Periodically, business conditions change. These changes can have positive or negative effects on certain sectors of the freight transportation industry.

Intermodal transportation uses at least two modes of transportation (i.e. road, rail) to move freight. The intermodal option works best when the rail service provider has terminals within a fifty-mile radius of the origin and destination points and on major long haul (i.e. over 1000 mile) lanes. While intermodal volumes have grown over the past couple of decades, this business remains a niche market. The typical road/rail combo service is usually a few days longer than over the road transportation, but it is normally priced a few percentage points below truck service. This may be a pivot point for intermodal. Here’s why.

The US and Canadian Domestic Intermodal Freight Markets

Two hurricanes in the southern US and solid economic conditions in Canada and United States have been driving a tightening of trucking capacity. As it tightens, intermodal service can be an option on some freight shipping corridors. Shippers often look to intermodal service for lower freight costs. As truck capacity shrinks and spot market rates rise, this may create an impetus for shippers to migrate some traffic from road to rail.

Back in the 90s, I had the privilege of leading Canada’s largest Intermodal Marketing Company. Since that time, I have been a big supporter of this service. In our consulting work with shippers, we are often struck by the fact that this service remains undervalued and underutilized. The purpose of this blog is to challenge shippers to revisit and rethink their company’s intermodal activity and help them craft an effective plan within their supply chain strategy.

While intermodal service provides various benefits, the top advantage is that on longer lengths of haul (i.e. over 1000 miles), it typically costs less than over the road truckload service. While transit times are longer in some (but not all) instances, the economies of moving multiple containers on an intermodal train usually provide shippers with a cost advantage. When compared to truck transport, lower fuel surcharges and less exposure to driver shortages are also beneficial.

Over the past decade, all of the class 1 railroads in North America have invested heavily in their Intermodal terminal network and service offerings. As an example, a few years ago, CN Rail built a rail facility in Prince Rupert, British Columbia, the closest North American port to Asia. That port allows for the movement of intermodal containers on a single-line CN train from Prince Rupert across Canada or through Chicago as far south as New Orleans, LA. Here are a few steps to consider in preparing an effective intermodal strategy.

Step 1 – Revisit your vendor and customer service requirements

The term intermodal refers to moving a container or trailer by more than one mode of transportation—generally truck plus rail, ocean plus rail, ocean plus truck, or all three modes. Some recent freight industry trends—such as long-haul trucking capacity shortages, higher fuel costs, and a drive to reduce environmental impact—have sparked new interest in intermodal, especially pairing truck and rail as an alternative to over-the-road (OTR) trucking for domestic moves. For many years, shippers were reluctant to use Intermodal service. Memories of poor service, of containers or trailers stuck in a rail yard, coupled with the speed and flexibility of using over the road service on shorter distances, inhibited intermodal growth. That seems to be changing.

The American Association of Railroads is reporting record intermodal volumes in some months. Truck capacity and driver shortages, the investments made by the major railways on many key business corridors, the increasing use of Intermodal long haul service by truckers, along with improved technology are fueling a so-called “rail renaissance.” "Domestic intermodal is growing much faster than almost any other area of the U.S. economy or industry," says Scott Webb, senior vice president at NFI Intermodal, a carrier based in Cherry Hill, N.J.

What are some Best Practices that shippers and Logistics Service Providers can follow to take advantage of Intermodal service? Here are a few tips.

1. Educate yourself on how Intermodal service can benefit your company

Identify the railroads, drayage companies and IMCs (Intermodal Marketing Companies) that service your lanes of traffic. Learn about chassis, trailers and containers and the size and number of the containers (e.g. 20 foot, 40 foot and/or 53 foot) available in your area. Educate yourself on the head haul and back haul requirements of the intermodal providers serving your traffic corridors. Compare the transit times and costs against the over the road options across all lanes. Find out about their closest rail terminal and its hours of operation. Examine the length of haul on your major lanes and the hours of service it will take a driver to move your loads. Will an OTR driver hit the maximum hours of service in a day on some key corridors and then have to take a ”time out?” Would you be able to obtain essentially the same transit time by switching to intermodal service that can be competitive on lanes as short as 450 miles? If you are an import/export shipper, learn more about the locations of ports that serve your major locations. Meet with representatives of these companies, take some terminal tours and review your operational requirements with them. Find out what they can do for you.

The Intermodal Association of North America (IANA) reported an increase of 4.7 percent in total intermodal traffic in the third quarter of 2013 compared to the same time period in 2012. Continuing to lead intermodal growth, domestic container volume increased for the 2013 third quarter by 9.4 percent when compared to third quarter 2012 volume. All domestic equipment experienced a 7.6-percent gain in the 2013 third quarter, including a 1.2-percent boost in intermodal trailer volume for the same period.

The increase in total intermodal traffic for the 2013 third quarter was also caused by a slight rise in international volume by 2 percent over 2012 third quarter volume. A slow but steady growth trend may be expected for the international market if jobs, consumer spending and/or the broader economy accelerate, according to IANA.

The third quarter of 2013 marked the first time that international shipments were outpaced by seasonally adjusted domestic shipments. Joni Casey, president and CEO of IANA, said, “For the tenth quarter in a row, domestic container volume flexed its muscles and has outpaced international shipments driving the gains in total intermodal traffic. It is also worth noting that the trailer segment grew in all three months of the third quarter, reversing three years of decline and contributed to domestic growth.” 

What are the factors contributing to the sustained growth in intermodal business?

The U.S. is still a major manufacturing centre