Intermodal Transportation’s Solution to Our Evolving Supply Chain Demands
One of the top supply chain trends impacting the transportation industry today is intermodal transportation. Over the past few years, capacity has been squeezed with driver shortages, increased demand, increased fuel prices, and heightened government oversight. All these extenuating circumstances affect everything from pricing to timing of loads, and executives are looking for the answer in maintaining a cost-effective supply chain.
Intermodal transportation has provided one such solution. While traditionally carriers strictly sell the advantages of their own modes, this approach to transportation is quickly becoming outdated in our global society. It’s becoming clearer that shippers need to take a more integrated approach to keep pace with economic expansion and consumer demands.
A good example of the success of a business sector integrating their processes to keep pace with the economy is mobile phones. In the 1980s, mobile phones had one purpose: to make phone calls. But, as the economy rapidly expanded, simply making a phone call no longer met business needs. The technology industry integrated talk, data, and connectivity to allow for communication at anytime, anywhere in the world.
Today, logistics executives are taking the same approach to addressing the capacity squeeze by integrating the different modes of transportation: rail, truck, air, and sea. With the economy going through one of its slowest periods of expansion in history, shippers are exploring different ways of integration before everything ramps back up.
The most successful integration undertaking has been with intermodal rail. Shippers across the nation discovered in recent years that intermodal rail proactively addresses the need to meet both current and future business demands as the economy continues to expand.
The concept of intermodal transportation has been around throughout supply chain history. In the United States, the first major efforts to integrate modern transportation systems began in the 1960s. This started with setting maritime networks to better connect with inland networks. However, this was strictly either ship-to-rail or ship-to-truck. Now, the idea of using both rail and trucks is gaining momentum for a variety of reasons, including cost savings, environmental benefits, and highway safety results.
Rail traffic for 2013 saw record growth, with intermodal volume totaling 12.8 million containers and 14.6 million carloads, according to the Association of American Railroads (AAR). This represented the highest volume on record, surpassing the record totals in 2006 by more than 549 thousand units.
As our nation continues to recover from the Great Recession and spending and production pick up, the transportation industry needs to prepare for an influx of traffic. With shrinking capacity from the driver shortage and increased fuel prices, trucks alone can no longer handle our nation’s transportation needs. As there is no positive change on the horizon for truck capacity, this trend is expected to continue and shippers continue to look for alternatives.
With intermodal transportation, shippers can take advantage of lower rates, more predictable pricing, and the flexibility of loading and unloading goods in a dropped trailer environment, which reduces handling costs. This significant cost savings can greatly outweigh the speed by which shippers can move their goods via truck alone. Further, with fewer drivers on the road and fewer hours by which drivers are allowed to work, companies need to maintain their level of efficiency with pick-ups and drop-offs, which in many cases can no longer be handled by truck alone.
Intermodal transportation also provides shippers with more access to equipment and standardized transit schedules. This translates into reliability, capacity, and safety advantages. As companies move their freight to intermodal, they will also be able to streamline their reverse logistics.
In addition, as the U.S. government continues regulating companies for environmental impact, shippers are looking to reduce their carbon footprint. Trucks emit approximately 19.8 pounds of carbon dioxide per 100 ton-miles. Compare this to trains, which emit 5.4 pounds of carbon dioxide per 100 ton-miles. Until manufacturers develop a cost-effective fleet with a significantly reduced carbon footprint, intermodal rail will continue to be the most environmentally friendly mode of inland transport. By taking an intermodal approach, executives have solid proof that that they are being proactive in complying with current and future government regulations surrounding the environment.
When rethinking their logistic strategies to deal with tightening truck capacity, company executives need to seriously look at how intermodal transportation can benefit their business. It provides significant cost savings, increased reliability, greater capacity, and offers substantial green and safety advantages.