Community Developers: Take the Intermodal Initiative

My Sears vacuum cleaner, made by Panasonic in Japan a decade ago, quit working recently. Replacing the original relay with a part now made in Indonesia fixed the problem.

Clearly, it’s not just America that is outsourcing. Manufacturing worldwide has morphed into production sharing, where companies assemble and sell products made from subassemblies sourced around the world. Your community’s intermodal terminals are the critical entry points into these global supply chains.

The number of terminals and services is shrinking just when intermodal connections are becoming crucial site selection factors. Railroads have been closing intermodal yards at a rapid pace.

To enter the global market, states that lack intermodal service must truck their shipments to yards in other states or to port cities.Maersk, the world’s largest container line, stopped accepting inland freight in 2007 except at a handful of intermodal hubs.

Manufacturers located outside these hubs must now arrange their own transportation to cities where Maersk will accept their cargo. Inland cities have become remote outposts in the global supply chain.

Railroads and big box retailers are driving these changes. Railroads started hauling containers inland from West Coast ports in the 1980s at half the cost of truck movements.

At about the same time, big box retailers began sourcing from Asia, stimulating demand. West Coast railroads now move dedicated, scheduled intermodal trains directly from container ports on the West Coast to inland freight yards. To keep these services on schedule, the railroads refuse to accept container freight in route.

During the past five years, railroads have reached their capacity to haul containers from Southern California ports. For the first time in history, rail shippers are coming to the railroads, rather than the railroads running trains to shippers.

End result: a global supply chain that is morphing into a clone of the hub-and-spoke system used by airlines – minus the spokes.

What Developers Can Do

If your development strategy targets manufacturing or distribution, intermodal service is a critical element in your competitiveness. You can’t do much once railroads decide to close your intermodal yards, but your chances of success are better if you are aware of the danger in time to implement a strategy to counteract it.

While incentives or co-investments might influence railroad behavior prior to a closure, it’s usually too little and too late to reverse it. Transportation departments typically look at intermodal facilities as part of their statewide plans but don’t recognize all the economic impacts that accrue from having intermodal service.

If it’s important to your community, your development organization needs to have a strategy in place to enhance it.

Intermodal logistics is changing rapidly as West Coast ports reach saturation for inland movements. Cargo has already started to shift to East Coast ports. Los Angeles imports were down seven percent in October 2007 from the prior year, while Asian container volumes at Charleston, Savannah, and New York were growing.

East Coast ports, served by different railroads, might well offer new services to inland shippers than those on the West Coast. The widening of the Panama Canal will have huge impacts on the geographic routing of commerce between U.S. cities and Asia. Expect a big shift to Atlantic and Gulf ports.

You might find that your intermodal service is much improved a decade from now—but that’s not likely if you ignore your community’s intermodal service and infrastructure today.

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