Intermodal transportation is being redefined as the modality freight movement shifts – but what will emerge as the new “intermodal” model is still a work in progress.
With so much recent scrutiny on last-mile transportation and delivery, it’s easy to lose track of all the miles and transport that comes before. Similarly, it’s tempting to dismiss last-mile as completely separate from the rest of the transport supply chain.
“That’s a weak link in how we deal with transportation logistics,” suggested Gerhardt Muller, a longtime maritime analyst, university lecturer and the author of the book “Intermodal Freight Transportation.” “We don’t think holistically. We think about individual pieces here and there.”
Perhaps nowhere along that transportation chain is the segmentation more pronounced than with intermodal transportation. And, say some, the definition of intermodal needs a serious rethink to better reflect logistics in 2020 and beyond.
“There’s no question that intermodal has changed in definition and it’s definitely an outdated term from a transportation standpoint,” asserted Jack Buffington, a professor at University of Denver’s Denver Transportation Institute and a former logistics specialist at MillerCoors.” I always question transportation providers who look at transportation as separate from overall logistics. So, when you talk about intermodal, I would even go so far as it should be called, ‘inter-logistics’ now. It’s not a matter of how you use truck and rail together or rail and air, it’s how you use modalities of transportation tied to distribution centers or retail.”
Distribution is experiencing seismic shifts, with everything from direct-to-consumer to omnichannel, from micro-fulfillment centers to crowdsourced delivery now rolling through the supply chain landscape. Lines are being blurred not only between distribution channels, but between shippers and logistics providers. Intermodal transportation isn’t immune. Amazon and Walmart, for example, both have branded containers that they ship via intermodal rail and truck. Amazon offers ocean freight services as well.
“When you and I say ‘intermodal,’ particularly in this e-commerce focused world, that’s not the same thing that intermodal data would be collected to capture,” added Anne Goodchild, the founding director of University of Washington’s Supply Chain Transportation and Logistics Center.
For years, intermodal transportation has been linked specifically to containers. The Intermodal Association of North America defines intermodal simply as the “movement of cargo in shipping containers or trailers by more than one mode of transport — ship, rail or truck.”
Steve Keppler, the association’s senior vice president, member service, defends this strict tethering to containers. “It is estimated that 95% of the world’s manufactured goods, at some point, travel in a container before arriving in the hands of the customer,” wrote Keppler, in an email. “The intermodal product of today is a mature offering for the customer, and the advancements in technology have had a marked impact on the intermodal business to the positive, enabling it to gain market share over the years.”
The origins of intermodal transportation, in fact, go back more than two millennia, according to Muller, to Alexander the Great, and a cleverly designed box that could be moved from wagon to ship without disturbing its contents. Others trace intermodal transportation to somewhat more sophisticated boxes and 19th Century rail and barge traffic, and then to so-called “lift vans,” larger wooden crates which held household goods and could be easily transferred from truck to train to ship, which came on the scene at the beginning of the 20th Century.
Muller defines intermodal as freight transport “in continuous motion from point of origin to final destination, where [the freight] is never touched during that entire process,” adding that it involves a single bill of lading.
Intermodal transport is often confused with the more generic term “multimodal transport,” which is exactly what it says: the use of two or more modes of transport to ship cargo. Multimodal transport is far more common in freight transport. This term, some maintain, offers a more nuanced view of transportation complexities. It encompasses air transport that isn’t equipped to handle most containers. It also allows, for example, to distinguish between semis and vans, which in turn represent two legs of the transportation chain.
“Two or more modes being involved in the transportation [of goods] is becoming more and more the case,” said Philip Evers, professor of logistics management at the Robert H. Smith School of Business, University of Maryland. “Because of the changes in distribution, because of the inherent efficiencies or services of the different modes of transportation.”
Intermodal Large and Small
What’s more, Evers believes, present-day intermodal traffic “blurs some of those traditional lines” between modes of transportation that better handle large shipments and those that emphasize smaller shipments, explained Evers. Today’s “e-commerce phenomenon really puts the emphasis on small shipments,” he said.
Evers cites UPS, which can handle shipments from origin to destination. It utilizes rail to ship its container loads of goods long distances. Containers, yes, but ones filled with individual parcels and boxes destined for thousands of discrete destinations. “Rail is actually now able to capture, or at least be involved with, small shipments that they give it up 70 years ago,” Evers said.
Buffington goes one step further. “A smaller percentage of goods that are being sold are coming in these big containers that are broken down into distribution centers,” he said. “Surprisingly, there’s more parcels that are coming from China. Or coming from anywhere. The business is becoming more parcel-ized.”
Not everyone believes there’s a need for a definition change. “It’s broad enough to encompass changes,” said Anthony Hatch, a New York-based transport analyst with ABH Consulting, “We’re still going to get a lot of large percentage of our consumer goods from overseas. We’re still going to be moving some of those goods within the continent long distances where rail economics can play a role, working with sophisticated partners who help them with the first and last mile. I don’t see that changing for the next 40 years.”
Future of Intermodal
Intermodal traffic this year is forecast to be down some 10% over 2019, Keppler’s association predicts, blaming Covid-related trade dislocation.
This reflects in part rail-related dips. According to the Association of American Railroads, US rail traffic through August 29 this year was down almost 12%, while rail-related intermodal dropped almost 8%. (Plummeting coal traffic brought down rail freight statistics as a whole.)
However, intermodal, like freight transport as a whole, is much more complicated than these figures portray. “This industry is moving so fast and it’s so complex, we just haven’t updated and shifted the data that we have,” Goodchild believes.
Take the clash between road and rail for certain line haul business. Hatch lists five structural advantages rail has over trucking, when it comes to intermodal carry of containers. These include labor, where trains can haul containers with about 10% of the manpower needed for trucking; fuel, where trains enjoy a four-fold savings over trucks; environmental, which will become more and more important as highways continue to clog, infrastructure lags and pressure on energy savings increases; capacity flexibility, because rail can shift resources with far less impact on the efficiency of the system as a whole; and financial strength.
Railroads “will never deliver pizza,” Hatch quipped. But they aren’t limited to cross-country hauls as well and can go head-to-head with trucks on much shorter runs.
Railroads believe they are competitive with trucking on anything more than 500 miles. “But in Savannah, Norfolk Southern makes good money moving 180 miles to Atlanta,” Hatch said.
What’s more, Hatch maintained, rail has become more competitive with trucks recently because of an industry shift to precision scheduled railroading, or PSR, in which trains run on schedules rather than roll whenever enough cars are filled. “They’re more reliable,” said Hatch. “Less stuff gets in their way.”
Of course, these kinds of shifts help with the reduction in overall freight costs and shouldn’t be minimized. But critics of current intermodal designation maintain that the rise of Amazon, e-commerce and a far more sophisticated and complicated system of distribution underscore changes along the whole transportation chain, which also is becoming more complex. They believe the segmentation of intermodal just gets in the way of a better understanding of present-day logistics. “We should be thinking of modalities in terms of distribution models,” said Buffington, adding: “Distribution centers and modality of transportation are just a means to an end. And the end is how we serve the consumer.”