shutterstock_168956879Intermodal transportation combines the best abilities of different transportation modes to deliver service, savings, and solutions to shippers. Intermodal refers to any freight movement that involves transferring a shipping container from one mode of transportation to another—including, for instance, a move from ship to rail to truck or vice versa. Throughout the process, intermodal facilitators, or third-party logistics providers, arrange for each piece of the move from pick up to drop off.

This year has seen a slowdown in the intermodal industry as compared to 2015, according to Intermodal Association of North America (IANA) due to lower over-the-road trucking rates of which shippers are taking advantage. Yet intermodal transportation with the rail component continues to be a core option for many shippers.

For instance, when intermodal terminals are close to both the origin and destination and/or the rail portion of the trip is sufficiently long, intermodal transportation indeed makes sense. According to Inbound Logistics, domestic shippers seem to be following this logic, as the average length of a domestic intermodal haul has been growing longer. Also, large shippers continue with intermodal transportation more consistently, in order to lock in capacity as market conditions vary. This option allows them to renegotiate some prices with intermodal providers, and continue to manage risk across multiple modes.

In addition, shippers taking advantage of today’s lower trucking rates are also aware that the favorable pricing won’t last forever. For instance, new regulations requiring all commercial trucks to use electronic logging devices (ELDs) by December 2017 may put a fresh squeeze on trucking capacity, with shippers taking a new look between opting to use over-the-road truck and intermodal.

Inbound Logistics also notes that new shippers also continue to explore intermodal. Their numbers include retailers that haven’t used this strategy much in the past. Retailers use the rails to move product from distribution centers (DCs) to intermodal terminals, where trucks pick up the loads for last-mile delivery.

Investments in Intermodal

For example, in 2015 alone, key players invested as much as $10.9 billion in equipment and infrastructure to improve railroad velocity.

IANA also recently introduced three electronic services designed to make the exchange of containers and chassis among carriers more efficient: Street Interchange provides an official, automated way for one motor carrier to transfer a container to another without first returning the container to the pick-up location. This occurs, for example, when one carrier drops a loaded container at a customer’s DC, the customer unloads it, and another carrier picks it up for transport elsewhere. The Chassis Gate Control technology automatically validates that when a carrier picks up an intermodal chassis, the carrier has an agreement with the chassis owner allowing it to handle that particular piece of equipment. IANA’s Bad Order Equipment Status service maintains a clearinghouse of information on chassis that have been damaged. It notifies everyone concerned about the status of that equipment, both when it’s damaged and when it’s ready to go back into circulation.

These developments and many others with the goal of improving speed and service continue to make intermodal an essential transportation strategy.

Roanoke Underwriting serves the commercial marine insurance and customs bond needs of agents and brokers throughout North America working with supply chain risks and logistics service providers. For more information about our products, please contact us at 1.855.213.4545.

Sources: Inbound Logistics, IANA