Domestic multimodal shipping.
Multimodal shipping takes advantage of the different modes of transportation across segments of a shipment's life cycle. This is particularly advantageous when certain modes of transportation are more cost effective, like shipping or rail, or when special requirements are only necessary at one point in a shipment's life cycle, such as crane loading or airlift for security reasons. When requirements only exist across a short span of a shipment's life cycle, it makes sense to place the greatest number of miles on the lowest cost mode of transportation.
With the changes in our nation's defense infrastructure after over a decade of engagement, there will be new logistics challenges occurring in the transportation of equipment, materiel, and supplies within the continental US (CONUS), which will continue to increase as troops return from theater. In addition, equipment returning From theater will undergo decommissioning or refurbishment in preparation for future engagement. The projected flow and relative consistency of both changes is significantly more stable and less time-critical than supporting troops in theater. However, requirements are often set with an expedited mentality in mind, thus preventing the opportunity to reduce cost via multimodal shipping, further constraining our nation's transportation resources.
In order to create a multimodal supply chain, there needs to be an understanding of the modes involved, as well as the benefits and constraints of each. In addition, you must identify what opportunities exist to overcome these constraints. The basics of multimodal shipping include the following key activities:
1. Identifying the supporting networks and infrastructure within each mode in the supply chain;
2. Identifying the key suppliers within each network;
3. Correlating the move requirements with each supplier.
In identifying the supporting networks, one can look to the basic modes of transportation in the US for guidance: pipeline, maritime shipping/barge, rail, trucking, and air.
In order, these modes represent the relationship of both cost and speed within the supply chain. Moving towards the left tends to decrease cost and speed while moving to the right will increase cost and speed. Generally speaking, multimodal exists within the overlap between modes and offers a logistics decision maker a bridge between two otherwise distinct choices. The networks within each of these modes vary and can range from static, in the case of pipeline, to fluid in the case of trucking. A well-known network example is our Nation's airports with regard to air freight.
The suppliers within each network are relatively static as well, predominantly due to the investments required in each mode of transportation. Rarely do you find suppliers that own physical assets in more than one modal network. While each supplier is generally accustomed to communicating with other adjacent members of the mode chain, not all interactions are standardized, leading to the need for increased involvement from the shipping coordinator in order to ensure successful "handoffs" in multi modal shipping.
Once modes and suppliers have been identified, a logistician needs to coordinate the move requirements so the shipping coordinator can ensure shipment integrity during each leg of the movement. These requirements may include:
1. Load securing appropriate for each segment of the movement;
2. In-transit visibility and communications;
3. Cargo security and contingency planning;
4. Setting expectations for availability dates at origins and destinations throughout transit.
USE OF INTERMODAL COMPANIES AND THIRD PARTY LOGISTICS
While this level of involvement from the logistics manager may seem like a relatively daunting way to achieve savings, there are other avenues the shipper can leverage to achieve the same degree of savings, while minimizing or eliminating the high degree of involvement. The first option is to utilize an intermodal company that specializes in coordinating the steps mentioned above. In most cases, intermodal companies have pre-established relationships with suppliers in adjacent modal options which provides a ready-made multimodal solution, and addresses the requirements and "handoffs" for each leg in the process. For instance, some ship lines offer inland pickup and delivery via truck and rail for international shipments. In most cases, the shipper is not involved in the transition from one mode to another. One example is the pickup of a container in Fort Hood, TX, transported to the rail terminal in Haslet, TX, to another rail terminal in Los Angeles, CA, and a drayage move to Long Beach, CA, to be loaded on a ship to Asia. While not directly involved in the various changes in mode, the shipper does have visibility of each transition thanks to the integrated communication processes intermodal companies have developed. This requires only one communication channel be established between the shipper and the intermodal company, as opposed to multiple channels for each modal network in the supply chain.
A similar service is often provided by intermodal marketing companies and third party logistics providers specializing in integrating supply chains. These companies, like intermodal companies, invest heavily in the technology and communications infrastructure necessary to ensure in-transit visibility, streamlined coordination between modes, and proactive problem resolution to prevent delays that could be caused at different network nodes. Resources exist to guide shippers to intermodal companies and third party logistics companies specializing in multimodal transportation, such as the Intermodal Association of North America (IANA), thus reducing leg work by budget-conscious logisticians.
INTERMODAL MARKETPLACE IN THE US
The remainder of this article will focus on a specific segment of the multimodal marketplace in the US--the domestic truck-rail marketplace. There are two reasons for doing so. First, as mentioned, the increased troop and equipment presence on domestic soil over the coming year signifies the greatest opportunity to impact costs. Second, truck-rail multimodal represents the largest segment of the marketplace positioned to service domestic military facilities. Note the locations of the major intermodal terminals and their proximity to major shipping ports and military facilities. Most major metropolitan areas have intermodal terminals; this makes most of the country reasonably accessible to rail service.
