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Shipper — Whitepaper
The state of intermodal
How shipping via rail is changing the transportation industry
DownloadAmid mounting disruptions to the transportation industry, now is the time to build relationships with strategic intermodal carriers
The railway freight industry has come a long way since the 1800s when horses pulled train cars and few were using words like “network” and “efficiency” to describe the advancement in the movement of goods. Today, the U.S. rail network is a well-oiled machine used to cost-effectively move more than 40 tons of freight – and counting – for every person in the country.
For companies that seek reliable and predictable service at competitive pricing, integrating intermodal into their transportation strategy can be a cost-effective decision.
What is intermodal transportation?
Intermodal transportation is the movement of freight by combination of rail and road, typically in 53' shipping containers. This transportation method provides a consistent experience with over-the-road truck transportation. With North America’s comprehensive railway freight network, intermodal makes shipments throughout North America a smart move.
It’s vital, however, that shippers work with established, reputable intermodal carriers. Doing so ensures they are receiving the best overall value and expertise to quickly overcome supply chain disruptions.
When considering a strategic intermodal transportation strategy, it’s important to consider recent and possible future disruptions to the market, including, but not limited to:
- Inefficiencies from railway conversions to precision scheduled railroading (PSR).
- Fluctuating accessibility and reliability of intermodal transportation equipment like shipping containers and shipping chassis.
- Ongoing and increasing shortage of truck drivers in the transportation industry and the looming challenge for using owner-operators or third-party drivers.
- Impending and continuing industry regulatory changes, such as the new electronic logging device (ELD) mandate final compliance deadline, the Drug and Alcohol Clearinghouse and Assembly Bill 5.
- Failing long-term spot market strategies for pricing loads.
What is precision scheduled railroading (PSR)?
Despite common belief, railway freight networks are not set in stone – they’re malleable. With the growth in demand for transporting goods faster and more efficiently, rail companies have sought ways to optimize their networks and operations.
One way to do that is by implementing precision scheduled railroading (PSR). What is PSR? PSR is a rail improvement strategy that transports the same amount of freight with fewer rail cars and locomotives, while using a scheduled direct line of transport across a network.
Conventional rail shipments leave once the train is full, which can add to delayed delivery times for shippers. The PSR system model is more similar to experiences in an airport: The train leaves at the time scheduled whether freight is there or not.
The goals of using departure schedules and directly routed deliveries are to enable longer trains, faster speeds and less dwell time in terminals – to the ultimate benefit of the shipper moving its freight via intermodal.
In 2018, CSX rail company went through a conversion to PSR. In doing so, it removed ramps that had little volume and eliminated some lanes that shippers were relying on to move their freight. The conversion ultimately enabled a streamlined network with increased reliability and cost-effectiveness for shippers using CSX. However, it also caused major headaches for shippers during the transition period.
Elimination of lanes and increased dray length of haul ultimately reduced equipment and workforce needs (10%–12% in first year) and led to a streamlined transportation network.
Norfolk Southern and Union Pacific railroads have announced plans to follow CSX in the implementation of PSR, which will prove to be a significant challenge for shippers using their networks.
Shippers using railroads that will soon implement precision scheduled railroading can expect to experience uncertainty and disruption in their supply chain for some time, with possible consequences such as:
- Ramp closures that may drastically alter existing shipper networks.
- Poor service resulting from scheduling complexity of an upended network.
- · Increased costs from loads converting to competitive networks or to truck from intermodal during transition periods.
Despite the initial disruption the PSR system can produce, it has resulted in positive outcomes for shippers ranging from improved service to increased on-time delivery and reliability of railway freight.
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