Non-Asset-Based IMCs: Adapting Yet Again
BNSF Railroad's decision to eliminate rail-owned intermodal equipment by June 2006 is easy to understand. By only accepting private trailers and containers for transit, BNSF's cost savings and bottom line should swell. Both Wall Street and shareholders applaud the railroad's move.
Will traditional non-asset-based intermodal marketing companies (IMCs) be a casualty of BNSF's decision? Strong arguments can be made supporting the demise of IMCs, but I believe they are far from dead.
In the early 1980s, intermodal was all but dead. Rail equipment was almost unserviceable, schedules were met on paper only, and cargo damage was the only reliable result of an intermodal move.
Despite the odds, a few savvy entrepreneurs—including R.C. Matney, Phil Yeager, Don Oris, and Doug Wright—emerged to show rail carriers how they might change their intermodal ways. These intermodal pioneers made enormous gains in service reliability.
In addition, the development of stack- train service changed the market so dramatically that shippers once vehemently opposed to intermodal service suddenly became staunch believers after only a handful of intermodal test loads.
Rail carriers' marketing mantra became an appeal to the IMCs to divert highway freight to reliable, high-speed, damage-free, double-stack intermodal service. And divert they did. IMCs were so successful diverting highway freight to intermodal that motor freight carriers began to reconsider their adversarial relationships with the railroads.
As time progressed, however, more changes occurred—not all of them good for IMCs or their customers.
Rail mergers, increased import volume moving inland via ports, hub closures, and heavy investment in intermodal super-terminals again changed the product for IMCs. Bottlenecks popped up. Service grew unreliable. Equipment availability was hit-or-miss during peak season. And IMCs could no longer rely on intermodal service to meet their customers' transportation needs.
As a result, considerable intermodal freight diverted back to the highways. Companies with freight brokerage divisions mushroomed, as their acceptance by motor freight carriers and shippers grew. Organizations such as the Transportation Intermediaries Association worked hard to legitimize brokers as a viable source of quality transportation.
Since their inception, IMCs have always responded to industry conditions, creating a sound, innovative solution for their constituents. And they will do it again in light of BNSF's decision, by confining their scope of intermodal operations, which will result in tight equipment control.
IMCs will adapt to the change fostered by the BNSF decision by developing select intermodal corridors that are well managed and fiercely sensitive to expedited service. With IMCs managing private equipment, intermodal transportation will evolve from a commodity to a differentiated product.
Not since the development of double-stacked container service have IMCs had such an opportunity to decommoditize intermodal service. Service enhancements and opportunities for additional products to sell will follow. IMCs will make this happen.
That's why I say that IMCs are anything but finished.