Modal Harmony in a Discordant Market
When U.S. gas prices hit all-time highs in summer 2008, surpassing $4 per gallon and $140 per barrel, shippers felt the pinch. For some, it pushed the needle in a new direction.
Shippers such as Welch's used the 2008 gas crisis as a burning platform to test intermodal solutions in certain lanes. It was a call to action that precipitated a rush to ramps. Then the economy tanked. Soft demand yielded surplus capacity, which, in turn, made truck pricing more competitive.
Six years later, that paradigm has completely flipped. Today shippers are flopping between rock-hard pricing and hardened capacity constraints that show no signs of easing. Capacity, customer service, and pricing are neatly aligned. If you want those two Cs stat, it's going to cost you.
Not convinced? Consider this. Truck driver turnover increased 11 percent from first-quarter 2014 figures to an annualized rate of 103 percent, according to the American Trucking Associations. Translated: carriers are losing drivers faster than they can replace them. Companies spend as much as $5,000 to hire and train one new recruit. No wonder Con-way, Boyd Bros., U.S. Xpress, Swift, Celadon, and countless other carriers are raising driver pay, and some are even offering substantial signing bonuses.
Absent a silver bullet solution, intermodal is the only alternative that promises capacity while reducing transportation spend. The returns are significant. It's why U.S. intermodal loadings continue to set new monthly records. But conversion is not without challenges.
Merrill Douglas' feature article, Intermodal: Too Much of a Good Thing? takes a close look at a market that is bridled by space. Expediting freight throughput at ports, managing rail handoffs, avoiding visibility black holes, tackling urban congestion, and simply finding chassis are puzzling pieces in a fast-changing intermodal mosaic.
Wondering where you need to be to take advantage of multi-modal volume and capacity? Check out our guide to U.S. rail-intermodal sites.
Further afield, you'll find equal challenges and opportunities. More shippers and consignees are looking at hybrid air-ocean solutions, or converting one mode to the other, even for higher-value, time-sensitive product.
Leveraging postponement strategies, improving demand forecasting, regionalizing supply chains, and increasing visibility are all tactics that empower companies to match modes with actual need and squeeze out costs—savings that, in turn, may offset increased transportation spend closer to market.
That's when intermodal becomes a capacity force equalizer—and from a competitive standpoint, a force multiplier.