Business & Investment

The intermodal is tied with a knot. When do shippers feel at ease?

Intermodal rail service providers are experiencing a banner year thanks to unprecedented levels of imports into US ports, a surge in demand for capacity, and an e-commerce-led economy that continues to track in. The confluence of this event spotlights important interactions between rail and harbors, truck drivers, drag providers and warehouse operators, causing record delays in moving container cargo on rails. It reveals the underlying challenges and weaknesses that exist.

Whose fault is it? You can spread it almost evenly to all participants in the country’s overwhelming supply chain.

Railroads, which reduced their workforce during the pandemic, face the challenge of rehiring crew and bringing a mile-long intermodal train online fast enough to meet demand. The port is dealing with a record number of vessel calls, which overburdens coastal capacity and creates untreated sea and land. For example, in early September, we were waiting for 44 container ships to berth in San Pedro Bay, Southern California. After unloading Los Angeles harbor The terminal faced a peak dwell time of more than 5 days.

Truck drivers are also overwhelmed by the serious shortages of both drivers and container chassis. Also, warehouses already piled up on stock-rich rafters have postponed delivery of containers, and in some cases simply parking the container on wheels in the lot can result in the return and relocation of critical chassis. I’m late.

Frustrated ship

Shippers are aware that port / rail congestion and service delays are affecting operations at various points in the supply chain, especially in the “middle mile” segment.

That’s exactly that Kitchen cabinet distributor Encountered by an importer of ready-to-assemble cabinets (KCD) based in Raleigh, NC. According to Glen Wegel, vice president of operations and IT, KCD isn’t the only one struggling to move cargo, but it’s still frustrating customers. The impact is big enough that KCD is rethinking the mode choices. “We generally avoid railroads as much as possible because the services of all railroad companies are deteriorating,” he says. Still, he recognizes that “whenever possible, they are against” while the railroad company is processing the backlog. [the same] With labor [Covid-19] We are struggling as the rest of us. “

Intermodal backlogs occur primarily in crowded ports. This is one of the reasons Wegel completely avoids the ports of Southern California.Instead, KCD accepts most imported containers Virginia harbor Complex and “quite heavy” use Port of Houston Similarly. However, Wegel said the congestion in Houston, which took more than seven days to clear up the vessel in late August, is beginning to feel like congestion on the west coast.

KCD also uses the inland port system in Savannah, Georgia to transport boxes to destinations in that state and Tennessee. There is no relief there either. “The inland port is where my cargo continues to stagnate,” Wegel said, saying that it can take up to six weeks to put a box on the railroad and head inland. But that doesn’t matter in Florida. KCD will build a new DC in Orlando, servicing from Tampa, Jacksonville and Miami ports. Container ships call from Asia seven days a week between these ports.

Wegel summarizes this situation as follows: Labor issues, congestion, and lack of trucks and chassis make it very difficult to predict the arrival of cargo. “

Domestic intermodal also faces service challenges for a variety of reasons. Rob Kemp, President and Chief Executive Officer of Lebanon, based in Lebanon, Pennsylvania, said: DRT transportation, He says he is a low-asset logistics, trucking, brokerage, and transportation management company that makes “tens of millions of dollars a year” in transactions with Rail. “Since the beginning of this precision railroad [the railroads] It’s just not equipped to handle the moving volumes. (On Precision Lines (PSR), freight trains operate on a fixed schedule, similar to passenger trains, rather than being shipped each time a sufficient number of loaded vehicles are available.)

Kemp says it’s difficult to commit to DRT customers due to inconsistent rail services. Intermodal capacity and service challenges have led the company to move customer cargo onto the road, add tractors and hire more drivers. “We have always been a road-rail conversion company,” he observes. “We are a really big channel partner. We have a big business book, but the volume has skyrocketed and [rail intermodal] The lamp is full of 100 loads. [the railroads] Will take it, and we get a little lost in shuffle. The price difference between railroads and trucks was painful. “Due to the turmoil caused by railroads, the losses incurred in intermodal and trucking are significant,” he says.

Kemp states that not all Class 1 railroads operate that way, “even in this destructive environment, we are trying to fulfill our promises.” Nevertheless, meeting the needs of shippers is a constant battle in this market. “We move 20 pieces of luggage a day. [the railroads] Please tell me that you can only move five. What should I tell other customers? You will have to be late until you can get on the train, or move on the road if you find a driver. ”

He is not optimistic about the peak season and service and capacity outlook. “I think they’re working hard to prepare for the fourth quarter,” says Kemp. “”[But] I have never seen anything that makes me [confident] That wouldn’t turn into another catastrophic event. “

Railroad takes action

Class 1 railroads say they are working hard to keep intermodal traffic moving, but are hampered by capacity constraints. Jeff Heller, Vice President of Intermodal and Automotive, based in Norfolk, Virginia, said: Norfolk Southern. He says the container has more time to stay in the terminal because the warehouse is full. [it] Togo. ”

Also, the longer it takes to “rotate” the container and its chassis, and the longer the cycle time, the more delay there is. All of this causes containers to pile up at port terminals and depots, causing congestion. “The chain has slowed down,” says Heller.

