Intermodal Freight 101: A Beginner’s Guide to Shipping on the Rail
If you ship full truckload freight, you should be utilizing intermodal as well-it is a key component of any shipper of choice strategy. Using intermodal adds capacity, reduces transportation spend and contributes to your sustainability initiatives.
If you’re new to the mode, this article covers a few of the basics you need to know to get started.
What is Intermodal?
Intermodal shipping is the transportation of freight using multiple modes, including ocean, rail, truck and air. For North American shipments, “intermodal” typically refers to the combination of trucks and railroads to move containerized freight.
How Intermodal Shipping Works
An intermodal load moves in three parts using three separate carriers.
Benefits of Intermodal Shipping
Compared to full truckload shipping, intermodal is typically slower (at least one day in many lanes) and more complex (it involves multiple parties). So why do shippers use it? Let’s take a look at the core benefits.
Cost-Savings
First and foremost, shippers use intermodal to protect their budgets. Though savings vary by lane, seasonality and state of the current truckload market, intermodal options are often hundreds-sometimes thousands-of dollars cheaper than truckload. Even in lanes where intermodal is only marginally less expensive on a per-load basis, taken over the course of the year, the savings rack up.
Sustainability
On average, rail shipping is four times more fuel efficient than truck-a train can move one ton of freight 479 miles on single gallon. In addition to reducing greenhouse gas emissions by 75%, a fully loaded intermodal train takes about 280 trucks off the road, decongesting the air and North America’s highways.
Capacity:
Every shipper will experience supply chain disruptions, from minor incidents to macroeconomic trends. Incorporating intermodal into a supply chain strategy increases and diversifies capacity while reducing reliance on the truckload market, where-as most shippers experienced in 2017 and 2018 -capacity is not always easy to come by. Intermodal unlocks an entirely different source of carrier and equipment capacity.
The Class I North American railroads maintain shared equipment fleets with over 100,000 domestic 53' containers, and there are several asset carries with thousands of their own privately-held containers. This massive pool of equipment moves across the continent through an interconnected web of railroads, departing from and arriving to dozens of intermodal facilities accessible in nearly every metro area.
No matter where you are, or where you are shipping to, there is a decent chance that the North American intermodal network can cover it.
Types of Intermodal Providers
Shippers cannot go directly to the railroads to move intermodal freight. Instead, they must work with an intermodal service provider. There are a few different types shippers can choose from, each with their strengths and weaknesses. Each shipper will have to decide what’s right for their business based on their supply chain-many use a blend.
Asset-Based Carriers
Own their own fleet of intermodal containers and typically their own drayage operation (trucks, drivers, chassis, yards, etc.).
- Pros: Have a high degree of control over cost and equipment.
- Cons: Limited to the physical presence of their assets, do not cover all lanes, prefer to avoid certain lanes based on network balance.
Non-Asset-Based Carriers
Also called intermodal marketing companies (IMCs), they are intermodal 3PLs that maintain contracts with the Class I railroads. IMCs rely on the railroads’ shared pool of +100,000 containers.
- Pros: Provide a high degree of flexibility and provide access to the railroads’ equipment pool and a wider drayage community.
- Cons: IMCs are reliant on the railroad for cost and equipment.
Asset-Lite Carriers
These carriers have access to the railroads’ equipment pool, but also own some of their own intermodal assets. Coyote, as an IMC with access to UPS’s asset network, fits into this category.
Resellers
These are typically truckload brokerages that are not actual IMCs. They do not have direct relationships with the railroads, relying on asset carriers and IMCs to move their intermodal loads.
- Pros: Assuming a shipper is already working with the reseller for truckload, they don’t have add another vendor.
- Cons: Add another layer of margin to the shipper, inability to secure committed rail pricing, inability to source their own equipment, no control over drayage operations, and less visibility to the shipments in transit.
How to Find Intermodal Conversion Opportunities in Your Network
There is no hard-and-fast rule to determine which lanes are a better fit for the rail. Several factors come into play, including: total lane distance, proximity of origin and destination points to rail ramps, current truckload rates, rail service routing, and underlying shipment requirements.
The best way to optimize your network and find every conversion opportunity is to work with an experienced intermodal provider. They will simplify the process and make your intermodal shipping experience as fluid as truckload shipping.
As a general rule, if the lane is longer than 700 miles and you can ship it in a 53' dry van, it is a potential candidate for intermodal conversion. Some lanes as short as 500 miles can even work. Getting an intermodal rate is free, so it’s always worth checking.
All Aboard
Intermodal opens up capacity, protects your budget, and reduces your shipping carbon footprint. And service is only getting better-all Class I railroads are continually investing in intermodal infrastructure and service improvements. Though it is not the solution for every lane, it’s an important component of any shipper’s strategy.
Ready to start shipping on the rail?
Coyote can help. We have the intermodal expertise to help you every step of the way.
Originally published at https://resources.coyote.com on July 31, 2019.
