destination by connecting to the ShipCSX tracking system from their desktop or mobile device," explains Cost. "While the fluid nature of the rail network means we can't guarantee a to-the-minute estimated time of arrival, shippers are able to plan in advance to receive the freight."
BNSF makes a variety of tools available to help customers plan, ship, trace, and manage shipments. All BNSF customers receive a unique user name and password that allow them to access the full suite of tools. One popular application is called "Rail Central," which enables customers to create multiple customized reports and schedule them to be sent via email.
In addition, BNSF also offers "Track Your Shipment," allowing shippers to trace up to 300 units and drill down to individual units to view more details about the shipment. Intermodal shippers also use "Display Intermodal Lot Location," a tool that enables them to receive accurate lot location information, providing an estimated time when the shipment will be available, and the date when free storage expires for that particular shipment.
With ocean carriers, railroads, and trucking companies all offering different options for tracking and tracing, how does a shipper manage information across multiple modes and providers? In some instances, shippers turn to neutral third-party logistics providers or ask for a "push" system to receive information from a variety of providers.
TriMas Corporation uses international and domestic intermodal daily. The Bloomfield Hills, Mich.-based company is a diversified global designer, manufacturer, and distributor of engineered products that serve a variety of industrial, commercial, and consumer end markets. TriMas operates 50 facilities in 16 countries.
Ocean to rail to truck
A typical shipment for TriMas might begin with product being manufactured in China and traveling by ocean carrier to a U.S. port location, typically on the West Coast. From there, the shipment moves by rail to Chicago, then through a drayage carrier to the TriMas location in South Bend, Ind. At that point, less-than-truckload, truckload, or parcel carriers move products to end users.
The company relies on a non-vessel-operating common carrier (NVOCC) to manage relationships with ocean carriers and railroads, while TriMas logistics team members interact directly with parcel or trucking companies, says Candace Holowicki, director of global transportation and logistics for TriMas.
Across every mode, Holowicki stays closely involved with all negotiations and provider selections. "It is important that everyone is on the same page and understands our expectations," she says.
TriMas manages by exception, and views each leg and mode as an opportunity to support its supply chain, in some instances following a "plug and play" approach. The company uses global trade management tools, as well as its own transportation management system.
Regardless of the many tools available, however, collaboration and communication are required to manage a complex multi-modal global supply chain, Holowicki says.
"We focus our attention where we can make the greatest impact," she says. "There is little I can do while a shipment is traveling across the ocean. For landed distribution, however, we can make decisions based on the situation's unique needs, such as demand being higher than anticipated in any of our product lines."
For example, Holowicki must work with TriMas vendors, procurement, and manufacturing to address specific supply chain needs. If a production line sits idle or demand exceeds expectations, "we have to do the analysis and make a decision," she says. "In that situation, we may not have the option of using an economical rail solution to move products from the West Coast to Chicago. Due to time-sensitivity, we may look into trucking that shipment."
Whether dealing with a unique situation or day-to-day supply chain needs, connectivity with transportation service providers and internal customers is the key to successful execution. Holowicki sums up her advice to other logistics professionals in one word: "Communicate."
Total Intermodal Loadings 2000-2014
Source: IANA Intermodal Market Trends & Statistics Report