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RAIL-TRUCK INTERMODAL SHIPPING COMBINES BEST OF EACH MODE, MAKING GLOBAL TRADE ECONOMICAL & EFFICIENT:

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By: Phil Sneed

TANDEM LOGISTICS NEWS FEED (4/27/2012): What was intended as a way to reduce traffic congestion on the highways through short-sea shipping along the East Coast more than 50 years ago has ended up playing a key role in making offshore manufacturing in low-cost locations across the globe economically viable. The innovative use of large metal containers to ship goods eventually led to the development of an intermodal transportation system that today is the unsung hero of global trade.

Coordinating Transportation

Intermodal transportation is, as the name implies, the coordinated use of multiple modes of transportation for a single shipment. While intermodal can refer to the transfer of goods between any mode of transportation, it is most commonly used for ocean-rail, ocean-truck or rail-truck combinations. The use of common containers, which are standardized reusable steel boxes used for the safe, efficient and secure storage and movement of materials and products, is critical in any intermodal transportation system.

Rail-truck intermodal shipments also bring out the best in each mode of transportation. Rail typically has high fixed and low variable costs per shipment (with respect to distance and weight), while truckload shipment costs are just the opposite. Combining rail and truck creates universal access and lowers the minimum economic length of the haul. Hauls of less than 500 miles are more economically carried by truck, but longer shipments favor rail-truck intermodal. There is a time trade-off, however, because loading the containers adds extra time, and the circuitousness of the rail network adds to total transit time. Rail-truck intermodal transportation also is more fuel-efficient than truck transportation alone. This not only minimizes the cost paid by the shipper in the form of a fuel surcharge but also minimizes the impact of fuel price variability.

A recent study comparing fuel surcharge programs for more than 80 shippers representing more than US$16 billion in annual freight spend. The professional services company found that the average fuel surcharge paid by shippers for truckload transportation at $3.50 per gallon was 40 cents per mile compared to 25 cents per mile for rail-truck intermodal. If fuel increased to $4 per gallon, the average fuel surcharge rates for truckload (TL) and rail-truck would be 49 cents and 29 cents, respectively. The rail component of the movement essentially dampens the impact of the fuel price volatility.

Intermodal Trends

Intermodal shipments have grown steadily over the past several years (see below). International shipments make up 54 percent of the intermodal shipments on rail, according to the Intermodal Association of North America (IANA). Intermodal traffic is by far the fastest growing segment of rail traffic. The last few years also have seen the growth of new railroad corridors that are specifically designed for containerization. For example, the Heartland Corridor is a $150 million plan to facilitate more efficient travel on Norfolk Southern (NS) rail lines between the Norfolk, Virginia port region and Chicago and Columbus, Ohio. One of the project goals is to increase clearances in tunnels to permit the operation of double-stack intermodal trains, increasing the capacity of rail lines, shortening rail journeys and reducing tractor-trailer traffic.

Chris Caplice, Ph.D.