Full Speed Ahead: Railroad Intermodal Sees Growth
Our CEO, Tom Sanderson, recently spoke to Supply Chain Brain about the factors driving railroad intermodal growth. More freight is now moving from truck to intermodal, and the market is rapidly growing because of that conversion. According to Tom, driving this trend are three particular needs of manufacturers and retailers:
- Carriers that are competitive on cost, but also have a high level of on-time service and reliability
- Damage free delivery
- Secure capacity
“With the shortage of over-the-road truck drivers, intermodal has become a great solution,” says Tom. He points out that the biggest opportunities for growth are in non-traditional intermodal lanes, and notes that most of the freight today moving from Los Angeles to Chicago or New York is already moving intermodal. The area seeing the greatest growth overall is east of the Rockies, which is where the majority of the population lives and the majority of goods are consumed.
Tom says that specific growth in intermodal is seen in shorter-than-normal lengths of haul as well as in customer delivery freight. Shorter haul has also become much more efficient because of many factors, but most specifically points to:
- Economics. The rising cost of truck transportation and diesel fuel makes intermodal more economically viable on shorter hauls. There is nominal savings in line haul rate, but the savings in fuel by shifting to intermodal is significant.
- Service. The business strategy of intermodal providers is to approach the market like a trucking company would. A single truck-like service is essential in converting shorter haul freight from road to intermodal.
Railroads have also improved to provide more of the necessary reliability for intermodal shipping, and Tom notes a number of positive changes. Historically, intermodal cost a lot less, but the service was not reliable, but today the intermodal providers are doing a much better job. Tom also mentions that there is plenty of room for growth in the ability of railroads to offer continuing reliability and service. There is significant additional freight that could be moved from on-highways to the rail, as it’s much more fuel efficient, environmentally friendly and helps with the shortage of over-the-road drivers.
What else is Tom planning for the future? He says he’s closely watching truck capacity and how the new Hours of Service rules are impacting the driver shortage. “There are currently 3.5 million truck drivers, and with the Hours-of-Services changes an extra hundred-thousand drivers are needed just to break even – that’s going to be difficult to accomplish. It’s going to accelerate the shortage of capacity and will further incentivize the shipper to look to converting from truck to intermodal.”
Yet, overall, Tom has a very positive outlook for the next few years. “It’s a tremendous time to be in the logistics industry!”