Inside Logistics

The Logistics Review – Intermodal

October 20, 2009
by Deborah Aarts

Intermodal transportation has taken a beating in the past year.

Late this summer, in its quarterly Intermodal Market Trends Report, the Intermodal Association of North America (IANA) reported that year-over-year traffic was down 18.7 percent.

“Intermodal volumes have leveled, on an absolute basis, since the sharp downturn from early fall [2008] through late winter [2009],” the report reads. “Though loadings are no longer worsening, neither are there yet clear signs of improvement.”

But the recession isn’t the only reason intermodal is underused.

The challenge

Even in good times, many shippers have been hesitant to use intermodal.

There are two main reasons behind this. The first is misperception. Since there are many variables (marine, rail and truck modes; 20ft, 40ft and 53ft containers) involved, there is often a tendency for shippers not to realize that a good intermodal solution is greater than the sum of its parts. According to Dimitri Mousmoulis, a Montreal-based intermodal specialist for Wheels Group, nearly half of shippers don’t fully understand that intermodal could benefit their business, believing that the added steps between modes and containers will add costs to their supply chains.

The second reason is intermodal’s heavy reliance on rail transport—specifically, the limitations of the mode. Time is a problem: rail is slower than truck, so expedited cargo is out. Reliability can be an issue, too: cargo moved by rail is susceptible to the weather, labour and equipment failure delays.

This makes scheduling difficult, and while some railways offer shippers the option of paying extra to secure a guaranteed delivery time, most are not willing to commit to a deadline. Then there is the flexibility problem: shippers who want to change the routing of a container after it’s been loaded are often subject to heavy fines.

The opportunity

Yet in this economic climate, there is a big—and difficult to ignore—advantage to moving freight intermodally: cost. Load per load, mile per mile, it’s almost always cheaper to use rail for at least some of a trip than it is to ship exclusively by truck.

For years, service providers have preached the cost-saving benefits of intermodal to shippers, Paul Waite, CN’s vice-president of intermodal, tells MM&D. Traditionally the promise of better margins hasn’t been enough to lure most away from tried-and-true methods. But that has changed in the past year or so.

“It’s been an ongoing dialogue that probably needed something of a watershed moment to make it tip, and I think the recession was that watershed moment,” Waite says. “People are looking at the most cost-efficient way to get things to destination.”