Soft Economy Means Hard Savings

Good news for domestic shippers in a bad economy.


Jobless claims reach a 16-year high." "The Dow Jones Industrial Average drops another 500 points." "Congress refuses to bail out the faltering auto industry."

Over and over again corporations are bombarded with sour news regarding the U.S. economy and how a long and sustained recession is imminent.

However, amid the cries of economic disaster, there is some good news, at least for shippers in the food and beverage industry. This is a great time for domestic intermodal shipping, as well as for companies that export their goods overseas.

According to the Intermodal Association of North America (IANA), domestic intermodal shipping had its best performance this quarter since the second quarter of 2004. This was lead by a strong 10.5 percent rise in domestic containers, which according to the IANA, made this quarter the strongest quarter of growth since 1999. Add to this a two percent growth in domestic trailer volumes and overall domestic volume was up an impressive 6.7 percent. The soft market, it seems, is causing companies to reconsider transitioning their highway freight to intermodal shipping.

"There are a number of reasons to do so," says Steve Branscum, group vice president of consumer products for the Burlington Northern and Santa Fe Railroad (BNSF), Fort Worth, TX. "Among them are highway congestion, driver recruiting problems, the fact that consumers are eating in more and even the environment. Companies are looking for ways to reduce their carbon footprints."

Another reason is diminishing capacity on the part of truckload carriers. As the economy continues to tighten, more and more trucking companies are realizing that they can't turn a profit and are closing their doors.

"The shippers we're dealing with, huge Fortune 500 companies, are reducing their carriers to a level they can manage," says Rich Gutsell, vice president, national accounts for Alliance Shippers, a global logistics and transportation services company located in Englewood, NJ. He notes that one of his customers, a mere 18 months ago, was utilizing 140 over-the-road and intermodal carriers and is now down to using just 33.

"Their staffs can't handle as many carriers as they could in the past."

In addition to the shrinking capacity of dry trailers, a lack of reefers is causing the intermodals to see double digit increases in their own reefer businesses.

"At this point, there really are no large over-the-road reefer carries like there is in the dry freight arena, where you have large carriers like J.B. Hunt and U.S. Express--there are smaller players, but we are taking business from all of them," says BNSF's Branscum.

Fueling The Fire

Another reason that companies are switching to intermodal is the high cost of fuel.

"What we're hearing from our customers now is that a combination of high fuel costs and less demand for their products is forcing them to look at intermodal as an alternative to over-the-road shipping," says Steve Weiby, vice president of transportation for C.H. Robinson Worldwide Inc., a third-party logistics company located in Eden Prairie, MN. "They can save money in longer haul lanes on fuel costs by using intermodal instead of trucking good directly--because of this we're actually quoting more customers than ever."

CSX Transportation, a Class 1 railroad headquartered in Jacksonville, FL, has made a good show of this with the coast-to-coast produce train it runs, in conjunction with Railex, which ships produce from Washington to New York and back.

"With fuel in the $60 range, trucking is still very expensive and people in the Northeast still want vegetables in the winter. They're going to ship them one way or the other and our competitive position compared to the highway is a very powerful one," says Adam Weber, marketing manager for CSX.

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