Study says intermodal freight more sustainable and cheaper, but still lags in market share

In 2023, Bill Loftis co-authored a study on how intermodal rail could be a viable option to help decarbonize freight. The study, titled Decarbonizing Long-Haul Freight and conducted with Therese Langer, examined the sustainability benefits of intermodal freight and how rail could be the best transportation mode to advance this effort, as Loftis presented during the ASCM Connect conference in Austin, Texas.

Loftis, owner and principal of Supply Chain Ecology, highlighted several advantages of using rail, including cost savings, reduced road deterioration, the ability to move larger volumes of cargo, and lower emissions.

“If you can go from diesel to electric, you’re going to be far more sustainable,” Loftis said. “Diesel rail is even more sustainable than electric truck.”

Loftis believes the transportation industry lacks a solution for sustainable, high-performance, long-haul land freight, noting that alternative fuels are still extremely expensive, technically challenging, and years away from becoming viable options.

Emphasizing the benefits of intermodal, Loftis noted that it is 10 to 20 per cent less expensive than truckload shipping, with 95 per cent of shippers choosing intermodal for its cost savings. He also pointed out that 70 per cent of road deterioration is caused by trucks, not passenger vehicles, and that a single train can move the equivalent of 280 trucks, reducing highway congestion and cutting carrier costs by US$94.6 billion, or 1.27 billion hours.

Loftis added that intermodal is five times safer than trucking and 75 per cent more efficient, whether using electric or diesel energy.

Despite these advantages, the market share of intermodal freight is low and declining, with the international market share peaking in 2015. Intermodal grew rapidly from 2000 to 2015 but has since dropped 10 to 20 per cent since 2018.

Reliability is one reason behind intermodal’s decline. Loftis noted that shippers need confidence in their service providers, and trucking has long been seen as more reliable. Data shows that trucking has better on-time delivery rates. For short trips between 450 and 900 miles, intermodal has an 8.5 per cent lateness rate, but this rises to approximately 31.5 per cent for longer shipments.

Shippers often require intermodal experts to ensure service quality, and those using third-party logistics providers (3PLs) seldom consider intermodal as an option.

To become a more viable option, intermodal must remain cost-effective while covering longer distances and higher densities. However, intermodal’s one-size-fits-all business model, lack of competition, and limited regulatory oversight continue to drive declining volumes.

Loftis emphasized the need for more intermodal hubs across the U.S. and beyond. One disadvantage of rail is its limited proximity to shippers and receivers, often requiring cargo to be transferred to trucks for the final delivery leg.

Loftis stated that intermodal should account for less than a third of the total transport distance, making proximity to a hub essential.

“To put that in intermodal perspective, we need more intermodal hubs,” said Loftis, noting that the cost of a new hub is around US$47 million. “I’m not saying we shouldn’t electrify…what I’m saying is that we can’t electrify everything.”

Loftis also mentioned an innovative rail car known as a bogie that could be a game-changer for intermodal.

A bogie is an autonomous, battery-powered, truck-like rail car that does not require a locomotive. With a range of 500 miles, bogies would be a low-volume, electrified addition to the rail industry, designed to address intermodal’s density challenges.

To bring intermodal closer to customers, Loftis recommended building more short-line or regional routes to connect communities and customers not served by main networks. These regional routes could also connect to the Class 1 network.

“We need more connectivity if we want to win this game,” said Loftis.