He offers another interesting observation: the peak season, which seemed never to end this year, has evolved into three different stages. “International—import container movement—starts in August and lasts until November. Domestic starts in September and continues until Thanksgiving. Next, the peak of e-commerce-led parcels. [for which rails provide the middle-mile service] It starts with Thanksgiving and lasts until the end of the year, “he explains.

“Currently, we’re working pretty hard. The business keeps going, but the ability of the North American supply chain to handle it is pretty limited to the rate of execution we’re doing. [at] today. “

Heller describes last year’s challenges, and perhaps the rest of the year, as “generational events.” “I’ve never seen anything like this,” he said, and Norfolk Southern, the second largest intermodal service provider in North America, continued to step up to the plate and “network to accommodate throughput.” Invest in and support customer demand. “

Seana Fairchild, Vice President of Marketing and Sales, based in Omaha, Nebraska Union Pacific Railroad (UP) agrees that lack of warehouse space, workforce, and drought capacity all contribute to increased terminal and street dwell times and delays, especially in Chicago. She states that UP has worked closely with stakeholders and has taken several actions to increase liquidity and reduce congestion.

First, in July, she reports that the railroad “stopped import traffic on the west coast for a week.” “We have temporarily reopened the Global III facility in Rochelle, Illinois, to store international containers.” This alleviated port congestion and provided maritime carriers with an efficient inland storage solution. Second, the railroad added locomotive and railcar assets, supporting an incremental increase of approximately 150 to 200 containers per day from the long beach and Los Angeles marine terminals.And third, UP marshalled that resource Loop logistics A subsidiary to help shippers overcome the shortage of rarity for final mile delivery.

“Things are more fluid now, but frankly, throughout the supply chain from the rest of the year to 2022,” said Fairchild, who said these moves helped drive improvements in Chicago’s business. I expect it to be stressful. “

Similarly Burlington Northern Santa Fe Railroad (BNSF) has made operational changes to reduce congestion. Tom Williams, Group Vice President of Consumer Products, said: Throughout the system, BNSF has hired more staff and increased lifts by 20% at all facilities. We also reopened the Harvard facility in Marion, Arkansas for intermodal service, removing two truck segments from Logistics Park Chicago from service and converting them into stacked container areas. This allows BNSF to improve BNSF’s capabilities. Turn off the train lights and stage the unit immediately.

The perfect intermodal storm

Oakland, California-based Chairman and CEO Scott Taylor said the supply chain burden and fast-growing economy imposed by Covid-19 created a complete storm of challenges. .. GSC Logistics. “Record imports have stressed all modes,” Taylor observes. “We don’t think it will end soon.”

According to Taylor, GSC’s core competencies are transshipment, deintegration, and local and regional trucking. The company is also one of the largest providers of local drought services in Auckland, Seattle and Tacoma ports, making GSC the basic link between ports, railroads and shippers.

One of Taylor’s biggest concerns is that increased warehouse dwell times and unusual cargo routing put serious stress on container chassis availability. In response, GSC has expanded its chassis fleet by nearly 40% to 1,000 units over the past year. Even with that expansion, “chassis utilization is over 95% daily,” he says.

Like other port-oriented logistics service providers, GSC has seen changes in truck and rail load combinations as a result of pressure on intermodal rail capacity. “Previously 60% was intermodal and 40% was truck, but it’s reversed,” says Taylor. Currently, over-the-road trucks make up 60% of travel and intermodal railroads make up 40%. The biggest demand Taylor gets from customers: Find capacity at almost every price.

What is ahead

Everyone guesses when the situation will ease. As the peak fall season accelerates, supply chain managers stay under guns, take goods out of the harbor, put them on rails, and finally deliver them to retail shelves (and e-commerce fulfillment warehouses) for consumers. Are facing great pressure to make it available. The harbor is once again full of ships, containers are placed in crowded gardens, and warehouses are full. Equipment for moving containers from ports to rail and rail across the country is capacity-constrained, and most industry executives expect not to be disappointed until the end of the 2022 Chinese New Year.

“Currently, such replacements are taking place in the market,” says GSC Taylor. Still, despite all the turmoil, he still has the hope that the situation can be resolved. He says service providers can work together to understand how each segment affects the entire chain and find a viable solution. “The question is how to address these challenges at the grassroots level. It all comes down to providing communication, integrity, and certainty.”

The intermodal is tied with a knot. When do shippers feel at ease? The intermodal is tied with a knot. When do shippers feel at ease?

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