The intermodal marketplace in the United States continues to grow annually, demonstrating resilience against economic headwinds. The driving forces behind these increases are the economic opportunities resulting from this supply chain strategy. Total growth in 2012 pushed the marketplace to more than 14 million shipments, according to IANA. This growth trend is expected to continue in 2013, where shipments have already exceeded 1.2 million per month on average over the first half of the year.
Projections are for intermodal loadings in the US to increase over 5% per year in 2013 and 2014 according to FTR Associates. Continued growth in this sector outpaces projected GDP growth by a factor of over 3 as the Conference Board Projects GDP in the US to grow at only 1.6% in 2013. This suggests a continued trend of mode conversion by shippers away from other transportation modes, predominantly trucking.
In addition to pure cost savings, which is the primary driver behind this growth, other benefits are encouraging shippers to change to intermodal service:
1. Reduced demand on highway infrastructure, improving congestion safety, and reducing delays;
2. Improved environmental sustainability from dramatically reduced carbon emissions;
3. Reduced demand on truck driving force and corresponding constrained capacity.
INTERMODAL COMPANIES IN THE US
There are a number of companies involved in intermodal transaction within the US:
2. Drayage providers
3. Intermodal companies
4. Intermodal marketing companies
5. Third party logistics companies
Each provides a unique service within the marketplace and has its advantages.
A cornerstone in the truck-rail intermodal transaction is, of course, the railroad. The railroad serves two primary functions in many intermodal transactions. First and foremost, it provides the bulk of the ton miles of most intermodal shipments. Second, railroads supply some shippers and other companies with the containers and chassis required to ship intermodal. There are two types of intermodal shipping on railroads, trailer on flatcar (TOFC) or container on flatcar (COFC). Trailer on flatcar has been in decline, due to its relative inefficiency. According to TANA, the number of trailers declined 6.3% in 2013 to 21% of the total equipment used in domestic intermodal shipping. Containers, which have detachable chassis and can be double-stacked, grew 10.2% in 2013 to become a majority of the market place. There are two primary container leasing programs in the United States managed by railroads--the EMPU program and the UMAX program. Through these programs, companies engage in a trip-lease arrangement with the container riding on the corresponding railroads, and the cost of the equipment included in the pricing.
All Class I railroads provide intermodal services and work with other companies, to ensure a seamless transactions. Refer to the figure on intermodal terminals for a listing of North American railroads offering intermodal services. Railroads offer services outside their physical footprint through co-operative arrangements with other railroads. In addition, cross town services with drayage companies and steel wheel agreements permit containers to switch from one railroad to another in transit. For example, these arrangements allow a container to travel from Harrisburg, PA to Los Angeles, CA without any involvement by the shipper.
Several companies perform the role of drayage for both railroads and ship lines in the United States, which is simply the transition from one network node to another, such as a warehouse dock, a port, or between rail terminals. Most drayage is provided by locally based companies, although a handful of national or seminational drayage companies exist. The drayage provider is often under a separate contract with the shipper, railroad, or one of the other companies discussed below, to provide drayage services.
Intermodal companies differ from others by one key criterion--they own their own equipment. The primary equipment is the container, but it could also apply to the chassis, as well as trucks to perform some or all of the drayage work. The benefit of an intermodal company is it typically controls the transaction from end-to-end, including all drayage and railroad activities, so it creates a seamless transaction for the shipper. Second, because the intermodal company owns some or all of the equipment, there is a higher degree of control during the course of the shipment.
There are a number of intermodal companies in the US. While some specialize in a particular type of transportation, such a refrigerated or dry van, others may provide a multiple service offering with different equipment options and service levels. Many intermodal companies have established relationships with certain railroads.
INTERMODAL MARKETING COMPANIES
By contrast to an intermodal company, an intermodal marketing company does not typically own any equipment. Rather, it will trip lease as part of the rail transaction described under railroads, or it will partner with intermodal companies or ship lines that own equipment to provide intermodal services to its customers. In many cases, an intermodal marketing company works with a particular railroad to "market" the services of a railroad. In return, the intermodal marketing company may secure more favorable pricing arrangements.
THIRD PARTY LOGISTICS COMPANIES
Several third party logistics (3PL) companies offer intermodal services. Most often, these companies will partner with one or more of the companies listed above--railroads, drayage, in termodal companies, and intermodal marketing companies--to provide their services. In some cases, the 3PL may have standing contracts with one or more providers in the marketplace.
