Shippers Turn to Intermodal Transport for 2018 Capacity

As we begin 2018, capacity remains the most pressing logistics issue across the supply chain.  This is especially true within the transportation sector, where the driver shortage, ELD mandate, and other factors have severely impacted the trucking industry’s ability to handle increasing freight volumes. Because of this, more shippers are looking to intermodal transport for capacity.

Intermodal Transport Outlook

In the current logistics climate, freight is ready for the taking and intermodal is poised to handle capacity that OTR alone cannot.  Because of this, 2017 finished on a very high note for the intermodal industry and 2018 looks even better. According to the Association for American Railroads (AAR), intermodal volume rose by 3.9% in 2017 and recorded its highest-ever annual tally. Along with the trucking industry’s current issues, intermodal growth has also been helped by stable oil prices and an improving U.S. economy. 

According to Logistics Management, this intermodal growth could have been even greater – and ramped up sooner – if it wasn’t for the issues affecting service throughout 2017. These issues included the year’s major hurricanes, a lack of container capacity early in the year, as well as CSX’s current company transformation. As rail service improved in the second half of 2017, analysts feel 2018 will be a year of more substantial growth. 

Why Intermodal?

In addition to capacity, there are many other reasons why shippers are turning to intermodal. Rail is a greener and less expensive transportation method than trucking – it’s 4 times more fuel efficient and the average train can carry the equivalent of 280 trucks. And, where rail transport used to be a major headache, the railroad industry has poured billions of dollars into U.S. rail service and infrastructure over the last decade. These improvements – along with greater cooperation across rail lines – have allowed for seamless connections between major freight markets. For instance, what was once nearly a week-long trip from California to the Ohio Valley can now be done in a predictable 4-5 days. 

Another major improvement has been in the area of visibility. Rail companies have embraced automation for key functions such as routing, and have made major investments in electronic monitoring to allow shippers to track containers anywhere in route. Readers placed along tracks and in rail yards capture the information, which rail companies make available on web portals.

At KANE, intermodal is in the mix for many of our customers. Most KANE facilities either have direct rail siding or are very close to a transload terminal. We execute a number of interesting intermodal rail projects for customers, including our outside storage solution for Dow Building Products.

Current Intermodal Factors to Consider

While intermodal rail certainly has many advantages over trucking in the current transportation climate, there still are potential hurdles that you must consider. First and foremost, intermodal transport is slower than OTR. This means that it is better equipped to handle non-urgent shipments – freight that is on a predictable, repeating schedule. 

And, while price and capacity are certainly strong suits of intermodal, the current capacity issues are leading to price increases within the intermodal industry. Freight capacity can also fluctuate nationwide. Current capacity on the West Coast, for instance, is very tight for intermodal as it is for all modes of transport. 

Getting Started with Intermodal

If you’re new to rail or just use it for a small portion of your shipments, it may be in your interest to talk to a supply chain expert who has experience, capabilities – and, perhaps most importantly, the relationships – related to intermodal transport. Third-party logistics companies (3PLs), for instance, handle every aspect of the supply chain between manufacturer and consumer and can help you find opportunities to implement intermodal and other optimization solutions. 

So, in 2018, capacity is the challenge. Contact KANE today to how intermodal can be a part of your company’s solution.