Intermodal transportation is currently under great scrutiny in the supply chain. Pundits debate whether intermodal is a cost-saving method that can help ease supply chain capacity issues, or a second-tier solution fenced in by customer service concerns and a finite supply of railroad track in the United States.
Like many aspects of today's supply chain industry, the intermodal debate has its roots in globalization.
Thanks to ubiquitous global trade and sourcing from low-cost countries, containerized imports to the United States have increased at warp speed—from slightly more than 5 million TEUs in 1991 to more than 18 million TEUs in 2005, according to research by international trade database Piers and rail services provider TTX Company.
In addition, imports will continue to grow at a 6-percent compounded annual rate over the next 10 years, experts predict.
"This surge in imports, coupled with the issues facing U.S. domestic transportation, will create unprecedented growth for the intermodal industry," says James Hertwig, president, CSX Intermodal (CSXI), Jacksonville, Fla., a subsidiary of global transportation firm CSX Corporation.
Recent statistics from the Intermodal Association of North America (IANA) support Hertwig's robust predictions—between 2001 and 2005, intermodal units (trailers and containers) grew from 10.3 million to 13.6 million, according to IANA's Intermodal Market Trends & Statistics Report.
The all-too-familiar litany of trucking industry woes—a driver shortage; increasing fuel, equipment, and insurance costs; and a potentially volatile regulatory environment, among others—add to intermodal's appeal. In addition, the industry has made strides in creating seamless interactions between modes as a result of shipper demands.
"Intermodal products are now well integrated with most over-the-road carriers," Hertwig explains.
Hertwig's bullish outlook on intermodal is not just lip service. CSXI is putting money where its mouth is, committing a whopping $1.4 billion in capital expenditure during the next two years to improve its intermodal network.
The massive investment is split among infrastructure, capacity, equipment, and technology needs, and includes the following projects:
Terminal expansions and improvements. An expansion to CSXI's Buffalo, N.Y., terminal will create a facility capable of handling 60,000 trailers and/or containers per year. CSXI is also boosting the size of the paved processing area at its Tampa, Fla., location to increase lift capacity.
In addition, track infrastructure improvements will allow CSXI to handle additional trains at its Chicago-area terminal in Bedford Park, Ill.
A new terminal. Upon completion in September 2007, CSXI's new terminal in Chambersburg, Pa., will offer more than 100,000 lifts and 20,700 feet of track. The 114-acre intermodal facility sits close to Interstate 81, as well as area warehousing and logistics parks, and will service traffic from the West and Midwest.
Technology upgrades. CSXI is implementing radio frequency systems at more than 20 terminals to speed throughput and reliability, and improve driver safety.
The company is also reviewing capacity needs and market opportunities in locations throughout the United States, and has entered into an agreement with rail carrier BNSF to increase capacity and provide improved service in the Pacific Southwest-Southeast corridor.
If CSXI's investments are any indication, shippers will be embracing intermodal as a means of handling increased import volumes in 2007 and beyond.
In that case, the debate may shift from whether or not intermodal is the answer to capacity issues, to whether or not intermodal providers can keep up with demand.
Taking WMS to the Next Level
For many companies, implementing a warehouse management system (WMS) is the key to improving a variety of warehouse management tasks and ensuring the smooth flow of goods into and out of the DC.
But merely implementing a WMS is not effective enough, because many organizations under-utilize their WMS investment or do not make sound upgrade and replacement decisions, finds a new benchmarking and best practices survey from the Supply Chain Consortium, Raleigh, N.C.
"Although companies are implementing WMS solutions to enhance operations, too many do not maximize their investment by continually evaluating how well they employ their WMS and seeking improvement opportunities," says Tom Singer, a consultant with Tompkins Associates, and author of the WMS survey report.
WMS functionality can help improve packing, order and shipment consolidation, value-added services, carrier selection, and quality assurance processes, according to Singer.
"Best-of-breed and ERP WMS solutions generally offer rich outbound functionality that can help operations dramatically improve their efficiency and customer service levels," he says, noting however, that any WMS solution must be properly implemented, managed, and utilized to achieve its full potential.
Part of achieving that full potential comes from using more than the basic functions of a WMS—something many companies fail to do.
The majority of respondents use their WMS solutions to support receiving, putaway, picking, and shipping, but other functions such as cycle counting, packing, slot management, labor management, dock management, and yard management are under-utilized, finds the report, which surveyed 100 top retail and related companies.
Radio frequency (RF) picking using mobile handheld or vehicle mount terminals proved to be the most popular picking technology, while respondents report surprisingly low use of RF pick carts and voice picking.
Other key findings from the WMS benchmarking and best practices survey include:
- Customization still plays a major role in WMS implementations—45 percent of reported WMS solutions are internally or custom developed.
- Twelve percent of respondents use a third-party hosting service to access their WMS solutions.