MYTHS ABOUT INTERMODAL
There are several myths about intermodal that continue to deter logisticians from leveraging this mode in their supply chain strategy. Some of these myths stem from operations experiences decades old or from those with an interest in preventing intermodal traffic.
The most prevalent myth is slow transit time. In reality, intermodal transit time today is very close to over the road transit time. For example, a shipment from New Cumberland, PA to Los Angeles, CA will take just two days longer shipping intermodal than via over the road trucking, according to J.B. Hunt Transport, Inc. (J.B. Hunt). In addition, many intermodal companies, like J.B. Hunt, offer expedited rail schedules which reduce transit time even further to a five day delivery--identical to over the road trucking. With innovations in equipment planning and visibility by all parties in the transaction, service continues to improve to the same levels as over the road trucking.
The second myth is intermodal transportation only works with longer lengths of haul. Infrastructure investments by all major railroads continue to open new lanes in all networks. Today, it is common to see lanes with fewer than 500 miles appearing as intermodal options within carriers' networks. For example, one of the shortest intermodal lanes J.B. Hunt offers is from Atlanta, GA to Jacksonville, FL, a mere 299 miles. It is no longer necessary for shipments to be thousands of miles for intermodal to become a viable option.
A third myth is a shipper loses visibility in an intermodal transaction. With current industry standards requiring EDI and web connectivity at all stages of the operation, intermodal participants have a high degree of communication and forecasting, in some cases, days or weeks before events happen. GPS technology has become so readily available, companies provide applications allowing track and trace capabilities on any GPS enabled cell phone. A shipper should question a supplier that cannot provide real-time tracking at every stage of die transaction.
THE FUTURE OF INTERMODAL
As intermodal continues to gain notoriety within the logistics community, the industry is rapidly looking at new opportunities to take advantage of cost-savings and increased capacity. New service offerings are being released by a variety of companies to capitalize on the intermodal economy of scale. As advances in technology create more stable temperature units with satellite tracking and real-time cargo temperature information, services like 53' containerized refrigerated intermodal are now being offered by J.B. Hunt and other providers. These new units can sense potential problems and notify various groups simultaneously, before cargo loss occurs.
In addition to refrigerated intermodal, opportunities exist for multi-modal shipping of vehicles and military containers, previously reserved for flatbed transportation. Transload facilities provide logisticians with the ability to create staging areas of equipment near the demand location, such as the National Training Center, and create shuttles between the staging area and base, thereby freeing capacity and providing a more consistent experience. New equipment innovations in this space, such as cargo sleds, permit freight, previously reserved for crane loading, to be on--and off-loaded with a fork lift at a dock, and provides A domestic roll-on roll-off capability for smaller vehicles, and open options for capacity and cost considerations logisticians have not had before.
In addition to equipment innovations in the container space, railroads continue to invest billions of dollars annually in improved terminal capacity, increased tunnel size and capacity, and additional track, increasing throughput across their intermodal networks. This includes The National Gateway, a public-private partnership to connect the Midwest US with ports on the mid-Atlantic coast. This initiative prepares the way for expansion in east coast ports to accept larger ships and more traffic from Asia with the expansion of the Panama Canal.
In addition to CONUS intermodal, partnerships between railroads and intermodal companies have increased the presence of intermodal traffic across borders. These partnerships also reduce delays related to customs clearance between Mexico and Canada due to streamlined communication flow and programs like C-TPAT. These changes in intermodal networks allow more traffic to flow to and from seaports in Mexico and Canada, as well as facilities in the interior of these countries on a more cost-effective basis, which is particularly important in the face of increased regulations on truck drivers crossing these borders today.
As our military copes with changes resulting from recent fiscal policies, a significant amount of vision will be necessary to do more with less. Intermodal shipping within the United States is a crucial tool in a logistician's kit, creating new capacity options and freeing up budget resources for other mission critical tasks. With potential cost reductions in intermodal transportation up to 30%, intermodal is a powerful weapon in the fight against an ever-constrained logistics environment. Emerging leaders will recognize this changing environment and seek out industry experts to assist in navigating these changing circumstances. A recent survey of non-DTCI shipments by J.B. Hunt indicated over 60% of lanes moved by the DOD may be eligible for a multi-modal transportation option. This creates opportunities for the future of the department's supply chain and the industry stands ready to embrace these positive changes as well.
"To improve is to change; to be perfect is to change often."
By Brett Beavers, Director of Government Services, J.B. Hunt Transport, Inc.
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|Publication:||Defense Transportation Journal|
|Date:||Oct 1, 2013|
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