- Only 60 percent of respondents perform a post-implementation audit of their supply chain technology investments.
- Less than half of respondents use their systems to schedule appointments for their receiving docks.
- Eighty-eight percent of respondents indicate that their WMS is integrated to a customer or store order management system.
Seeing is Succeeding
Improving visibility of order, inventory, and shipment status is at the top of many logistics executives' wish lists this year. Gaining visibility is the number-one global supply chain priority for 79 percent of enterprises with more than $1 billion in revenue, finds new research from Aberdeen Group, Boston.
Why is visibility so necessary? Companies cite the need to enhance the customer experience, improve operational efficiency, and ease regulatory compliance issues.
But desiring visibility does not correlate with possessing it—most companies still only maintain rudimentary levels of visibility, finds Aberdeen's report, Supply Chain Visibility Roadmap.
In the absence of sophisticated visibility systems, most companies depend on a hodgepodge of spreadsheets, carrier tracking web sites, and homegrown applications for data, says Beth Enslow, Aberdeen senior vice president and author of the report.
"Visibility leaders, on the other hand, deploy visibility software with cross-functional access, and achieve better results across key metrics," she says.
Enslow points to the following as proof: Visibility leaders are 2.4 times more likely than other companies to have reduced inventory levels since 2004; three times as likely to offer fast order-to-delivery times; and twice as likely to boast an on-time delivery rate of 95 percent or higher.
These firms use visibility systems to drive sustainable improvements in lead time, delivery reliability, and inventory reduction, Enslow says. They also use visibility information to protect gross margin and capture market share.
With such positive benefits, why do companies still lag in adopting visibility systems? Many are hesitant to invest the required time and technology, Enslow explains.
Also, organizational questions pop up, such as who is responsible for visibility—the need for visibility typically cuts across organizational functions—as well as who should fund the program.
In addition, implementation is daunting in some cases because visibility systems must gather information from multiple internal and external systems.
The future outlook for visibility systems is positive, however, according to Enslow.
"Companies can exploit visibility functionality now offered by their logistics service providers, cargo portals, transportation management system vendors, global trade solution providers, and others," she says.
No Shortage of Driver Shortage Issues
Among the myriad challenges trucking companies face, driver shortage concerns weigh most heavily on the industry, reports The American Transportation Research Institute's (ATRI) annual Top 10 list of critical issues facing U.S. carriers. The survey of more than 4,000 trucking executives indicates the main problem is the inability to recruit new drivers.
The industry achieved moderate success attracting new drivers in 2006, with a year-to-date total of 25,500 new hires as of September. "Nevertheless, industry research indicates that the projected driver shortage will exceed 110,000 by 2014," ATRI notes.
Fifty-seven percent of survey respondents place the driver shortage as their first, second, or third concern, and recent statistics on the driver turnover rate lend weight to their worries.
Driver turnover for both small and large truckload carriers increased during the third quarter of 2006, according to the American Trucking Associations (ATA). Large truckload carrier line-haul driver turnover increased to 121 percent from 110 percent in the second quarter, while small truckload carrier turnover jumped to 114 percent from 100 percent, ATA reports.
The need to attract and retain new drivers boosted the driver shortage to first place on ATRI's list, past fuel costs, which was the number-one concern in last year's survey.
The other issues rounding out this year's Top 10 are: driver retention, hours-of-service, congestion, government regulations, highway infrastructure, tort reform, tolls/highway funding, and environmental issues.
Driver retention and highway infrastructure were new additions to the Top 10 list this year, replacing insurance costs and truck security from last year's list.
Un-Fouling the Air
As supply chain professionals know all too well, environmental concerns have become a key issue for shippers. New regulations—both at home and abroad—have made reducing packaging waste, converting to biofuels, and complying with environmental mandates common concerns.
Now, ocean carriers and port organizations are getting into "green" mode as well.
Global container shipping company APL, for example, recently announced major initiatives to improve California's air quality.
APL, the world's eighth-largest container carrier, has teamed up with the California Air Resources Board, the U.S. Environmental Protection Agency (EPA), the ports of Los Angeles and Long Beach, and four California air quality management boards to test innovative fuel emulsification technology that could reduce emissions of nitrogen oxides from vessels by as much as 20 percent.
These eight partners will also test marine engine technologies—including slide valves and a next-generation lubricating system—that could further cut down on exhaust pollution. APL has begun using cleaner-burning, low-sulfur diesel fuel in the auxiliary engines of 23 vessels that regularly call on the ports of Los Angeles/Long Beach and Oakland.
Taken together, the initiatives are expected to spur long-term air quality benefits for coastal communities by cutting down exhaust from ocean-going containerships.
"The shipping industry is exploring a number of innovative approaches to curb vessel emissions and reduce the impact on the environment," says Wayne Nastri, regional administrator for the EPA. "Our goal with these initiatives is to prove they can be effective means of addressing harmful emissions from large ships."